Capitalism is failing us all. Could Islamic economics be the answer?

[SQ8]

What in the world is this “Islamic” economics?
There is very little economics mentioned in the Quran except Zakat and Jizya.
Concepts that existed prior to Islam and the only thing set is the rate for Zakat.

How would one apply that to an entire economic system built on complex interest and valuation requirements?

 

[Reddington]

Many economists in the west do agree that capitalism as an economic model has failed, cautious ones say it is failing and then there is others who refuse totally, but had we developed, adopted it to current requirement Islamic mode of economics would have been accepted. We rather hid it behind deep rooted arabic jargons and did not align it inline with current requirements.

Sir, in Islam there is no tax on income or indirect taxes as much as I have read about this. The tax (annual Zakat 2.5%) is only on savings. So let's suppose that government abolishes income tax and implements Zakat on savings annualy. So then how would the government have the money to fund projects e.g. making infrastructure, roads etc??

 

[313ghazi]

Sir, in Islam there is no tax on income or indirect taxes as much as I have read about this. The tax (annual Zakat 2.5%) is only on savings. So let's suppose that government abolishes income tax and implements Zakat on savings annualy. So then how would the government have the money to fund projects e.g. making infrastructure, roads etc??

This is not a limit of tax. All sorts of other taxes can be imposed, they just have to be fair. The tax has to come from wealth not income. Like business tax really, business pay tax after expenses, yet the salaries class, we pay taxes before our expenses.

If taxes were fair, certain mandatory expenses like shelter, energy, food, transportation, healthcare and medical costs would be considered per household any any remaining income would be taxed.

People seem to think Islam and Islamic practices are some sort of history lesson - they're not. We don't need to limit ourselves to the past and the methods of the past. The only thing important is the principles.

 

[Verve]

Sir, in Islam there is no tax on income or indirect taxes as much as I have read about this. The tax (annual Zakat 2.5%) is only on savings. So let's suppose that government abolishes income tax and implements Zakat on savings annualy. So then how would the government have the money to fund projects e.g. making infrastructure, roads etc??

Extracting & selling natural resources and state run profit making organisations supplying raw materials & foods to private industries. Supply of raw materials should be fully controlled by the government, and all private companies buy at the standard rate so there is a level playing field for all (small, medium, big private firms). Farmers sell to government and government sells to factories / exporters at fixed prices. No bulk discounts. This way one sector can be subsidised by other (eg. for export purposes)

These state owned organisations should transfer new technologies to private sector for the development of new products.

Problem arises when rights to natural resources and raw materials are given to large private firms. These firms end up cannibalising others effectively killing competition and innovation.

 

[Pakhtoon yum]

bhai to apni islamic economy use ker ke muslim aaj tak ameer kiyoo nhi ho gaay 1440 saal main

Because being a Muslim and having an economy doesn't make it "Islamic economy" The requirements for having such an economy have never been fulfilled by any Muslim state. They either adaptad to capitalism or communism. Only the very first Muslim states had an actual Islamic economy and they seemed to have been thriving.

 

[GHCommando]

What in the world is this “Islamic” economics?
There is very little economics mentioned in the Quran except Zakat and Jizya.
Concepts that existed prior to Islam and the only thing set is the rate for Zakat.

How would one apply that to an entire economic system built on complex interest and valuation requirements?

Economics that was followed by tha Khulfa-e-Rashideen. Thats Islamic Economics.

 

[GumNaam]

^^^ a california bank asking for donations to feed "1 in 3 kids" in the silicon valley (of all places) that are going hungry. and mind you, california is the richest state of the richest country in the world! if this isn't a practical example of capitalism (and democracy) failing then I don't know what is!

 

[Verve]

Q: Should the Government be profit-making or tax collecting?

 

[nahtanbob]

Capitalism is failing us all. Could Islamic economics be the answer?

last updated: 16/04/2019 - 18:10
By Muhammed Yesilhark

Opinions expressed in View articles are solely those of the authors.


Billionaire Ray Dalio, manager of the world's largest hedge fund Bridgewater, recently shocked the world when he announced that "capitalism is failing" and that a "revolution" is coming.

There is no denying that global inequality is at unsustainable levels, and that interest-based economies are no longer fit for purpose (in many countries interest rates are too low to incentivise saving at all).


I believe that Islamic economics, with its 2.5% zakat wealth tax (and much lower taxes in other areas) might give us a clue on how to eliminate the worst social inequality. And with a prohibition of abusive high-interest businesses and the incentivisation away from interest-based savings accounts, it can reinvigorate the global economy. These are not just Islamic economic concepts; these are universalist traditional Abrahamic ethics, and a common sense way for us all to enjoy a truly free market.


"Once we strip away the Arabic terminology, concepts like zakat can return our economies to the common sense-based, transparent and equitable set up that the architects of modern capitalism envisaged".
Muhammed Yesilhark
Philanthropist


Dalio’s statements matter, not only because of how strongly worded they are but also because of how topical they are in today’s news climate. They are significant because of who Dalio is, that is to say probably the most successful hedge fund manager in the world. One of my colleagues commented last week that this was the equivalent of the Pope declaring that Catholicism is failing.

Dalio’s words are perhaps more shocking because they violate one of the most sacred unwritten rules of the global rich: you’re not allowed to criticise capitalism if you have benefited hugely from it. Protest - or even displeasure - with the system is a luxury only the poor can afford. It’s normal to see cleaners, or even Uber drivers, angry at inequality. It is less normal to see the world’s wealthiest publicly stating that the order to which they owe their success is “not providing the American Dream.”

The “no protest for the rich” rule has led billionaires to channel their sense of responsibility, frustration or even guilt into philanthropy. This means that we seldom have the wealthy discuss these issues, let alone the root causes from which these problems arise. Those root causes go deeper than many of us realise and addressing them will mean re-examining not only our economics, but our politics and values.

Most of us want a societal order where there isn’t a huge vacuum between the classes. Unfortunately, this gap keeps widening as “casino capitalism” and high interest consumer products entrench divisions.

To create societies where there is mutual respect and compassion, we need an environment of reconciliation between the elites and the masses. The only way to achieve this is through a wealth tax such as the payment of zakat - one of the pillars of Islam - and an effective tool in addressing our current issues. But first, to reform a failing capitalism, we need to fix two things: taxation and the interest rate system. Taxation is easier (and far less left field) to critique since there is an emerging consensus that the global tax system simply no longer works. Through a combination of tax avoidance schemes, tax havens and even relatively innocent methods like transfer pricing, high net worth individuals and their corporations have very little (if any) tax to pay on their wealth. In the absence of effective wealth taxes, governments have no choice but to enforce taxes that perhaps unfairly target the poor, like sales tax and inheritance tax. The injustice of some of these taxes further normalises tax avoidance and polarises society even more.

Critiquing the interest rate system is more controversial. Most people feel that possessing money has some inherent value that should be recognised in a zero (or almost zero) risk way. But with negative interest rates spreading around in the developed world, interest rates are so low in many countries that they simply do not fulfil their purpose of incentivising consumers to save any longer. In short, as Deutsche Bank’s Jim Reid titled his research report last year, we might be witnessing “The Start of the End of Fiat Money.”

Therefore, our current fiat-based monetary system might require a rethink. After all, in the grand scheme of global economic history, it can still be considered an experiment as the vast majority of human history was based on gold and silver-backed sound money. Current proponents of digital currencies (such as so-called Bitcoin maximalists) are proposing a new form of supra-national sound money based on maths - quasi-“digital gold” for the globalised world.

Islamic economics, on the other hand, can give us clues to solve both these issues. Zakat, or Islamic alms, is a simple, transparent annual wealth tax of 2.5%. Let’s only consider tax havens, where estimated wealth of $10 trillion is held around the world. That means if zakat was paid on these funds (perhaps as some kind of amnesty agreement), there would be $25 billion per year flowing into the world’s poorest areas and worthiest causes.

At the same time, other taxes could be reduced or eliminated. In return for the wealth tax, Islamic economics suggests almost zero tax in every other area, including inheritance.

Solving the interest problem will be more gradual and will require a rethink of the monetary system we currently live in, as I previously mentioned. I can’t see a sudden global ban on interest but governments (particularly those with low interest rates) could incentivise other forms of investment, increasing regulation around abusive high interest products and businesses to start with.

Some of these might seem very drastic but once we strip away the Arabic terminology, concepts like zakat can return our economies to the common sense-based, transparent and equitable set up that the architects of modern capitalism envisaged.

When the richest guy in the room is telling you the game is rigged, it’s time to change the rules.
Muhammed Yesilhark is a philanthropist, a trustee of the UK National Zakat Foundation and founder of the Q2Q Foundation

https://www.euronews.com/2019/04/16...Social&utm_source=Facebook#Echobox=1555431381

@Mangus Ortus Novem @Verve @Pan-Islamic-Pakistan

Did you fall off the sky or come from an outer planet ?? Most wealthy in USA and Europe pay close to 40-50% of their income in taxes. Property tax rates in USA range from 1% to 3%

Sir, in Islam there is no tax on income or indirect taxes as much as I have read about this. The tax (annual Zakat 2.5%) is only on savings. So let's suppose that government abolishes income tax and implements Zakat on savings annualy. So then how would the government have the money to fund projects e.g. making infrastructure, roads etc??

what incentive do people have to save if you are taking it away ?

This is not a limit of tax. All sorts of other taxes can be imposed, they just have to be fair. The tax has to come from wealth not income. Like business tax really, business pay tax after expenses, yet the salaries class, we pay taxes before our expenses.

If taxes were fair, certain mandatory expenses like shelter, energy, food, transportation, healthcare and medical costs would be considered per household any any remaining income would be taxed.

People seem to think Islam and Islamic practices are some sort of history lesson - they're not. We don't need to limit ourselves to the past and the methods of the past. The only thing important is the principles.

It is called Standard Deduction in American tax code. I am sure Pakistan has something similar and the elite exploit it to the maximum

 

[Placemat]

I think Chinese style centrally forced economy is best right. All muslim countries should follow it instead of western based.

 

[jamal18]

When they talk of a failure of Capitalism, they mean 'corporate Capitalism' ; there are different types.

This creates a consolidation of wealth, larger companies devouring smaller ones and a massive increase in the inequality of wealth. And effectively the end of the power of labour.

Politically this creates an oligarchy of power, as money controls government.

 

[El Sidd]

What in the world is this “Islamic” economics?
There is very little economics mentioned in the Quran except Zakat and Jizya.
Concepts that existed prior to Islam and the only thing set is the rate for Zakat.

How would one apply that to an entire economic system built on complex interest and valuation requirements?

Islamic economics is a term coined out of Islamic principles of Justice that humans be protected from exploitation of their resources. Modern capitalism unless capped by a system of transparency is nothing short of modern slavery and the most evil form of exploitation.

The concept of Jizya and Zakaat is simply a method of buying rights from the state and their protection.

Q: Should the Government be profit-making or tax collecting?

The government is only a tax collecting entity which by definition ensures fair distribution of wealth and resource.

 

[Verve]

The government is only a tax collecting entity which by definition ensures fair distribution of wealth and resource.

Government has more functions than tax collection.

I do not think the government should be imposing or collecting taxes. Government should be a profit making entity instead, by being the only supplier at the top most level of supply chain of all industries. That is the only way to achieve fair distribution of wealth and resources with tight control over inflation. Profit for expenses, subsidies and any other programmes.

 

[El Sidd]

Government has more functions than tax collection.

I do not think the government should be imposing or collecting taxes. Government should be a profit making entity instead, by being the only supplier at the top most level of supply chain of all industries. That is the only way to achieve fair distribution of wealth and resources with tight control over inflation. Profit for expenses, subsidies and any other programmes.

We do not agree.

 

[Verve]

We do not agree.

Why?

And who is 'we'? The entrenched?