11

IDB/IRTI LECTUREIDB/IRTI LECTURE

CAPITALISM, SOCIALISM, CAPITALISM, SOCIALISM,

THE WELFARE STATE, AND THE WELFARE STATE, AND

ISLAMISLAM

PROF. KHURSHID AHMAD

MIHE, MARKFIELD, LEICESTER

NOVEMBER 6TH, 2007

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INTRODUCTIONINTRODUCTION 1.1 Comparative Economic Systems1.1 Comparative Economic Systems

- Rise and Fall of the DisciplineRise and Fall of the Discipline- Capitalism: the Challenge from SocialismCapitalism: the Challenge from Socialism- Decline of Socialism and the Disintegration of the Soviet UnionDecline of Socialism and the Disintegration of the Soviet Union- ““The End of History” EuphoriaThe End of History” Euphoria

““As mankind approaches the end of the millennium, the twin crises of As mankind approaches the end of the millennium, the twin crises of authoritarianism and socialist central planning have left only one authoritarianism and socialist central planning have left only one competitor standing in the ring as an ideology of potentially competitor standing in the ring as an ideology of potentially universal validity: liberal democracy, the doctrine of individual universal validity: liberal democracy, the doctrine of individual freedom and popular sovereignty… In its economic manifestation freedom and popular sovereignty… In its economic manifestation liberalism is the recognition of the right of free economic activity and liberalism is the recognition of the right of free economic activity and economic exchange based on private property and markets.”economic exchange based on private property and markets.”

- Francis Fukuyama, Francis Fukuyama, The End of History and the Last Man,The End of History and the Last Man, 1992 1992

Yegor Gaidar, former Prime Minister of Russia in his address to the Yegor Gaidar, former Prime Minister of Russia in his address to the International Economic Association, Moscow, August 1992 said: International Economic Association, Moscow, August 1992 said:

““Henceforth books on Comparative Economic Systems will be found Henceforth books on Comparative Economic Systems will be found on the shelves dealing with Economic Development.” on the shelves dealing with Economic Development.”

- The expected adoption of the American Model of Capitalism by the - The expected adoption of the American Model of Capitalism by the entire world did not materialise.entire world did not materialise.

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1.2 Disintegration of the ONE Global Capitalism Scenario1.2 Disintegration of the ONE Global Capitalism Scenario- Challenges from withinChallenges from within- Many Capitalist ModelsMany Capitalist Models

Liberal Market CapitalismLiberal Market CapitalismManaged Market CapitalismManaged Market Capitalism Institutional/Cultural FactorsInstitutional/Cultural FactorsMoral and Spiritual VersionsMoral and Spiritual VersionsSocial Market CapitalismSocial Market CapitalismDevelopmental CapitalismDevelopmental CapitalismCommunist-Capitalist SystemCommunist-Capitalist System

- The Dilemma:The Dilemma:““The search for an alternative Capitalism is fruitless in a world where The search for an alternative Capitalism is fruitless in a world where

Capitalism has become utterly dominant, and no final crisis is in sight or, Capitalism has become utterly dominant, and no final crisis is in sight or, short of some ecological catastrophe, even really conceivable. The socialist short of some ecological catastrophe, even really conceivable. The socialist alternative has lost its creditability, while contemporary anti-capitalist alternative has lost its creditability, while contemporary anti-capitalist movements seem to lead nowhere… Those who wish to reform the world movements seem to lead nowhere… Those who wish to reform the world should focus on the potential for change should focus on the potential for change within within capitalism. There are capitalism. There are different capitalisms, and capitalism has gone through many different capitalisms, and capitalism has gone through many transformations. Reform does, however, require an engagement with transformations. Reform does, however, require an engagement with capitalism and cannot be accomplished by movements that stand outside it capitalism and cannot be accomplished by movements that stand outside it and merely demonstrate against it.”and merely demonstrate against it.”

James Fulcher, James Fulcher, Capitalism: A Very Short IntroductionCapitalism: A Very Short Introduction, Oxford University Press, , Oxford University Press, 2004, p 127.2004, p 127.

44

1.3 Contemporary Crises of Capitalism1.3 Contemporary Crises of Capitalism- Failure of Privatisation StrategiesFailure of Privatisation Strategies

- Frustrated Take Off for Global Spread of CapitalismFrustrated Take Off for Global Spread of Capitalism

- Popular Disenchantment Popular Disenchantment

- Search for AlternativesSearch for Alternatives

The Russian ScenarioThe Russian Scenario

Source: Source: Comparative Economics In A Transforming World EconomyComparative Economics In A Transforming World Economy

By J. Barkley Rosser Jr. and Maria V. Rosser, Second Edition, The MIT Press, Cambridge, By J. Barkley Rosser Jr. and Maria V. Rosser, Second Edition, The MIT Press, Cambridge, Massachusetts, 2004. p 296.Massachusetts, 2004. p 296.

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1.4 Revival of Interest in Alternatives1.4 Revival of Interest in Alternatives- Variants of Socialist Economies Variants of Socialist Economies

- Russia, China, Poland, Hungary, South AmericaRussia, China, Poland, Hungary, South America

- Islamic Economics and Economics of other ReligionsIslamic Economics and Economics of other Religions

- Iran and the Struggle for a New Traditional EconomyIran and the Struggle for a New Traditional Economy

1.5 Islamic Alternative/ Alternatives1.5 Islamic Alternative/ Alternatives- Founding FathersFounding Fathers

MawdudiMawdudiSayyed QutbSayyed QutbBaqar Al-SadreBaqar Al-Sadre

- Contemporary Critiques/ ExpositionsContemporary Critiques/ Expositions- Current Experiments: State Level/ Private SectorCurrent Experiments: State Level/ Private Sector

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IIIIMAJOR CONTEMPORARY ECONOMIC MAJOR CONTEMPORARY ECONOMIC

EXPERIMENTSEXPERIMENTS 2.1 CAPITALISM2.1 CAPITALISM 2.2 SOCIALISM2.2 SOCIALISM 2.3 FASCISM2.3 FASCISM 2.4 WELFARE STATE2.4 WELFARE STATE

All under the umbrella of one civilizational paradigm of SECULARISMAll under the umbrella of one civilizational paradigm of SECULARISM

- World ViewWorld View

- Concept of Man and SocietyConcept of Man and Society

- ObjectivesObjectives

- Parameters for Decision makingParameters for Decision making

- Operational MechanismsOperational Mechanisms

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IIIIIIEVALUATION: ACHEIVEMENTS AND EVALUATION: ACHEIVEMENTS AND

FAILURESFAILURES

3.1 POSTITIVES 3.1 POSTITIVES 3.1.1 Development/ Affluence/ Welfare3.1.1 Development/ Affluence/ Welfare

3.1.2 Power/ Control/ Supremacy3.1.2 Power/ Control/ Supremacy

3.1.3 Freedom/ Democracy/ Participatory System3.1.3 Freedom/ Democracy/ Participatory System

3.1.4 Innovation/ Technology3.1.4 Innovation/ Technology

3.2 NEGATIVES3.2 NEGATIVES3.2.1 Injustices/ Contradictions/ Conflicts and Rivalries3.2.1 Injustices/ Contradictions/ Conflicts and Rivalries

3.2.2 Exploitative/ Colonial/ Hegemony 3.2.2 Exploitative/ Colonial/ Hegemony

3.2.4 Inefficient/ Wasteful3.2.4 Inefficient/ Wasteful

3.2.4 Instability 3.2.4 Instability

3.2.5 Unsustainable3.2.5 Unsustainable

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IVIVTHE GLOBAL SITUATIONTHE GLOBAL SITUATION

4.1 FROM WHERE WE BEGAN4.1 FROM WHERE WE BEGAN

RELATIVE SHARES OF WORLD MANUFACTURING OUTPUT

RegionRegion CountryCountry YearsYears

17501750 18001800 18301830 18601860 19001900

EuropeEurope 23.223.2 28.128.1 34.234.2 53.253.2 62.062.0

(Russia)(Russia) (5.0)(5.0) (5.6)(5.6) (5.6)(5.6) (7.0)(7.0) (8.8)(8.8)

(U.K)(U.K) (1.9)(1.9) (4.3)(4.3) (9.5)(9.5) (19.9)(19.9) (18.5)(18.5)

USAUSA 0.10.1 0.80.8 2.42.4 7.27.2 23.623.6

Third WorldThird World 73.073.0 67.767.7 60.560.5 36.636.6 11.011.0

(India/Pakistan)(India/Pakistan)

(24.5(24.5)) (19.7)(19.7) (17.6)(17.6) (8.6)(8.6) (1.7)(1.7)

— Source: PAUL KENNEDY The Rise and Fall of Great Powers, Random House, New York, 1987.

99

Per Capita Levels of Industrialization (1750-1900)Per Capita Levels of Industrialization (1750-1900)

(Relative to UK in 1900 = 100)(Relative to UK in 1900 = 100)

RegionRegion CountryCountry YearsYears

17501750 18001800 18301830 18601860 19001900

EuropeEurope 88 88 1111 1616 3535

(Russia)(Russia) (6)(6) (6)(6) (7)(7) (8)(8) (15)(15)

(U.K)(U.K) (10)(10) (16)(16) (25)(25) (64)(64) (100)(100)

USAUSA 44 99 1414 2121 6969

Third WorldThird World 77 66 66 44 22

(India/Pakistan)(India/Pakistan) (7)(7) (6)(6) (6)(6) (3)(3) (1)(1)

— Source: PAUL KENNEDY The Rise and Fall of Great Powers, Random House, New York, 1987, p. 149.

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4.2 WHERE WE ARE TODAY4.2 WHERE WE ARE TODAY

4.2.1 THE PRESENT POSITION IS THAT THE TWENTY TWO DEVELOPED COUNTRIES OF THE WORLD HAVE 87 PERCENT OF WORLD GDP WHILE THE REMAINING 160 COUNTRIES HAVE TO LIVE ON ONLY 13 PER CENT. INEQUALITIES BETWEEN THE DEVELOPED AND

DEVELOPING COUNTRIES AS WELL AS WITHIN THESE COUNTRIES ARE INCREASING, MAKING RICH RICHER AND THE POOR POORER. THE WORLD IS BECOMING MORE UNJUST AND EXPLOITATIVE.

4.2.2 INCREASE IN GLOBAL INEQUALITY

“AN EXAMINATION OF INTERNATIONAL INEQUALITY USING ABSOLUTE RATHER THAN RELATIVE MEASURES OF INEQUALITY REVEALS A STEADY INCREASE OVER THE LONG RUN, AS WELL AS

IN RECENT DECADES………”.

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“… “…. INTERNATIONAL INEQUALITY WAS ESSENTIALLY . INTERNATIONAL INEQUALITY WAS ESSENTIALLY NEGLIGABLE AT THE TURN OF THE NINETEENTH CENTURY NEGLIGABLE AT THE TURN OF THE NINETEENTH CENTURY ACCOUNTING FOR ROUGHLY 12 PER CENT OF GLOBAL ACCOUNTING FOR ROUGHLY 12 PER CENT OF GLOBAL INEQUALITY, BUT THAT, IT INCREASED VERY RAPIDLY UNTIL INEQUALITY, BUT THAT, IT INCREASED VERY RAPIDLY UNTIL WORLD WAR II, AND THEN CONTINUED TO INCREASE BUT AT A WORLD WAR II, AND THEN CONTINUED TO INCREASE BUT AT A MUCH SLOWER PACE…. IN SUMMARY, WHILE THE WORLD GOT MUCH SLOWER PACE…. IN SUMMARY, WHILE THE WORLD GOT RICHER, INCOME INEQUALITY RELATIVE AND ABSOLUTE, RICHER, INCOME INEQUALITY RELATIVE AND ABSOLUTE,

INTERNATIONAL AND GLOBAL INCREASED INTERNATIONAL AND GLOBAL INCREASED TREMENDOUSLY OVER A LONG PERIOD OF TIME (1820-1992)”TREMENDOUSLY OVER A LONG PERIOD OF TIME (1820-1992)”

(WORLD DEVELOPMENT REPORT 2006, EQALITY AND DEVELOPMENT, THE (WORLD DEVELOPMENT REPORT 2006, EQALITY AND DEVELOPMENT, THE WORLD BANK, 2006, P.64-65)WORLD BANK, 2006, P.64-65)

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4.2.34.2.3 THE RICHEST 1% OF PEOPLE IN THE WORLD THE RICHEST 1% OF PEOPLE IN THE WORLD RECEIVE RECEIVE AS MUCH AS 57% AT THE BOTTOM. THAT IS AS MUCH AS 57% AT THE BOTTOM. THAT IS LESS THAN LESS THAN 50 MILLION OF RICH PEOPLE IN THE HIGH 50 MILLION OF RICH PEOPLE IN THE HIGH INCOME INCOME COUNTRIES RECEIVE AS MUCH AS 2.7 COUNTRIES RECEIVE AS MUCH AS 2.7 BILLION POOR BILLION POOR PEOPLE IN THE WORLD. PEOPLE IN THE WORLD.

TOP 10% OF THE US AGGREGATE INCOME IS EQUAL TOP 10% OF THE US AGGREGATE INCOME IS EQUAL TO THE TOTAL INCOME OF THE POOREST 43% OF TO THE TOTAL INCOME OF THE POOREST 43% OF

THE THE WORLD. THAT IS INCOME OF 25 MILLION PEOPLE IN WORLD. THAT IS INCOME OF 25 MILLION PEOPLE IN AMERICA IS EQUAL TO THE TOTAL INCOME OF 2 AMERICA IS EQUAL TO THE TOTAL INCOME OF 2 BILLION POOR PEOPLE IN THE WORLD. BILLION POOR PEOPLE IN THE WORLD.

IT MAY BE INSTRUCTIVE TO RECALL THAT THE IT MAY BE INSTRUCTIVE TO RECALL THAT THE TOTAL TOTAL US FOREIGN AID TO THE WORLD IS 0.2% OF ITS GDP.US FOREIGN AID TO THE WORLD IS 0.2% OF ITS GDP.

AVERAGE INCOME DIFFERENTIAL BETWEEN THE AVERAGE INCOME DIFFERENTIAL BETWEEN THE RICH RICH AND THE POOR COUNTRIES OF THE WORLD WAS AND THE POOR COUNTRIES OF THE WORLD WAS 1:78 1:78 IN 1988, 1:114 IN 1993 AND 1:140 IN 2006. IN 1988, 1:114 IN 1993 AND 1:140 IN 2006.

RECENTLY A NUMBER OF FUND MANAGERS ARE RECENTLY A NUMBER OF FUND MANAGERS ARE REPORTED TO REPORTED TO HAVE RECEIVED AN ANNUAL TAKE HAVE RECEIVED AN ANNUAL TAKE HOME INCOME OF US$1 BILLION EACH THIS YEAR.HOME INCOME OF US$1 BILLION EACH THIS YEAR.

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4.2.44.2.4 HALF OF THE HUMAN RACE IS LIVING TODAY HALF OF THE HUMAN RACE IS LIVING TODAY ON ON LESS THAN US$2 PER DAY, THAT IS OVER 3 LESS THAN US$2 PER DAY, THAT IS OVER 3

BILLION PEOPLE. BILLION PEOPLE.

AROUND 1 BILLION HAVE TO SURVIVE ON AROUND 1 BILLION HAVE TO SURVIVE ON LESS LESS THAT US$1 A THAT US$1 A DAY. DAY.

AROUND 800 MILLION ARE REPORTED TO BE AROUND 800 MILLION ARE REPORTED TO BE SUFFERING FROM MALNUTRITION AND SUFFERING FROM MALNUTRITION AND

HAUNTED HAUNTED BY THREATS OF STARVATION. BY THREATS OF STARVATION.

MILLIONS ARE SUFFERING FROM CURABLE MILLIONS ARE SUFFERING FROM CURABLE DISEASES AND THOUSANDS DYING DISEASES AND THOUSANDS DYING

EVERYDAY EVERYDAY BECAUSE OF LACK OF MEDICAL CARE. BECAUSE OF LACK OF MEDICAL CARE.

ALMOST 1/5TH OF HUMANITY IS SUFFERING ALMOST 1/5TH OF HUMANITY IS SUFFERING FROM THE AGONY OF A LIVING DEATH. FROM THE AGONY OF A LIVING DEATH.

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4.2.54.2.5 AFRICAAFRICA

““THE POST INDEPENDENCE INTEGRATION OF THE AFRICAN ECONOMIES THE POST INDEPENDENCE INTEGRATION OF THE AFRICAN ECONOMIES INTO THE WESTERN CONTROLLED GLOBAL ECONOMY HAS PROVED TO INTO THE WESTERN CONTROLLED GLOBAL ECONOMY HAS PROVED TO BE DEVASTATING TO THE CONTINENT’S DEVELOPMENT EFFORTS. WHEN BE DEVASTATING TO THE CONTINENT’S DEVELOPMENT EFFORTS. WHEN AFRICAN COUNTRIES WERE FREED FROM COLONIALISM IN THE 1960’S, AFRICAN COUNTRIES WERE FREED FROM COLONIALISM IN THE 1960’S, WESTERN CAPITALIST POWERS STRUGGLED HARD TO ENSURE THEIR WESTERN CAPITALIST POWERS STRUGGLED HARD TO ENSURE THEIR ECONOMIC DEPENDENCE ON THE WEST …… AFRICAN STATES SLID ECONOMIC DEPENDENCE ON THE WEST …… AFRICAN STATES SLID INTO GREATER ECONOMIC PROBLEMS AS THEY BEGAN TO ADOPT INTO GREATER ECONOMIC PROBLEMS AS THEY BEGAN TO ADOPT EXTERNALLY GENERATED ECONOMIC POLICIES THAT HAVE LITTLE OR EXTERNALLY GENERATED ECONOMIC POLICIES THAT HAVE LITTLE OR NO RELEVANCE TO THEIR SITUATION ……THE STRUCTURAL NO RELEVANCE TO THEIR SITUATION ……THE STRUCTURAL ADJUSTMENT PROGRAMME FORMULATED BY THE WORLD BANK AND ADJUSTMENT PROGRAMME FORMULATED BY THE WORLD BANK AND THE IMF, TO SAY THE LEAST, HAS NOT LED TO IMPROVEMENT IN THE THE IMF, TO SAY THE LEAST, HAS NOT LED TO IMPROVEMENT IN THE LIVING STANDARD OF THE PEOPLE. THE CONDITIONALITIES OF THE LIVING STANDARD OF THE PEOPLE. THE CONDITIONALITIES OF THE PROGRAMME LIKE CURRENCY DEVALUATION, FOR EXAMPLE, HAVE HAD PROGRAMME LIKE CURRENCY DEVALUATION, FOR EXAMPLE, HAVE HAD A CRIPPLING EFFECT ON A LARGE POPULATION OF THOSE AFRICAN A CRIPPLING EFFECT ON A LARGE POPULATION OF THOSE AFRICAN STATES IMPLEMENTING THE PROGRAMME. MOHSIN KHAN FOUND THAT STATES IMPLEMENTING THE PROGRAMME. MOHSIN KHAN FOUND THAT THE PROGRAMME NEGATIVELY AFFECTS GROWTH RATES IMMEDIATELY THE PROGRAMME NEGATIVELY AFFECTS GROWTH RATES IMMEDIATELY AFTER IT IS ADOPTED.”AFTER IT IS ADOPTED.”

VICTOR OGUEJEOFOR OKAFOR AND SHERIFFDEN TELLA, “VICTOR OGUEJEOFOR OKAFOR AND SHERIFFDEN TELLA, “ECONOMIC DEVELOPMENT ECONOMIC DEVELOPMENT AND THE PROSPECT FOR ECONOMIC SECURITY IN AFRICA”,AND THE PROSPECT FOR ECONOMIC SECURITY IN AFRICA”,IN ADABAYO OYEBADE AND IN ADABAYO OYEBADE AND ABIODUN ALAO, “ABIODUN ALAO, “AFRICA AFTER THE COLD WAR : THE CHANGING PERSPECTIVES OF AFRICA AFTER THE COLD WAR : THE CHANGING PERSPECTIVES OF THE SECURITY” THE SECURITY” AFRICA WORLD PRESS, TRENTO, 1998, p.p. 24-25. AFRICA WORLD PRESS, TRENTO, 1998, p.p. 24-25.

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4.2.6 Capitalism is characterised by establishment of a debt-based 4.2.6 Capitalism is characterised by establishment of a debt-based economy. Income inequalities, demand manipulations and easy debt economy. Income inequalities, demand manipulations and easy debt facilities have resulted in a lifestyle of living beyond ones means. Interest facilities have resulted in a lifestyle of living beyond ones means. Interest has played a pivotal role in producing a debt-based economy. Developed has played a pivotal role in producing a debt-based economy. Developed and developing countries both are caught in the grip of this new form of and developing countries both are caught in the grip of this new form of virtual slavery. Some idea of the plight of humanity can be had from the virtual slavery. Some idea of the plight of humanity can be had from the following facts:following facts:

HOUSEHOLD DEBT IN THE UNITED KINGDOMHOUSEHOLD DEBT IN THE UNITED KINGDOM 19631963 £9.0 BILLION£9.0 BILLION 1973 1973 £32 .0 BILLION£32 .0 BILLION 19831983 £151.0 BILLION£151.0 BILLION 19931993 £625.0 BILLION£625.0 BILLION 19971997 £780.0 BILLION£780.0 BILLION

““IN 2006, U.K. INDIVIDUALS AND HOUSEHOLDS OWED £1,174 BILLION, IN 2006, U.K. INDIVIDUALS AND HOUSEHOLDS OWED £1,174 BILLION, ALMOST EXACTLY EQUAL TO TOTAL U.K. INCOME OR GDP. ALMOST EXACTLY EQUAL TO TOTAL U.K. INCOME OR GDP.

IN OTHER WORDS, EVERY UK’S ADULT OWED ON AVERGE £25,200 MORE IN OTHER WORDS, EVERY UK’S ADULT OWED ON AVERGE £25,200 MORE THAN MEDIAN ANNUAL EARNINGS WHICH IN 2004/ 05 WERE ONLY THAN MEDIAN ANNUAL EARNINGS WHICH IN 2004/ 05 WERE ONLY £22,900.(ANN PETTIFOR, £22,900.(ANN PETTIFOR, THE COMING FIRST WORLD DEBT CRISIS, THE COMING FIRST WORLD DEBT CRISIS, Palgrave, 2006, p.97Palgrave, 2006, p.97))

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4.2.7 4.2.7 UNITED STATES OF AMERICAUNITED STATES OF AMERICA

TOTAL NATIONAL DEBT AT THE BEGINING TOTAL NATIONAL DEBT AT THE BEGINING OF THE 20TH CENTURY WAS REPORTED TO BE OF THE 20TH CENTURY WAS REPORTED TO BE ONLY US$ 1 BILLION. ONLY US$ 1 BILLION.

IN THE YEAR 2004 IT HAD SOARED TO US$ IN THE YEAR 2004 IT HAD SOARED TO US$ 7.8 TRILLION. THAT IS 7.8 TRILLION. THAT IS GOVERNMENT DEBT GOVERNMENT DEBT ONLY. TOTAL NON FINANCIAL MARKET DEBT ONLY. TOTAL NON FINANCIAL MARKET DEBT

STOOD AT US$ 23 TRILLION IN 2004. STOOD AT US$ 23 TRILLION IN 2004. FOREIGN INDEBTEDNESS OF THE ONLY FOREIGN INDEBTEDNESS OF THE ONLY

SUPER POWER WAS US$ 3.3 TRILLION IN 2004, SUPER POWER WAS US$ 3.3 TRILLION IN 2004, UP FROM ROUGHLY ZERO IN 1987. UP FROM ROUGHLY ZERO IN 1987.

(KEVIN PHILLIPS, (KEVIN PHILLIPS, AMERICAN THEOCRACY: THE PERIL AND AMERICAN THEOCRACY: THE PERIL AND POLITICS OF RADICAL RELIGION, OIL, AND BORROWED POLITICS OF RADICAL RELIGION, OIL, AND BORROWED MONEY IN THE 21ST CENTURY, MONEY IN THE 21ST CENTURY, PENGUIN BOOKS, 2006, P.272-PENGUIN BOOKS, 2006, P.272-273).273).

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4.2.84.2.8 DEVELOPING COUNTRIESDEVELOPING COUNTRIES TODAY OWE OVER TODAY OWE OVER

US$3.242 TRILLION TO THE RICH COUNTRIES US$3.242 TRILLION TO THE RICH COUNTRIES OF OF THE WORLD. THIS SCENARIO HAS UNFOLDED THE WORLD. THIS SCENARIO HAS UNFOLDED

OVER THE LAST HALF A CENTURY. TOTAL OVER THE LAST HALF A CENTURY. TOTAL INDEBTEDNESS IN 1970 WAS US$ 97 BILLION. INDEBTEDNESS IN 1970 WAS US$ 97 BILLION.

IN IN 2006 IT HAD SNOWBALLED TO US$ 3.242 2006 IT HAD SNOWBALLED TO US$ 3.242 TRILLION. THIS IS SO DESPITE THE TRILLION. THIS IS SO DESPITE THE

GRUESOME GRUESOME FACT THAT THE DEBTED COUNTIES IN FACT THAT THE DEBTED COUNTIES IN THE THE UNDER DEVELOPED WORLD DURING UNDER DEVELOPED WORLD DURING THE LAST THE LAST TWO DECADES PAID TO THE TWO DECADES PAID TO THE NORTHERN NORTHERN CREDITORS OVER US$1.5 T CREDITORS OVER US$1.5 T RILLION. RILLION.

DEBT SERVICING IN YEAR 2006 HAS JUMPED TO DEBT SERVICING IN YEAR 2006 HAS JUMPED TO US$665.2BILLION, EVEN HIGHER THAN THE TOTAL AMOUNT US$665.2BILLION, EVEN HIGHER THAN THE TOTAL AMOUNT OF DEBT OWED BY ALL THE DEVELOPING COUNTRIES OF OF DEBT OWED BY ALL THE DEVELOPING COUNTRIES OF THE WORLD IN 1980 (i.e. US$633.3 BILLION).THE WORLD IN 1980 (i.e. US$633.3 BILLION).

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4.3 POVERTY, UNEMPLOYMENT AND INEQUALITY ARE THREE MAJOR 4.3 POVERTY, UNEMPLOYMENT AND INEQUALITY ARE THREE MAJOR PROBLEMS DEFYING SOLUTION. PROBLEMS DEFYING SOLUTION.

These problems are not confined to the Third-World Countries.These problems are not confined to the Third-World Countries. Most of the Developed/Rich countries face them in varying degrees.Most of the Developed/Rich countries face them in varying degrees. Poverty measured by percent of children with less than one half of median Poverty measured by percent of children with less than one half of median

income (mid-1980s to mid 1990s) in respect of some of the developed income (mid-1980s to mid 1990s) in respect of some of the developed countries present the following picturecountries present the following picture

Source: Rosser and Rosser, opt. Cit, p.131.Source: Rosser and Rosser, opt. Cit, p.131.

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4.4 Poverty in the US, the richest Capitalist country, based on 4.4 Poverty in the US, the richest Capitalist country, based on officially measured poverty rates, defined as money income being officially measured poverty rates, defined as money income being less than three times the estimated cost of a minimum food budget, less than three times the estimated cost of a minimum food budget, has persisted over the decades. The following table reflects the has persisted over the decades. The following table reflects the overall situation as well as poverty in relation to race and ethnicity of overall situation as well as poverty in relation to race and ethnicity of the population:the population:

2020

4.5 Inequalities of income and wealth in the US have 4.5 Inequalities of income and wealth in the US have also increased, rich getting richer and poor getting also increased, rich getting richer and poor getting poorer, a phenomenon prevalent in the entire Capitalist poorer, a phenomenon prevalent in the entire Capitalist world. In 1970 top fifth of the population (20%) received world. In 1970 top fifth of the population (20%) received 40.9% of the National Income, whose share in 1999 40.9% of the National Income, whose share in 1999 increased to 47.2%. The share of the bottom fifth came increased to 47.2%. The share of the bottom fifth came down from 5.4% to 4.3% of the National Income. down from 5.4% to 4.3% of the National Income. (Source: For 1970 Statistical Abstract of the United (Source: For 1970 Statistical Abstract of the United States 1997, table 725; for 1980-1999, Statistical States 1997, table 725; for 1980-1999, Statistical Abstract of the United States 2001, table 670.Abstract of the United States 2001, table 670.

4.6 Unemployment, despite all developmental efforts, 4.6 Unemployment, despite all developmental efforts, could not be eliminated in any of the developed countries could not be eliminated in any of the developed countries of the world. Relative data for some of the countries for of the world. Relative data for some of the countries for the entire span of the twentieth century is worth the entire span of the twentieth century is worth reflecting upon. reflecting upon.

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CountryCountry 19211921 19311931 19511951 19611961 19711971 19791979 19931993 20002000

AustraliaAustralia 5.95.9 17.917.9 1.31.3 2.32.3 1.81.8 6.16.1 10.710.7 6.66.6

BelgiumBelgium 6.16.1 6.86.8 4.44.4 2.52.5 1.71.7 7.17.1 13.513.5 10.710.7

CanadaCanada 5.85.8 11.611.6 2.42.4 7.07.0 6.16.1 7.47.4 11.611.6 6.86.8

FranceFrance 2.72.7 2.22.2 2.12.1 1.51.5 2.62.6 5.95.9 11.711.7 9.29.2

GermanyGermany 1.21.2 13.913.9 7.37.3 0.70.7 0.70.7 3.33.3 7.57.5 9.29.2

ItalyItaly n.an.a 4.34.3 7.37.3 3.43.4 4.94.9 7.17.1 11.311.3 11.411.4

JapanJapan n.an.a n.an.a 1.71.7 1.41.4 1.21.2 2.12.1 2.52.5 4.64.6

SwedenSweden 1.31.3 4.84.8 1.61.6 1.51.5 2.52.5 2.12.1 9.09.0 3.93.9

UKUK 11.011.0 14.814.8 2.22.2 2.02.0 3.83.8 5.15.1 10.410.4 5.35.3

USAUSA 11.411.4 15.215.2 3.23.2 6.56.5 5.95.9 5.85.8 5.85.8 4.04.0

Percentage of Labour Force Unemployed

Source:Rosser and Rosser, Page 44

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4.7 Instability of the system is symbolised by recurring financial and 4.7 Instability of the system is symbolised by recurring financial and production crises. Fractional and now almost fictional system of production crises. Fractional and now almost fictional system of lending based on interest, and highly speculative character of lending based on interest, and highly speculative character of commodity and financial markets are at the root of the instability of commodity and financial markets are at the root of the instability of the system.the system.

4.8 Sustainability has also become a grave issue in view of 4.8 Sustainability has also become a grave issue in view of extensive overuse and misuse of the resources of the planet, extensive overuse and misuse of the resources of the planet, ignoring the needs of the posterity.ignoring the needs of the posterity.

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VVISLAMIC MODEL(s)ISLAMIC MODEL(s)

5.1 NEED FOR A CHANGE 5.1 NEED FOR A CHANGE OFOF THE PARADIGM AND NOT THE PARADIGM AND NOT SIMPLY CHANGE SIMPLY CHANGE WITHIN WITHIN THE PARADIGMTHE PARADIGM

5.2 WORLD VIEW AND VALUE FRAMEWORK5.2 WORLD VIEW AND VALUE FRAMEWORK5.2.1 5.2.1 TAWHEEDTAWHEED (UNITY OF GOD) (UNITY OF GOD)

5.2.2 5.2.2 RABYBIYYAH RABYBIYYAH (DIVINE SYSTEM OF SUSTENANCE)(DIVINE SYSTEM OF SUSTENANCE)

5.2.3 5.2.3 RISALAHRISALAH/ PROPHETHOOD AND GUIDANCE/ PROPHETHOOD AND GUIDANCE

5.2.4 5.2.4 AAKHIRAHAAKHIRAH (LIFE- HEREAFTER/ ACCOUNTABILITY) (LIFE- HEREAFTER/ ACCOUNTABILITY)

5.2.5 5.2.5 ISTIKHLAFISTIKHLAF (VICEGERENCY/ STEWARDSHIP) (VICEGERENCY/ STEWARDSHIP)

5.2.6 5.2.6 TAZKIYYAHTAZKIYYAH (PURIFICATION AND GROWTH) (PURIFICATION AND GROWTH)

5.2.7 5.2.7 KAFALAHKAFALAH (MUTUAL SUPPORT/SOCIAL SOLIDARITY) (MUTUAL SUPPORT/SOCIAL SOLIDARITY)

5.2.8 ‘5.2.8 ‘ADALAH ADALAH AND AND QIST QIST (JUSTICE AND EQUITY)(JUSTICE AND EQUITY)

5.2.9 5.2.9 FALAHFALAH (WELLBEING/ HERE-HEREAFTER) (WELLBEING/ HERE-HEREAFTER)

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5.3 CHARACTERISTICS 5.3 CHARACTERISTICS

5.3.1 HOLISTIC/ COMPREHENSIVE/ INTEGRATED5.3.1 HOLISTIC/ COMPREHENSIVE/ INTEGRATED

5.3.2 VALUE BASED IDEALS AND OBJECTIVES:5.3.2 VALUE BASED IDEALS AND OBJECTIVES: CLEAR STATEMENT OF CLEAR STATEMENT OF MAQASID-E-SHARIAH MAQASID-E-SHARIAH PROVIDING THE VALUE FRAMEWORK FOR PROVIDING THE VALUE FRAMEWORK FOR ECONOMY AND SOCIETY.ECONOMY AND SOCIETY.

PROTECTION OF DEENPROTECTION OF DEENPROTECTION OF INTELLECTPROTECTION OF INTELLECTPROTECTION OF BODYPROTECTION OF BODYPROTECTION OF FAMILY/ POSTERITYPROTECTION OF FAMILY/ POSTERITYPROTECTION OF WEALTHPROTECTION OF WEALTH

5.3.3 BALANCED5.3.3 BALANCEDSPIRITUAL AND MATERIALSPIRITUAL AND MATERIAL INDIVIDUAL AND SOCIETYINDIVIDUAL AND SOCIETYSELF- INTEREST AND SOCIAL RESPONSIBILITYSELF- INTEREST AND SOCIAL RESPONSIBILITY

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5.3.4 REALISTIC:5.3.4 REALISTIC: WORLDY/ MATERIAL DIMENSIONWORLDY/ MATERIAL DIMENSIONWELFARE AND WELLBEING OF ALLWELFARE AND WELLBEING OF ALLMONEY’S UNIQUE ROLE AS MEDIUM OF EXCHANGE PROMOTING MONEY’S UNIQUE ROLE AS MEDIUM OF EXCHANGE PROMOTING

PHYSICAL ECONOMY AND NOT JUST FIDUCIARY EXPANSIONPHYSICAL ECONOMY AND NOT JUST FIDUCIARY EXPANSIONDIIVERSITY AND PLURALITYDIIVERSITY AND PLURALITY

5.3.5 HUMANISTIC5.3.5 HUMANISTIC

FOCUS ON MAN AND NOT MERELY ON WEALTH/ PRIORITY FOR FOCUS ON MAN AND NOT MERELY ON WEALTH/ PRIORITY FOR HUMAN DEVELOPMENT AND WELLBEING.HUMAN DEVELOPMENT AND WELLBEING.

5.3.6 JUSTICE AND EQUITY FOR ALL5.3.6 JUSTICE AND EQUITY FOR ALL

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VI VI MAJOR PRINICIPLES AND PROCESSES MAJOR PRINICIPLES AND PROCESSES

OF AN ISLAMIC ECONOMYOF AN ISLAMIC ECONOMY

6.1 FOUNDING ECONOMIC AND FINANCIAL DEALINGS ON 6.1 FOUNDING ECONOMIC AND FINANCIAL DEALINGS ON MORAL VALUES AND GUIDELINES FOR CONSUMPTION, MORAL VALUES AND GUIDELINES FOR CONSUMPTION, PRODUCTION, EXCHANGE AND STATE ACTIVITIES.PRODUCTION, EXCHANGE AND STATE ACTIVITIES.

6.2 PRIVATE PROPERTY, FREEDOM OF ENTERPRISE AND 6.2 PRIVATE PROPERTY, FREEDOM OF ENTERPRISE AND MARKET MECHANISM, WITH:MARKET MECHANISM, WITH:

MORAL FILTER, AT INDIVIDUAL AND SOCIETAL LEVELSMORAL FILTER, AT INDIVIDUAL AND SOCIETAL LEVELSCIVIL SOCIETY, SUPPORT MECHANISMS, WAKF, AND CIVIL SOCIETY, SUPPORT MECHANISMS, WAKF, AND

STRENGTHENING OF ALTRUISTIC (NON-PROFIT) SECTOR.STRENGTHENING OF ALTRUISTIC (NON-PROFIT) SECTOR.SUPPORTIVE, REGULATORY AND CORRECTIVE ROLE OF THE STATE.SUPPORTIVE, REGULATORY AND CORRECTIVE ROLE OF THE STATE.

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• 6.3 ABOLUTION OF 6.3 ABOLUTION OF RIBA RIBA (INTEREST/ USURY), (INTEREST/ USURY), MAISIR MAISIR (SPECULATION/GAMBLING), AND (SPECULATION/GAMBLING), AND GHARARGHARAR (AMBIGUITY, (AMBIGUITY, UNCERTAINTY AND DECEPTION)UNCERTAINTY AND DECEPTION)

• 6.4 EQUITY-BASED, RISK-SHARING AND STAKE HOLDING 6.4 EQUITY-BASED, RISK-SHARING AND STAKE HOLDING ECONOMY AS AGAINST DEBT-BASED ECONOMYECONOMY AS AGAINST DEBT-BASED ECONOMY

• 6.5 USEFUL CONSUMPTION AND PRODUCTION6.5 USEFUL CONSUMPTION AND PRODUCTION

• 6.6 DISTRIBUTIVE JUSTICE6.6 DISTRIBUTIVE JUSTICE

• 6.7 MONETARY DISCIPLINE AND PRICE STABILITY6.7 MONETARY DISCIPLINE AND PRICE STABILITY

• 6.8 EFFICIANCY WITH EQUITY AND WELL-BEING FOR ALL6.8 EFFICIANCY WITH EQUITY AND WELL-BEING FOR ALL

• 6.9 GLOBAL COOERATION AND INTEGRATION, WITH SELF-6.9 GLOBAL COOERATION AND INTEGRATION, WITH SELF-RELIANCE OF THE UMMAHRELIANCE OF THE UMMAH

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Suggested ReadingsSuggested Readings

1.1. AHMAD, Khurshid, AHMAD, Khurshid, “The Challenge of Global Capitalism: “The Challenge of Global Capitalism: An An Islamic Perspective”,Islamic Perspective”, in in Making Globalisation Good: The Moral Making Globalisation Good: The Moral Challenges of Global Capitalism, Challenges of Global Capitalism, ed. by John H. Dunning, Oxford, ed. by John H. Dunning, Oxford, 2003.2003.

2.2. CHAPRA, Mohammad Umer, CHAPRA, Mohammad Umer, Islam and the Economic Challenge,Islam and the Economic Challenge, Leicester, Islamic Foundation, 1992.Leicester, Islamic Foundation, 1992.

3.3. CHAPRA, Mohammad Umer, CHAPRA, Mohammad Umer, The Future of Economics: An The Future of Economics: An Islamic PerspectiveIslamic Perspective, Leicester, Islamic Foundation, 2000., Leicester, Islamic Foundation, 2000.

4.4. HALL, Peter A. and DavidHALL, Peter A. and David Soskice, Soskice, Varieties of Capitalism, Varieties of Capitalism, Oxford, 2001.Oxford, 2001.

5.5. PORRITT, Jonathan, PORRITT, Jonathan, Capitalism: As If the World Matters,Capitalism: As If the World Matters, London, London, Earthscan, 2005.Earthscan, 2005.

6.6. Rosser, J. Barkley and Marina V. Rosser, Rosser, J. Barkley and Marina V. Rosser, Comparative Comparative Economics in A Transforming World Economy, The MIT Press, Economics in A Transforming World Economy, The MIT Press, Cambridge, 2004.Cambridge, 2004.

7.7. SHUTT, Hary, SHUTT, Hary, The Trouble With Capitalism: An Enquiry Into The The Trouble With Capitalism: An Enquiry Into The Causes of Global Economic Failure, Causes of Global Economic Failure, London, Zed Books, 1998.London, Zed Books, 1998.

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8.8. LANE, R., LANE, R., The Loss of Happiness in Market Democracies, The Loss of Happiness in Market Democracies, Yale Yale University Press, 2000.University Press, 2000.

9.9. YOUNG, S., YOUNG, S., Moral Capitalism: Reconciling Private Interest With Public Moral Capitalism: Reconciling Private Interest With Public Good, Berrett-Koehler, Good, Berrett-Koehler, San Francisco, 2003.San Francisco, 2003.

10.10. AMBLE, Bruno, The Diversity of Modern Capitalism, AMBLE, Bruno, The Diversity of Modern Capitalism, Oxford University Oxford University Press, 2003.Press, 2003.

11.11. ROSEFIELDE, Steven, ROSEFIELDE, Steven, Comparative Economic Systems: Culture, Wealth Comparative Economic Systems: Culture, Wealth and Power in the 21and Power in the 21stst Century Century, Blackwell, 2002., Blackwell, 2002.

12.12. MONTIAS, John Michael, Avner Ben-Ner, and Egon Neuberger, MONTIAS, John Michael, Avner Ben-Ner, and Egon Neuberger, Comparative Economics, Comparative Economics, Routledge, 2002Routledge, 2002

13.13. SCHWEICKERT, David, SCHWEICKERT, David, Against CapitalismAgainst Capitalism, Westview Press, Oxford , Westview Press, Oxford 1996.1996.

14.14. FULCHER, James, FULCHER, James, Capitalism: A very Short IntroductionCapitalism: A very Short Introduction, Oxford, 2004., Oxford, 2004.

15.15. THUROW, Lester. C., THUROW, Lester. C., The Future of Capitalism: How Today’s Economic The Future of Capitalism: How Today’s Economic Forces will Shape Tomorrow’s WorldForces will Shape Tomorrow’s World, London, Nicholas Brealey, 1996., London, Nicholas Brealey, 1996.