A comprehensive solution for our economic woes

Should we give more money to GM? Is Citibank the missing link in our path to recovery? Will we fix everything by solving the mortgage crises? If we gave every American ten more dollars every month, would that fix the economy?

We see questions like these every few decades and in various locales. Responses range from Nazism to communism; from socialism to unbridled capitalism; from the “new deal” to the “tax cuts”. Are these enduring philosophies?

Islam provides the only comprehensive and permanent solution to today’s financial woes that addresses our psychological deficiencies, our moral decadence, and certain aspects of our policies.
Greenspan stated in a recent interview that “the innate human responses result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve”. Interestingly Islam tells us that unbridled capitalism will lead to our destruction (102:2-3). Our political leaders should ponder over this and understand that we need effective regulations to ensure that such forces do not run amuck.

Islam leaves room for free enterprise but rejects the flawed view that “money begets money.” Many of the billionaires listed in Forbes attribute their wealth to “investments.” While we need institutions to facilitate the circulation of wealth, we cannot let this be an end in itself. Making this the goal divorces the investors from the art of making a profit through entrepreneurial activities and instead results in financial catastrophes, such as the current mortgage meltdown.

Usury is forbidden in Islam. Economists suggest that such vehicles are an essential component of the overall system but Islam cautions us that it will lead to our destruction. It is interesting to see how we lower interest rates to rejuvenate the economy without acknowledging, as Islam does, the need to abolish it completely (2:276,277,280). Such interest encourages the hoarding of wealth and other reckless activity.

Islam rejects the practice of gambling (2:220). In modern times, unfortunately, this has taken center-stage in our economic system; from individuals who borrowed “betting” that their home will go up in price to banks who “gambled” on individuals paying, to the idea of selling that “risk” to other banks; is but a game of dice.

Islam emphasizes the circulation of wealth and suggests that uncirculated wealth should be taxed. Islam understands the need for such cash reserves, but for the greater good of the society, suggests that such money be appropriately taxed. The main beneficiary of such a tax should be the poor – those who did not enjoy the luxury of having such cash reserves.

Islam lays great importance to “straight talk” or saying the “right word” (33:71). In business one may be legally truthful while still being deceptive. Several banks violated this principle when they offered loans to those who could not afford it. Then they carried on their deception when they sold those bad loans to other institutions.

Finally, Islam presents our life as a struggle between God and the world and establishes God as the purpose of our lives (51:57). Rejecting God puts us at the mercy of our vain pursuits including that of accruing wealth (57:21). Islam teaches us to control our desires and to reign in our jealousy regarding material wealth (20:132). These verses caution those who borrow beyond their means.

Islam offers a unique approach for addressing today’s crisis. It focuses on the disease rather than the symptoms. This disease can deteriorate into Nazism, Communism, Radicalism, and chaos – so we need to address this positively and without preconceived notions.
A comprehensive translation of the Quran may be referenced at http://www.alislam.org.