Islamic Way To Solve Crises

 

Islamic Way To Solve Crises

Atif Salahuddin

Pakistan’s economic problems are chronic, endemic and systematic .If the ruinous problems are to be solved, a new alternative has to be found that changes the fundamentals of the political and economic parameters.

 

Islamic economics offers fundamental changes in the way a state’s economy should be managed. To begin with it would ban giving or taking of interest – the scourge of the global financial debt crises. This would mean that whilst the state may honour any previous legitimate debt, it would refuse to give any further interest payments. Neither would it seek new interest based loans.

 

This would be adhered to across the board whether applied to international loans and debts or domestic loans for individuals. In an Islamic system, Bait-ul-Maal would be used to provide interst free loans to the needy and poor who may wish to start new businesses or fund other personal projects.

 

Moreover the system would introduce the gold / silver monetary standard. Today under the fiat currency system every time the government wants to get itself out of a hole by borrowing from the State Bank of Pakistan, it not only creates more debt. It amounts to effectively printing money, thus increasing inflation and eroding the value of the rupee in every one’s pocket. In Islam any paper currency issued in lieu of the monetary standard must be backed by gold or silver and be fully convertible on demand.

 

Another area that would see complete change is taxation. As we painfully  know nearly every thing and every one is taxed except the rich and powerful who are either not legislated to bed taxed or simply flout the law.

 

In Islam, the principle of taxation is  based on the amount of wealth a person owns, not on income itself. Thus those who owns wealth above a certain limit (a Nisab) would see that wealth taxed, whilst those who may earn a large income but end up with less than a Nisab after essential expenses, would not be taxed. Those who surpass the Nisab thers hold for taxation would have annual Zakat levied at 2.5 percent. Non-Muslims would pay Jizya at 2.5 percent. If they can afford to whilst being exempted from the Zakat.

 

Agricultural land reforms would be an important part of the transformation. Today despite having such fertile land, the dietary needs of the people cannot be met because most of the land is locked up in the hands of Zamindars.

In Islam, any landowner who does not cultivate the land for more than three years would have that land confiscated and given to the poor who would use it. This would provide both an opportunity and warning to those who own land to use it in a productive way or face losing it. Any landowner would pay the annual Khiraj imposed on the owner of the land based upon its productivity whilst Usher would be collected on agriculture produce. The overall tax base would be considerably lower designed to encourage spending, investment and entrepreneurship.

 

Mineral resources and utilities such as oil, gas, gold, copper, electricity and water would be publically owned and manage for the benefit of all rather than being allowed into private ownership as this is not permitted by Islam. Neither would multinationals be allowed ownership although they may be paid a fee for their services in extraction and provision.

 

The state would be bound to provide essential utilities such as water, gas, electricity and fuel for trans-portation at cost price by investing in the infrastructure required. Islam is not against competition, neither does it seek to implement price controls in the market; in fact it sees  a fair market as essential to motivate the producer.

 

What it does seek though is to protect the vulnerable by preventing key essential resources ending up in the hands of powerful individuals who use them as a license to mint money. Private individual ownership would be allowed and encouraged in all other spheres as permitted under the under the Shariah.

 

The stock market would be abolished along with all other capitalist paraphernalia such as derivatives, securitisation, bonds , hedge funds and credit default swaps that$°hand in hand and have led to so much devastation on a global scale.

 

It is mandatory in Islam to own a commodity or service before being allowed to trade with it. This is unlikely western financial markets where trading has become akin to a grand casino by allowing the same commodity to be traded many times over finder various financial instruments without even leaving the original ®&& owner. Thus profit or losses are created and levera­ged over and over again in bets and transferred to others”

 

as we now know in an economic crisis huge losses conveniently hidden away will eventually. Become apparent. The requirement for ownership will prev­ent such ridiculous feverish speculation and short tra­ding that has undermined western economics by inflating and depreciating prices on a huge scale, triggering shocks in the global financial system.

A new vision is required in which the ruler is prepared to stand up for the country's vital interests and speed up mass industrialisation to generate internal consumption, develop agriculture, encourage new businesses and seek new export markets to sustain the viability of the ventures so created.

 

Adam Smith, the father of modern capital­ism revered in the West observed "the empire of the Cali­phs seems to have been the first state under which the world enjoyed that degree of tranquility which the cultiv­ation or the sciences rewires. it was under the protection of those generous and magnificent princes, that the ancient philosophy and astronomy of the Greeks were restored and established in the East; that tranquility, which their mild just and religious government diffused over their vast empire, revived the curiosity of mankind, to inquire into the connecting principles of nature."