The Difference between a Divinely-Revealed Economic Programme and a Man-Made one: How Islamic Economic Theory Can Prevent the Looming Global Recession

If they switched to the economic programme revealed in the Qur’an, today’s super-rich in both the Muslim and non-Muslim worlds could still live very comfortable lives, and everyone could be a lot happier. But are they brave enough to want to free themselves from the powerful grip of materialism and greed?

by Syed Muhammad Saleh Nasser & Syed Muhammad Tahir Nasser

Economic inequality is bad news for both rich and poor, as economists are slowly realising. House of Debt, acclaimed by the Financial Times as the “most important economics book” of 2015, by Princeton’s Professors of Economics, Atif Mian and Amir Sufi, demonstrated this well. They showed that the main cause of the 2008 U.S-led global recession was that indebted households pulled back on spending more during an economic downturn than the less indebted, driving businesses big and small into the ground and putting the whole economy into recession. Given that as of December 2015 household debt in the UK stands at a staggering 135% of income, and that U.S household debt is the highest it has been since 2010, we have good reason to worry.

The root of this problem is debt and the consequent wealth-gap between creditors and debtors. Interestingly, Islamic economic theory addresses such inequality and provides real solutions. Did you even know that Islam teaches economics?

Islamic economic theory differs from our current model in two particular ways: firstly, capital taxation, known as zakat (meaning: “that which purifies”) is advocated over income taxation, and secondly, interest is prohibited. In truth, these two mechanisms go hand in hand. Here’s how.

There are two things in an economy: 1) money; 2) goods (like ice cream) and services (like launderettes). The value of money is only in its ability to obtain goods/services. Beyond this, it has no value in and of itself. This is the basic premise of money and the basic premise of Islamic finance. It is this principle that is violated by interest.  How so?

Let’s take a society comprised only of 100 bottles and £100. 1 bottle = 1 pound. If the number of bottles increases by 50 but the amount of money in society increases by £200, then we will have 150 bottles and £300. Now 1 bottle = £2. The value of each bottle has gone up but the value of £1 has gone down. Now £1 only gets you half a bottle, whereas before you could get a whole bottle. This is called Inflation and occurs when the amount of money in society rises quicker than the goods/services. This process results in 1) goods/services getting more expensive and 2) money becoming relatively devalued.

Interest is the key driver of inflation. This is because interest results in money multiplying itself without any increase in goods/services. An individual with £100,000 in the bank gets an increase on his savings of £2000-£3000/year at an interest rate of 2-3%. His money has grown without any commensurate increase in the goods/services of society at all. This is the key driver of inflation: as the money of the rich grows exponentially and since sale is always to the highest bidder, the price of goods/services increases exponentially too.

The key to understanding how inflation drives wealth inequality in society is to understand that the rich live on their assets (acquired goods/services) through the generation of money via interest and inflation, not on their income. On the other hand, the poor live on their income, as they don’t have assets to any great extent. As inflation pushes the value of assets up while devaluing cash, the rich who hold assets get richer, while the poor, who live on cash from their incomes, have rising interest-driven debts to pay with a currency that is increasingly devalued, while trying to buy assets that are continuously increasing in price. Is it any surprise then that the wealthiest sixty-two individuals in the world hold as much wealth as the poorer 50% of humanity?

Islamic teachings address these issues very simply. Instead of taxing income, it advocates capital taxation of assets unused for one year (zakat). At the same time, it prohibits the system of interest, thus preventing inflation and preventing the devaluation of the income of the poor. Instead of providing loans with interest, Islam encourages banks to make investments, meaning that money would only be printed if a commensurate increase in goods/services were to occur. In cases where interest-free loans are made, it encourages debt-forgiveness as healthier than debt-enforcement – something that governments are today catching on to.

By taxing assets unused for one year instead of income, the poor, who live on their income, are freer to spend, thus driving the wheel of economic consumption, keeping businesses big and small, afloat. Capital taxation would also drive economic growth as it would be an incentive to invest into businesses. Furthermore, it would enrich the government, as demonstrated by Daniel Altman of the New York Times, who showed that a capital taxation rate of 1-2% on wealth over $500,000 would generate more tax for the U.S Treasury than their current income taxation rates. 0% taxation on assets up to $500,000 would also give ordinary individuals the freedom to build wealth. Additionally, by ridding us of interest, the indebted would be more able to move out of debt. Finally, given that the Qur’an commands that zakat money be used to aid social mobility, through distribution to the poor, needy, imprisoned, indebted etc., the gap between the rich and the poor would be further rapidly reduced.

So if a capital taxation, non-interest based system is so much better for 99.9% of people, why don’t we use it? Why have we got a system that works for only the 0.1%? Simple: the 0.1% have access via back-channels to the law-makers of our nations. If anything the Sanders-Clinton race has exposed, it is the degree to which financial manipulation of our representatives is occurring behind the scenes. If such an unjust system in which the poor continuously feed the rich continues, then the dissatisfaction of the masses, epitomized in the rise of such leaders like Corbyn in the U.K and Sanders in the U.S, will inevitably get worse.

So there you have it, the difference between an economic system revealed by God and a worldly economic system built on the backs of the poor, now on the brink of collapse. Given however, that “Muslim” countries don’t even practice these economic principles though, I wouldn’t hold out much hope that anyone else will either before the economic recession we are about to slide into, takes hold.

On that note, here’s a good website for calculating how much food to stock up on.

Reproduced from where it appeared under the title of “Can Islamic Economic Theory Prevent the Looming Global Recession?” posted by Qasim Rashid. For the original article, click HERE.



Universal Moral Values, Politics and World Peace

Over the past two centuries, the world has been drifting away from ethical behaviour rooted in a belief system with God central to all things, towards an atheistic world of selfish materialism in which the moral compass has been broken. As a result, modern civilisation is now racing towards chaos and collapse.

In his 1996 address in Canada to members of paliament and other dignitaries, the then Spiritual Head of the Worldwide Ahmadiyya Muslim Community, Mirza Tahir Ahmad, called on the world to return to Godly virtues. Moreover, he predicted that if mankind failed to return to moral values reflecting the attributes of divine goodness, capitalism, with its usury and interest, would inevitably lead to a global economic crisis and a third world war of terrifying proportions.

Hadrat Mirza Tahir Ahmad

Mirza Tahir Ahmad

Read his short address here.

World Crisis & the Pathway to Peace

World Crisis and pathway

The world is passing through very turbulent times. The global
economic crisis continues to manifest newer and graver dangers
almost every week. The similarities to the period just before the
Second World War continue to be cited and it seems clear that
events are moving the world at an unprecedented pace towards
a horrific third world war. There is an overwhelming sense that
things are quickly getting out of control and the people are looking
for someone to step on to the stage to offer concrete, solid,
guidance in which they can have confidence and that speaks to
their heart and mind alike and gives them hope that there is a path
that can lead to peace. The consequences of a nuclear war are so
catastrophic that none dare even think about them.
Here, in this book, we have gathered the guidance put forth
by Hadrat Mirza Masroor Ahmad, the Head of the worldwide
Ahmadiyya Muslim Community. Over the past several years, as
events have unfolded, he has been fearless in announcing to the

world where things are heading—not to create alarm but to prepare
them to think about how the world has arrived in this state
of being and how it can avert disaster and chart a course to peace
and security for all the people that inhabit this global village. He
has forthrightly proclaimed that the only way to insure peace is
for the world to adopt the ways of humility and justice and to
humbly, submissively, turn to God; for man to become humane;
for the strong to treat the weak with dignity and respect and
justice and for the weak and poor to also to show gratitude and
adopt the ways of truth and righteousness and for all to turn to
their Creator in utter humility and total sincerity.
Again and again he has reminded one and all that the way
back from the brink of disaster is for nations to make justice an
absolute requirement of their dealings with each other. Even if
there is enmity between them they need to still observe justice
because history has taught us that this is the only way to eliminate
all traces of future hatreds and thus build a lasting peace.
This is the teaching of the Holy Qur’an that he has emphasized
in his letters to the leaders of the world:
And let not the enmity of a people, that they hindered
you from the Sacred Mosque, incite you to transgress.
And help one another in righteousness and piety; but
help not one another in sin and transgression. And fear
Allah; surely, Allah is severe in punishment. (ch. 5: v. 3)
In his letter to the Prime Minister of Israel, he wrote:
Hence, it is my request to you that instead of leading

the world into the grip of a World War, make maximum
efforts to save the world from a global catastrophe. Instead
of resolving disputes with force, you should try to resolve
them through dialogue, so that we can gift our future generations
with a bright future rather than ‘gift’ them with
disability and defects.
To the President of the Islamic Republic of Iran, he admonished:
There is currently great agitation and restlessness in the
world. In some areas small-scale wars have broken out,
while in other places the superpowers act on the pretext
of trying to bring about peace. Each country is engaged in
activities to either help or oppose other countries, but the
requirements of justice are not being fulfilled. It is with
regret that if we now observe the current circumstances of
the world, we find that the foundation for another world
war has already been laid.
To President Obama, he stated:
As we are all aware, the main causes that led to the Second
World War were the failure of League of Nations and the
economic crisis, which began in 1932. Today, leading economists
state that there are numerous parallels between the
current economic crisis and that of 1932. We observe that
political and economic problems have once again led to
wars between smaller nations, and to internal discord and
discontentment becoming rife within these countries. This

will ultimately result in certain powers emerging to the
helm of government, who will lead us to a world war. If in
the smaller countries conflicts cannot be resolved through
politics or diplomacy, it will lead to new blocs and groupings
to form in the world. This will be the precursor for
the outbreak of a Third World War. Hence, I believe that
now, rather than focusing on the progress of the world, it is
more important and indeed essential, that we urgently increase
our efforts to save the world from this destruction.
There is an urgent need for mankind to recognise its One
God, Who is our Creator, as this is the only guarantor for
the survival of humanity; otherwise, the world will continue
to rapidly head towards self-destruction.

To Premier Wen Jiabao of the State of the People’s Republic of
China, he wrote:
It is my prayer that the leaders of the world act with
wisdom and do not allow mutual enmities between nations
and people on a small-scale to erupt into a global
And to the Prime Minister of the United Kingdom, he wrote:
It is my request that at every level and in every direction
we must try our level best to extinguish the flames of
hatred. Only if we are successful in this effort, will we be
enabled to guarantee brighter futures for our generations
to come. However, if we fail in this task, there should be

no doubt in our minds that as result of nuclear warfare,
our future generations everywhere will have to bear the
horrific consequences of our actions and they will never
forgive their elders for leading the world into a global catastrophe.
I again remind you that Britain is also one of
those countries that can and does exert influence in the
developed world as well as in developing countries. You
can guide this world, if you so desire, by fulfilling the requirements
of equity and justice. Thus, Britain and other
major powers should play their role towards establishing
world peace. May God the Almighty enable you and other
world leaders to understand this message.

It is our sincere prayer that the guidance collected herein may

prove a source of guidance for mankind in this time of great
danger so that by acting on the principles of justice and humility
and by turning to God, man may be blessed with a lasting peace.