Posted by Zia Shah
The short answer to this provocative question in the title is that the elite 1% will pay Zakat, which is a tax on savings and property. At a suitable rate of taxation, Zakat will have the potential to fulfill all the essential needs of the remaining 99%. If the top one percent in USA were true Muslims, they will gradually and genuinely abolish interest or usury and promote international free trade. This Op-Ed is a short presentation in favor of Zakat and an interest free economy and a more detailed exposition will be published later on. Read on and in the words of Sir Francis Bacon, “Read not to contradict… but to weigh and consider.”
John R. Gribbin is a British science writer, who earned his Ph.D. in astrophysics from the University of Cambridge, writes in his very well written book, the Scientists: A History of Science Told Through the Lives of its Greatest Inventors: “The renaissance was the time when Western Europeans lost their awe of the Ancients and realized that they had as much to contribute to civilization and society as the Greeks and Romans had contributed. To the modern eyes, the puzzle is not that this should have occurred, but that it should have taken so long for people to lose their inferiority complex.” In the same vein, it seems that the 99%, in the form of Occupy Wall Street protests, are finally ready to overcome their awe of the Nobel Laureates in Economics and fancily dressed rich investment bankers and throw away their inferiority complex and begin to understand the financial system. In this age of information, we should be ready to begin to learn from teachers like, Congressman Ron Paul, Prof. Niall Ferguson and Murray N. Rothbard, who have provided adequate education, in form of well written books, to understand and demystify our present day capitalism, grounded in Central Banking and interest based economy.
The Emperor of present day capitalism has no clothes! But, the masses until recently have not had the courage to see it. The human condition is as Plato would make Socrates say in the Republic (7.514a ff.), comparable to that of prisoners of an underground cave, whose unfortunate fate is to confuse reality with passing shadows created by a fire inside their miserable abode and kept in motion by clever manipulators, who in the name of politics, religion, science, and tradition control the human herd. This is the trick that the bankers and the economists have played on the naïve world in the last century or two. Usury (in the original sense of any interest rate) was denounced by a number of religious leaders and philosophers in the ancient world, including Plato, Aristotle, Cato, Cicero, Seneca, Aquinas, Muhammad, may peace be on him, Prophet Moses and Prophet Gautama Buddha. Not only Islam, but, the Catholic Church has also been against interest or usury over the centuries. What was a prohibition of usury in the teachings of the Prophet Moses was changed into a racist idea over generations in the form of treating a Jew differently from a stranger and the Old Testament records this distortion, “Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury!” (Deuteronomy 23:20) This biblical teaching is certainly terribly impractical for our Global village.
It should not be hard to understand the case and practicality of interest free economy. Interest rate in Japan has been close to zero for a long time and more recently it has been close to zero, at least for the banks, in USA. So, an easy case can be made that economies can work without interest. If the functional interest rate is zero it only means that the rich cannot benefit from their hoarded wealth. Only way they can make money, would be to invest their savings in the economy, which would not only benefit them but also the rest of the 99%. Additionally, at present, whenever the Western Governments increase the money supply, they have to pay interest on the money created, to the privately owned Central Banks, which are called Federal Reserve Banks in USA. In an interest free economy, the government and indirectly the whole nation has the power to create new money and not a few families owning the Central Banks. To further elaborate the problems with interest based economy, let us borrow a simple example of compound interest narrated as a parable. The penny invested by Augustus Caesar in 8 BC would be worth 3 trillion, trillion, trillion, trillion dollars today at 6 percent compound interest. The world only has around 100 trillion dollars in total wealth today. Given this power of compound interest it is not hard to understand, why wealth has accumulated in few hands in our country, USA, and why several million have lost their homes to foreclosures during the recent crisis. This is also why not only companies go bankrupt but also states, cities and countries, as we have witnessed several times during the last few years. The Holy Quran describes all this recent chaos in political and financial affairs, by calling the end result of those who indulge in interest or usury, as if they have been smitten into insanity by Satan! The Quran states, “Those who devour interest stand like one whom Satan has smitten with insanity. That is so because they keep saying: The business of buying and selling is also like lending money on interest; whereas Allah has made buying and selling lawful and has made the taking of interest unlawful.” (Al Quran 2:276)
Now let us turn to Zakat. Historically, Zakat was charged at 2.5% rate on certain savings. But, governments can suitably increase the rate based on national and other circumstances. At 5% annual taxation, in an interest free environment, even the biggest estates will disappear in thin air over a twenty year period, unless the owners were gainfully employing the estates in business and trade. This means that if Zakat and interest free economy is in place, wealth will not stay in few hands over generations, who according to the famous dictum, ‘power tends to corrupt and absolute power corrupts absolutely,’ use their power to the detriment of the common man.
If we ask the wrong questions the answers will not matter and that seems to be a very common ploy, of keeping masses duped, while the rich, the top one percent and more specifically the bankers exploit them. The right questions at the present time are: Why did communism collapse? What are the limitations of capitalism? What are the pros and cons of privately owned Central Banks? What are the positive ramifications of governments owning the Central and other banks? Would such ownership mean that the interest they charge is another form of taxation only? How can government owned banks be kept honest and support useful investments? What are the lessons to be learnt from the Chinese success story? Why cannot we make the political system in USA more fair and honest by taking the money out of elections and providing relatively free and open access in the public media to genuine candidates?
Communism failed as it did not properly reward personal effort and as we try to find solutions for our current malaise, we do not want to repeat the past mistakes. If we follow the two Islamic principles, namely interest free economy and payment of Zakat then we may find the happy medium between communism and capitalism, wherein individual effort is rewarded but wealth is not hoarding in a few hands. In the short space of this Op-Ed we will not quibble about the final details. Occupy Wall Street movement could encourage appropriate scholars, who have shown expertise and integrity, to try to answer the above questions and educate the masses. One teacher that comes to mind is Congressman Ron Paul and scores of others can be found with a genuine effort. It is reasonable to assume that the present day institutions are not going to ask or answer the appropriate questions; they are cozily in bed with the present financial system. So, we should look for solutions to our present problems elsewhere!
As we move forwards, we will need to examine various forms of Pyramidal or Ponzi schemes and declare them against law, for individuals as well as governments. Any financial system, which adequately rewards labor and creativity and is administered fairly, can provide for progress of human race. So, as long as we can motivate people enough with reward and put them to hard work and at the same time promote creativity, we should have a pragmatic system that can serve the needs of not only the 1% but also the remaining 99%.
I am not proposing an economic revolution here. Islam does not like disorder or chaos. I am suggesting incremental change only. I am suggesting only two principles, firstly, an interest rate close to zero and secondly, introducing the concept of Zakat at some suitable rate in a gradual fashion, within the present monetary, financial and economic paradigms. It should be done slow enough that it neither disrupts the rich families, nor gives false hopes and pretensions to the poor.
Picture is courtesy of CNN. The article is original Op-Ed of the Muslim Times.
To see a collection of articles by Dr. Zia H Shah on the theme of Religion, Politics and Human Rights, click here: