Religion & Economics
- From: "Altway" <altway@xxxxxxxxxxxxxx>
- Date: Mon, 17 Dec 2007 16:01:59 -0600
"A.C" wrote:-
Question:-
You say: Islam is a conscious comprehensive self-consistent way of life.
How, from the Islamic point of view, does Economics fit into Religion?
Answer:-
Human beings exist as part of a greater world of Total Reality with which
they interact through inputs, transformations and outputs, of three
interdependent factors, namely the Physical, the Social and the
Psychological at conscious, sub-conscious and unconscious levels.
Religion refers to the conscious methods of human development in progressive
adjustment to Objective Reality (i.e. Surrender to Allah). This has a
physical, mental and spiritual aspect corresponding to the three aspects of
man and three ways we interact with the environment. These are
interdependent and each has similar three aspects. This applies to:- (a) the
physical constructions and order (b) the social culture consisting of
ideology, organisation, and patterns of behaviour and (c) the general state
of existence. There is a correspondence, but not identity, between these
aspects and the divisions of Islam into Shariat (Law), Tariqat (Method or
Way) and Haqiqat (real state) which are also interdependent.
Economics refers mainly to the Physical interactions with the physical
environment, though not exclusively. It has also mental as well as spiritual
aspects and affects them. The Mental aspect that concerns feeling, thought
and action refers to the social, cultural and ideological aspects of life -
the institutions, laws, arts, sciences, philosophies and theologies. The
Spiritual aspect that concerns consciousness, conscience and will, refers to
moral states, attitudes and behaviour - the ethics, values, motives, the
world view, the psychological techniques, the worship, and the whole state
of being.
Inherently, human beings have the desire to benefit themselves and not to
harm themselves. This requires adjustment to Reality of which they are a
dependant and interactive part. In order to live correctly human beings
require correct knowledge, correct motives and correct action. They have a
built in capability for these. Action is a bridge between knowledge (facts)
and Motives (values). Economics can be regarded as a bridge between facts
and values and between the scientific aspect and the ethical aspect.
There are three kinds of Economies - Real, Illusory and False. Real
Economics concerns the real benefits or harm and real reactions to these.
This should be a part of the greater system of Planetary or even Universal
Ecology. Illusory Economics depends on the fact that human beings behave
according to their perception and knowledge which is not the same as reality
but is affected by their limitations. False Economics refers to the fact
that human beings often seek what is, in fact, harmful to them. This
produces frustration and further needs that would otherwise be unnecessary.
But misinterpretation of these needs leads to even more harm. A destructive
vicious circle is formed that acts as a self-maintaining parasite on them.
Human welfare and development requires us to get rid of False and Illusory
Economies.
There are three interdependent aspects to an Economy:-
(a) The institutions, activities and processes. These may have been
established by human beings to serve a human purpose, but tend to become
machines that enslave man.
(b) The motives, purposes, incentives. They manifest as pleasure and pain,
comfort or discomfort, likes and dislikes. But there is a difference between
what is really beneficial or harmful to the individual and what he feels as
pleasure and pain or likes and dislikes. Motives derive from the inherent
drives such as the self-preservative, the sexual-social (society is a
network of families) and the self-extensive. In general pain is an indicator
that something is wrong and provides an incentive to rectify it. In that it
is beneficial. But we might be addicted to certain kinds of pleasure such as
eating too many sweets, and this causes us harm. It is also possible to get
addicted to excitement and danger or get pleasure from pain as in masochism
and sadism. We form many kinds of habits and automatism that might be useful
in some circumstances but debilitating in others. Incentives are often
socially provided motives. There are three kinds: (i) Economic - wages,
salaries, profits, rewards, bonuses, fines, penalties. (ii) Social -
approval, disapproval, ridicule, hostility, ostracism, imprisonment,
assault. (iii) Moral - value systems, idea about what is beneficial or
harmful.
(c) The principles including the values on which the system is based. These
are not always known or understood though efforts are made to discover them
and to establish consciously constructed comprehensive self-consistent
systems.
Economics has three inter-connected aspects:- (a) Econ-1 - The actions of
individuals in their own interest. This interest may include perceived
benefits to themselves as well as to others with whom they identify. It is
not, therefore, necessarily selfish or self-centred. Western Economic
systems tend to base themselves on this. (b)Econ-2 - The actions of
individuals in association with each other. This requires mutual benefits
and mutual consultation and agreement based on adequate information. Islamic
Economics favours this. (c) Econ-3 - The collective action of groups or
communities. This is done through individuals that govern the people. They
ought to represent the people and be responsible to them. But this can vary
from one extreme of dictatorship, tyrannical or benevolent, to the opposite
which has not been achieved. Socialist systems, including the extreme form
of Communist ones, tend to place emphasis on this aspect.
It is supposed in some quarters that the Free Market based on Econ-1 can
work perfectly by itself for the benefit of all. But this is a mistake. It
can work only if every one has equal opportunity to fulfil their needs. In
fact, people live in communities and are inter-dependent, and they differ in
age, experience, knowledge, personality intelligence, abilities, motives and
advantages and opportunities provided by the physical, social and cultural
environment. There is a tendency in most people to take advantage of and
increase their own advantages over others. That is why all communities have
found it necessary to regulate affairs by means of Law and methods of its
enforcement. This brings in the need for Econ-2 and Econ-3. But the Economic
system will differ according to which of these aspects takes the dominant
position.
Econ-1 works as follows:-
Resources in the environment acquire value only when there is demand for
them because they have some usefulness in providing satisfaction. Though the
natural resources of the earth are limited, human ingenuity can turn things
that had no value into something valuable - e.g. oil to fuel cars and
material that is turned into plastics. Skills of labour and organisation
also make possible what is otherwise not possible. Resources, therefore,
includes Material, Social and Psychological resources. But the size, the
increase or decrease of the population not only affects the work force but
also the needs and demands, the values. These can vary in kind and increase
or decrease according to various environmental, cultural, social, political
and psychological changes.
A certain amount of work has to be done to convert the resources into
supply. This constitutes a sacrifice. There is, therefore, a balance between
sacrifice and satisfaction. The satisfaction must be equal or more than the
sacrifice. The difference constitutes the Profit and the incentive for the
work. Economics can be defined as the method of balancing sacrifice and
satisfaction or more specifically of the methods of maximising utility or
benefits - i.e. maximising satisfaction per unit of sacrifice or minimising
sacrifice per unit of satisfaction.
When supply is scarce prices demanded and paid are high and this reduces the
demand but ensures that the product is used in the most useful way - i.e.
utility or profit is maximised and it provides an incentive for expanding
supply. When supply expands then prices fall and demand increases, the
utility, profit and incentive diminishes which reduces supply. We have two
opposite processes that tend to reverse each other and reach a balance.
So, things seem to work perfectly. Why then do we get economic malfunctions?
There are several reasons, some of which are as follows:-
(1) The fact is that these processes are not a deterministic mechanical law
as those who think economics is a science suppose. It is human beings who
decide to raise or lower prices and by how much. They assess satisfaction
and sacrifice which are subjective judgements that may not correspond to
real needs and benefits. They may weigh up physical satisfaction against
social, mental or spiritual satisfaction and sacrifice one for the other.
(2) Balancing takes time and the economic pendulum can swing to greater or
lesser extremes. All parts of an economic system tend to be interdependent.
It depends on unpredicted factors such as new inventions that change
relative demand. Changes in demand or supply of one thing affect changes in
demand or supply for others. Satisfying or frustrating one need to a certain
level allows demand for something else to be increased or decreased. At the
more basic level needs tend to be predictable - there is an order of urgency
from things affecting self-preservation such as food, to social needs for
family and friends to psychological or spiritual needs for science, art,
philosophy and religion. At higher levels there is greater diversity and,
therefore, predictability decreases and uncertainty increases. Economic
changes also dependent on environmental factors such as the weather and
other geophysical, social and psychological forces such as population and
cultural changes. Populations grow or shrink owing to emigration, birth rate
and these days, abortion, and there are changes in the constitution of
populations - different age or cultural groups have different needs and
demands. Competition between firms causes some to succeed and others to fail
and the work force may not be flexible or mobile enough to move or more
efficient processes of manufacture may require fewer workers. In general, if
fewer workers are required to produce a product then either the price of the
goods will fall because of reduced costs of manufacture or wages of the
fewer workers will rise, or the profits will rise or some combination of
these factors will take place. As the total price of goods is always equal
to the total cost of manufacture including wages and profits, there will
always be enough money to purchase the goods that are manufactured. But
there may not be any demand for the goods. The extra money could be invested
in new projects and this would re-appear as wages and buying power for the
new goods. But there may not be any new projects or there may be reluctance
to invest. Economic malfunctions consist of a separation between goods in
shops, workers in factory and money in banks, a lack of co-ordination. Every
individual can and usually does co-ordinate these factors when left to
himself but a community collectively is not usually so well integrated as
the individual. Some kind of central control is needed. Unfortunately,
individuals in interaction with such economic systems also tend to become
irresponsible. They borrow money, thereby selling their future for a greater
price (when interest is added). The surplus money that is not used to
purchase goods or invested in new projects can be lent out to purchase
goods. The Banks make earn from the interest. But they must attract money
from savers by paying them interest. The Banks profit is the difference
between these. There is, therefore, a pressure for the Bank to lend out the
surplus money. But as a greater amount has to be paid back this can only be
balanced if this is balanced by an expansion of lending or other economic
activity.
(3) Power depends mostly on ownership, including patent rights, and its
enforcement. It is not a natural concept but a man made legal one. It is
true that in nature animals do protect the territories upon which their
livelihood (food) depends, but this is more like a right to use. Usually
natural justice rules in that what the organism obtains is proportional to
the work it does depending on the environment and its own nature. Human
beings too would require only the amount of land which they could work to
provide their needs. But the concept of ownership allowed them to control
more than that, allowing them to rent it out to others. That is, others were
put under the control of the owner who forced them to work for the owners
benefit. That is, they had to work not only to provide their own needs but
also had to work extra to pay the owner. The owner, apart from what he could
obtain from his own work, acquired the results of the work of others. These
others became his extra limbs and even brains. It is not difficult to see
that this is the same as slavery also done through law backed by force which
also has to be paid for. But it is paid for by extracting it in the same
way. The employed are dependent for their living on the employer who is
dependent on them. The Law enforcing it depends on governments, Econ-3. Thus
a self-maintaining vicious circle is created. It is the concept of ownership
that allowed the Europeans to dispossess the American Indians and the native
Africans.
People are unequal in that the Resources and means of production are owned
by the few and they control others and determine who will be given
employment or thrown out of work, what they will produce and how much they
will be paid according to their profits. If the profit of the factory falls
then even if there is demand for the goods, the factory closes and the
workers are thrown out of work. They loose wages and this means that demand
falls because there is no money to buy.
(4) Money which is a medium of exchange has been converted into a product
that is bought and sold, and there are institutions that deal purely in
money. Fortunes are made by gambling on the stock exchange. Usury is an
aspect of this and transfers money from those in need to the rich who have a
surplus. It creates an illusory Economic system. It is not the real utility
of products that is being assessed but its value in money.
(5) Profits can be increased by creating more efficient means of production
or new inventions which encourages research, development and invention and,
therefore, also encourages development of organisation, education and
training. But it also be done by all kinds of swindling and expansion of
control, forming monopolies and manipulating scarcity. Firms and Companies
become larger and larger because profit per item can be reduced giving
competitive advantage when the total profit in increased because the number
of items from which it is made is increased rather than by making greater
profit per item from fewer items. Government, Econ-3, action is necessary to
prevent monopolies, cartels and industrial conspiracies and maintain
competition. But it may be that Government ministers or officials have
interests in these things. The fact is that if firms need to expand in order
to make profits then preventing them from doing so must militate against the
economic advantages this provides. Great variety though it gives greater
choice also means that the same costs in research, development and
mechanisation have to be unnecessarily repeated and this adds to the cost of
goods. A few types in greater bulk can be made at less cost than many types
in smaller numbers. It is also much more difficult to create new companies
and factories because of the huge capital costs involved. In fact, existing
companies have shares in other companies and groups of companies are
controlled by a single parent company.
(6) The more general problem, of which the above is an aspect, is
disintegration - the existence of separate units isolated from one another
to different degrees. Though there is always an underlying unity and it is
impossible to stop interaction between all things, these units create
borders and barrier to certain influences and particularly conscious
control. They try to confine information and cause contradictions owing to
the fact that while trying to increase influence and control over others
they also try to decrease the same from others. The result is conflict
rather than co-operation. Co-operation and unification are obviously the
direction of evolution. The smaller units are becoming progressively less
viable. However, they may have to disintegrate to form even smaller units
that can become co-operative parts of larger units. The Industrial and
Commercial have grown so large and powerful that they have become
International Organisations and are able to dictate terms to Governments.
Even if a State claims to be Democratic they people and those they elect
have little power over them. If a government does not provide condition that
serves the interest of these Companies then they can take their business to
other countries that will provide the facilities they require. Thus firms
move factories and offices from one country where the work force is
discarded to another where the work force is cheaper. The original work
force is not consulted or even informed until the last moments and has no
power. They are no more than objects to be used and thrown away at will.
There is, however, a global advantage to this. It tends to spread out wealth
more evenly through the world. And Governments in order to combat their
disability seek to form alliances into greater units such as the European
Common Market where trade can be equalised. However, this tends to create an
even greater Bureaucracy which is like an unwieldy unintelligent machine
controlled by rules and regulations. These are required to prevent abuse
from human ambitions and confusion because of human limitations and
diversity but also create disability and inertia. A radically different
system of organisation is necessary.
(7) Power depends on having knowledge, motivation and ability. These are
dependent on education and the whole of the culture usually dominated by the
few. A just transaction depends on having sufficient information about it.
But there is a tendency to deceive or create information asymmetry by
suppressing certain facts and exaggerating or distorting others. This is
done by advertisements, shop and store displays and by often subtle
propaganda by the media and many pressure groups in their own interest.
Industrial, Business and political secrecy is widespread and enables much
criminal behaviour and public deception to be committed with impunity.
(8) Owing to mechanisation, manufacture is relative easy but takes time and
has to be done in bulk to be profitable as the huge costs of the machines
and the research and development have to be spread over a great number of
products. This means that the industry has to predict what the demand will
be in the future or create it artificially. There is pressure to sell
whether or not the products are needed or useful. Only a small percentage of
what people are made to buy is actually beneficial and provides true
satisfaction. In general, people are given the right to make a living
however they can. But the consumer is not adequately protected. This leads
to materialism and pressure on resources. It is, of course, essential for
the Economy that people should buy the products because if they do not then
the factory will close and the workers will be thrown out of work. They will
then have no money to buy the goods. So there is a self-maintaining vicious
circle in which the economic system controls man rather than the other way
round.
(9) The system is based on a hierarchical or pyramid organisation which
creates great inequality of power and wealth. Great inequality of wealth
causes distortion of the economy. Much of industry is geared to produce
luxury goods that have little real benefit value. This takes away production
and supply of the more essential goods. These become scarcer and costlier
for the majority. They are relatively further impoverished. There is a
devaluation of money because £1 to someone who has £ 1000 has less value
than it has to someone who has £ 100. However, those who have a surplus
over their basic needs could invest that money to produce factories to give
employment and produce goods which could be bought from the wages of the
producers. As the poorer people would have little to invest the mere
distribution of the wealth of the rich among the poor would not make them
much better off. There is, therefore, a policy to ensure that there is a
sufficient number of rich people. It should be realised that he distribution
of wealth is not so much the result of natural differences of talent and
amount of work but of man made laws and organisation. It can hardly be the
case that someone earning many thousands more than others is that many times
more meritorious. The earnings depend on the fact that the hierarchical
organisation ensures that the number of positions at the top of the pyramid
where the remuneration is highest is always limited and there is competition
between the many to get to the top. This competition is often cut-throat and
stressful using foul means by undermining and trampling on others and
involves ingratiation with those having the power. This ensures that the
ruthless get to the top and interest of those at the top is served and that
their ideas dominate over those of others. Thus we get a self-maintaining
system that is only broken with difficulty or changes very gradually because
those that rise to the top have also been influenced by new developments in
the cultural environment and may have to deal with new situations. There is
an increase of power as one goes to the top and an equivalent powerlessness
towards the bottom and a narrowing down of diversity. Those at the top
control not only the actions of the majority at the bottom but also often
their dress and their social status and relationships, their allegiances,
their thoughts, ideas and motives and their conscience.
(10) There is a distortion in the Economic system owing to the fact that
price of goods does not reflect the real cost of production, but much of
this is paid for either by the government through taxes or in other indirect
charges or it is not paid for in monetary terms at all but through many
other environmental, social and psychological consequences. These costs are
as follows:- (i) The cost of the infra-structure such as roads, regulatory
government institutions and law enforcement. (ii) The cost of dealing with
waste, pollution and the disruption of the ecological environment. (iii) The
cost of dealing with the social consequences caused by the industrial system
and the stresses it produces. This includes the breakdown of families and
its consequences in domestic violence, divorce, unmarried pregnancies, child
abuse, juvenile delinquency, drug and alcohol addiction and so on which must
be dealt with by employing an increasing number of social workers. There is
also an increase in psychosomatic, organic and stress related diseases. (iv)
The cost of Psychological and moral malfunctions such as various types of
psychopathy, neurosis and psychosis. There are also milder forms of
disorders with wide ranging consequences such as feelings of apathy,
hopeless, powerlessness, lack of confidence, purposelessness, low
self-images and reactions or bizarre over compensation for these. These
debilitate an increasing proportion of the population or lead to negative
destructive activities that neutralise constructive ones.
These problems could be solved when all firms and companies are partnerships
of the workers, and the firms are integrated in the society, there is
co-operation between firms and the shops, there is no Usury and all things
are done through mutual consultation. The representatives or leaders of the
various groups also consult with the rank and file and form groups within
which the same mutual consultation takes place.
As Islam is surrender to Allah, the fundamental Reality, the emphasis in
Islam is on Values and particularly on Justice, Compassion and Truth which
are the attributes of Allah. The above defects can probably not be removed
by Law alone, but Islam is also an educational system and creates or ought
to create a self-consistent organised way of life in which all aspects
support each other. The educational system it provides ought to produce an
appropriate social system which, when properly applied ought to support an
appropriate economic system. Instead we find it is usually the case that an
accidentally arisen economic system governs the social system which then
controls psychological and spiritual development. This sequence must be
regarded as mechanical as opposed to a conscious one which is much more
compatible with human evolution.
Hamid S. Aziz
.
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