Is Capitalism Evil?

Is Capitalism Evil?

by Muhammad Javed

Imagine a world in which it’s richest 1% control more wealth than 90% of the human population while 3 billion live on less than $2.5 a day and more than 1 billion children go to bed hungry![1] This is sadly the stark reality we live in today, in which the dominant economic system of capitalism breeds greed and inequality, fueled by interest, putting self-interest on a pedestal and irresponsibly consuming resources, leaving a devastating impact on the environment to maximize profits and share-holder interests. Is this system that has been adopted in most Muslim countries, willingly and unwillingly, by the powers of the day in line with the Quranic vision of an Islamic Economic system? What impact does adopting capitalism have on Muslims? These questions will be briefly explored in this short paper.

Although the definition of capitalism has eluded a fixed definition over the years and has evolved over time, today’s “extreme capitalism” can be defined as system that focuses on maximizing profits by any means:

“It represents an economy in which every attempt is made to ensure that costs of production – wages and costs of raw material – are kept as low as possible in order to increase profits to serve the objective of accumulation of capital and wealth.”[2]

What are the major side-effects that have surfaced because of capitalism in the Muslim world and beyond? These can be summarized in four critical issues:

1. Massive debt accumulation due to interest-driven economy
2. Massive inequalities, injustice and oppression due to uneven distribution of wealth
3. Massive destruction to the environment
4. Cyclical financial crises straining the world

New let us explore each of these in more detail and the Islamic perspective:

1. Massive debt accumulation due to interest-driven economy

Interest is the life-blood of capitalist economy. Money is used to make money by lending money and charging interest on the capital due over time. This is a mechanism by which the rich manage to stay rich and poor are unable to escape the viscous-circle of debt-repayment. This is observed at the micro individual level as well as the macro country level where the poor countries are constantly trapped in the cycle of debts to finance functioning of their governments from richer countries and institutions. This is starkly apparent in the Muslim world within which half of global poverty resides.[3] Moreover, institutions like IMF and World Bank control the economic policies and governance of poor Muslim nations due to the ballooning debt they’ve given them. Countries such as Egypt, Afghanistan, Pakistan and African nations become targets of austerity programs that prioritize economic performance over social welfare and service to the people. Abdullah highlights the role of international financial institutions in the Muslim world:

“A general critique of present IMF-World Bank practice is that it helps utilize the debt accumulated under dictatorship to enforce privatization and effectively limit true democratization. The $35 billion in private Egyptian debt certainly helped props up an economy that was guided by IMF-World Bank induced reform from the 1990’s, reform that similarly served only the interests of indigenous and foreign elite.”[4]

From an Islamic perspective, making money from money – interest in all its forms and uncertainty (gharar) by gambling and other forms are forbidden in no uncertain terms. Allah swt says:

“Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest…”[ 2:275]

“O you who have believed, fear Allah and give up what remains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger. But if you repent, you may have your principal - [thus] you do no wrong, nor are you wronged.” [2:278-9]

There are many prophetic narrations prohibiting various types of riba such as this:

Jabir said that Allah's Messenger (ﷺ) cursed the accepter of interest and its payer, and one who records it, and the two witnesses, and he said: “They are all equal.”[5]

In contrast to the capitalist interest-based model, Islam propagates that risk needs to be shared and not just in the hands of the borrower. Moreover, it promotes the concept of a production based real-economy by making money from good, service or production capacity and not by merely lending.

2. Massive inequalities, injustice and oppression due to uneven distribution of wealth

The excessive accumulation of wealth in the hands of a few is natural byproduct of capitalism which strives to maximize the profits of share-holders. The modern-day corporate system has produced corporations that are bigger than many governments and coupled with globalization, they are vehicles of modern day imperialism where countries are colonized indirectly and their resources are extracted, profits maximized by corporates headquartered in the developed world. The leaders of many resource-rich but under-developed nations are happy to be partners in crime as long as they receive lucrative incentives from bribes and corruption, with the common man suffering from lack of basic amenities and education.

3. Massive destruction to the environment

The insatiable appetite for consumption bred by capitalism, along with the ‘profit-maximization at any cost’ attitude has left a devastating impact on the environment and dismal forecasts for the future if the status quo remains. Massive release of Carbon Dioxide into the atmosphere has led to the greenhouse effect, depleting the ozone and triggering the global warming leading to melting of the glaciers and rising of sea level and many other problems. Many parts of the world are becoming flooded and villages and cities have to be relocated as the sea-level is rising. Extreme weather fluctuations, shifting wildlife populations, rapid deforestation, disappearing species, destruction of habitats, massive deforestation, irresponsible disposable of wastes all add to the climate crisis we find ourselves in today thanks to capitalistic greed.[6]

Mirakhor notes that any reversal of these trends will hurt the profits of powerful corporations by rising costs or would have to borne by the debt laden governments, resulting in the status-quo to prevail further plunging the environment into destruction. (Mirakhor, 2020) Muslim nations such as Indonesia are in the epicenter of this environmental crisis. Islam in contrasts defines man’s role as an agent-trustee (khalifaa fil-ard) and defines rights and responsibilities towards all fellow human beings, animals, plants, and environment.

4. Cyclical financial crises straining the world

The oppressive interest-based capitalistic economic system along with the economic policies to mitigate their harm have caused boom-bust cycles, inflation, economic and financial crises occurring in regular intervals either locally or globally, taking a massive toll on the financial sector and real economy.[7]

In contrast to this capitalistic model, Islam offers a viable alternative with the following characteristics (Shakespeare, 2007): ‘free markets,  private property and widespread ownership of productive capital,  economic efficiency, social and economic justice, no inflation, no riba /interest, a direct connection between the money supply and the real economy, and an ethical ethos.’

The balanced socialist-welfare model of Islamic Economics brings harmony by recognizing the rights of the Creator and the Created (other humans and nature). The economic engines function in compliance with the divine rules and objective of social justice, ‘constraining accumulation and hoarding of wealth, the redistributive instruments-Zakat, Khoms, Kharja, Sadaqat, Qardh Hassan, among others-in combination with Islamic rules of inheritance become crucial in pursing the prime objective of Islam, justice, for human societies.’ (Mirakhor & Askary, 2019)

In conclusion, capitalism has succeeded in stripping the moral compass when it comes to business, money and economics and has put profit above all consideration, spreading oppression and causing immense damage to the fabric of human society and the environment. In contrast, Islam offers an economic alternative that is based on divine guidance and brings harmony, balance and justice by aligning rights and responsibilities based on divine wisdom, in the pursuit of wealth.

Bibliography

AbdulHamid, A. S. (2020). Thematic Address. Failure of Extreme Capitalism: Is Islamic Economics the Answer? . Kuala Lumpur: Institute of Islamic Understanding Malaysia.

Ariff, D. M. (2020). Economic and Financial Crises: Can Islamic Economics and Finance Make a Difference. Failure of Extreme Capitalism: Is Islamic Economics the Answer? . Kuala Lumpur : Institute of Islamic Understanding Malaysia (IKIM).

Huntington, S. (1996). The Clash of Civilizations. London: Simon & Schuster.

Khan, A. (2008). There are alternatives to free market capitalism!

Mirakhor, A., & Askary, H. (2019). Conceptions of Justice from Islam to the Present (Vol 2) . New York: Palgrave Macmillan.

Mirakhor, D. A. (2020). Failure of Extreme Capitalism: Is Islamic Economics The Answer. IKIM National Colloquium Series on Islamic Understanding. Kuala Lumpur: Institute of Islamic Understanding Malaysia.

Muhammad, Y. A. (2013). Egypt and the IMF – An Economic Struggle for the Future of the New Middle East. Retrieved from Islam Policy: www.islampolicy.com

Shakespeare, R. (2007). An Islamic Money Supply as the Means to Integration. Seventh Harvard University Forum on Islamic Finance: Integrating Islamic Finance in the Mainstream – Regulation, Standardization and Transparency. Cambridge, MA : Harvard University .

[1] https://www.dosomething.org/us/facts/11-facts-about-global-poverty

[2] (Mirakhor D. A., 2020)

[3] (AbdulHamid, 2020)

[4] (Muhammad, 2013)

[5] Sahih Muslim 1598

[6] https://www.nationalgeographic.com/environment/global-warming/global-warming-overview/

[7] (Ariff, 2020)