The Battle for Knowledge: Countering Myths by Truths

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This is section 4.9, the last segment of Lecture 4: How Capitalism Shapes our Minds and Hearts. This is part of an ongoing online course on A New Approach to Islamic Economics. In previous segments (4.8: ) we have discussed how the survival of a market society requires implanting the “knowledge” of the roles and responsibilities, and conceptual frameworks, to members of the society. Building an Islamic society requires rejecting this “knowledge”, and replacing it by the knowledge given to us  by God, who “gave humanity knowledge which they did not have”. This battle for knowledge is central to building an Islamic Economy.

The Central Battleground is Knowledge

When Islamic society was organized according to the knowledge given by the Quran, the Islamic Civilization were leaders in production of knowledge for more than 1000 years. The Quran teaches us that all human beings have the potential to rise higher than angels, and also to become worse than the beasts. An ideal society encourages all members to strive for excellence in conduct, and creates an environment conduct to human development. Ebb and flow of this knowledge over time led to many variants – the Islamicate – all patterned on the foundations of Islam.

Colonization & Global Conquest

Knowledge of how to build an Islamic Society was wiped out by European conquest and colonization of Islamic lands. The Social Sciences were build on the assumption that European society is the most advanced, by far, among all societies. Europe is “developed” while the rest are undeveloped. These Eurocentric assumptions were absorbed by the ruling classes in the colonized world, and transmitted to the masses through Western education now in global use.  The rich and powerful elites seek to create European societies all over the Islamic world, in order to “develop”. They use Social Science to do so. We need to develop our own Islamic politics and economics.

Solutions: Personal and Collective

Once it is understood that the central battlefield is knowledge, then it becomes clear that we must produce our own knowledge, built on Islamic foundations, to counter the toxic effects of Western knowledge currently being imparted to Muslims youth and intellectuals around the globe, via Western education. The first step must be on a personal level – we must learn to cleanse our own minds, and purify our own hearts. This requires UNLEARNING many myths. We can then make our own individual efforts to reach more people – as this course attempt to do. But the only real solution on a collective level is to produce an alternative to Western education. That is, we need to teach all skills essential for today, but set within an Islamic framework.

This course in Islamic Economics is ONE small piece of the massive effort required to replace the ENTIRE structure of Western Social Science by an understanding of how to shape societies according to Islamic laws. We need to learn to apply our age-old traditions of Fiqh to the modern world. Some more details about what needs to be done are given below.

On a personal level, some of the central lessons are summarized in: Unlearning Jahiliyya and Relearning Islam: http://bit.ly/SSUJRI :

  1. Our human lives are infinitely precious.
  2. Our success will be determined on Day of Judgment.
  3. Life on this Earth is test – we succeed if we struggle for the GOOD, not if we achieve a successful outcome.
  4. Wealth and Poverty are not signs of favor or disfavor from Allah.

Our education conditions us to think in certain ways. If we can learn to see the chains which bind our thoughts, then it becomes possible to free ourselves. The crucial first step is to realize that we are human beings, with infinite potential, and not human resources – see: Learning Who You Are: http://bit.ly/AZwya On a larger scale, events of world history has taught us to think in certain ways. See: Three Mega-Events Which Shape Our Thoughts: http://bit.ly/AZ3ME

  1. Global Colonization and Conquest: Shock-and-Awe of the West
  2. European Transition to Secular Thought: Marginalization of Religion
  3. The Great Transformation to Market Society. Wealth as Goal of Life

To build an alternative to Western Social Science, we must start with the building block of all societies, and learn to understand Human Beings. Our methodology focuses on our own intuitive, direct, experiental understanding of our human experience – no mathematics. Also, we have a developed and sophisticated understanding of human behavior, founded on the Quran, and the Sufic spiritual tradition. A recent book which summarized developments in this area is “Developing a Model of Islamic Psychology and Psychotherapy” by Rothman. An article which provides a brief summary is: Toward a Framework for Islamic Psychology and Psychotherapy: An Islamic Model of the Soul, by Abdallah Rothman & Adrian Coyle, in Journal of Religion and Health volume 57, pages 1731–1744 (2018). A cursory examination shows that our four dimensional Islamic model based on Nafs, Soul, Aql, and Qalb is substantially more sophisticated and realistic than the homo economicus of modern Economics. It should be obvious that a realistic model of human behavior will lead to a more realistic  theory of economics.

Very important work in this area by been done by Recep Şentürk in a series of lecture on Decolonizing the Social Sciences: From Uniplexity to Multiplexity. Brief Writeup/Outline: http://bit.ly/AZdss  Video Lecture Series: http://bit.ly/RSDSSU2M

We can conclude by noting that central to capitalism is the pursuit of wealth, as the goal of both individuals and society. The sophisticated Islamic attitude towards wealth is described in the following Hadeeth:

Al-Bukhari reports that the Prophet Muhammad (may the peace and blessings of Allah be upon him) said: Hakim! Wealth has a deceptive appearance. It appears to be very sweet (but it is really not so). It is a blessing when earned with contentment of heart, but there is no satisfaction in it when it is got with greed. (al-Bukhari, 1422H, 2:123, ḥadīth no. 1472)

The antidote is to replace pursuit of wealth by pursuit of spiritual progress. We should recognize that Modern Economics is the economics of the spiritually stunted Nafs-Ammara. Economics advocates the worship of the Nafs: maximization of pleasure as the goal of life. Instead, we must recognize that the soul of human beings is a battle-ground for good and evil. In “Islam’s Gift: An Economy of Spiritual Progress” http://bit.ly/AZgift I have explained that Islamic Economics pursues spiritual progress, from Nafs-e-Ammara to Nafs-e-Lawwama to Nafs-e-Mutma’innah.

Central Myths of Capitalism

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Section 4.8 of A New Approach to Islamic Economics. Capitalism is built on a collection of myths which justify the wealth of the capitalists, the exploitation of the working classes, and glorify the system, painting it as the best possible, to which there is no alternative. This segment explores some of the most important of these myths. Previous section 4.7 The Transition to Capitalist Society.

Foundational Narratives Create Societies

Every society is built on some foundational narratives. This because a society is an idea in our minds about our connection to each other – it is grouping which does not exist in external reality. For example, the Ummah – the collection of all the Muslims – is created by our common belief in the Quran. Because the manifestation of this imaginative ideal in concrete reality is at a low level, some have denied the existence of the Ummah. But, let us shift to an imaginative ideal which governs our lives today: the nation-state. This comes into existence by an act of collective imagination: we all agree to be bound by the idea of the nation state. As a thought experiment, suppose we imagine that one day human beings wake up and decide that we are all brothers and sisters, and should not divide ourselves into nations which wage war with each other. By our collective act of refusal to recognize the authority of nations, nations would cease to exist. Of course, chaos is likely to ensue as a result, but the point is to demonstrate that the idea of a nation exists in our collective imagination, not in external reality.

Societies Are Defined By Knowledge

Once we recognize that societies are created by consensus on certain ways of thinking and acting, it becomes easy to understand the French philosopher Michel Foucault who writes that: “Each society has its regime of truth, its ‘general politics’ of truth: that is, the types of discourse which it accepts and makes function as true; the mechanisms and instances which enable one to distinguish true and false statements, the means by which each is sanctioned; the techniques and procedures accorded value in the acquisition of truth; the status of those who are charged with saying what counts as true.” One of the central functions of society is to produce the “knowledge” which creates the collective identity which defines that society. Failure to create this knowledge within the members would result in the destruction of that society. The aphorism that “History forgets those who forget their history” is literally true – social groups without history cease to exist.

Ideas of Ruling Class Dominate Society

Karl Marx noted that capitalists do not use force to exploit labor; rather, laborers are trained to believe in the necessity of their own exploitation. The masses are educated into believing the perspectives of the ruling classes. The following quote is taken from Volume 1 of Das Kapital:

It is not enough that the conditions of labour are concentrated at one pole of society in the shape of capital, while at the other pole are grouped masses of men who have nothing to sell but their labour-power. Nor is it enough that they are compelled to sell themselves voluntarily. The advance of capitalist production develops a working class which by education, tradition and habit looks upon the requirements of that mode of production as self-evident natural laws. The organization of the capitalist process of production, once it is fully developed, breaks down all resistance.

Karl Marx, Capital: A Critique of Political Economy, Volume 1

The Myth of Progress: Central to Capitalism

Since we have all been educated in a capitalist economy, it would come as a surprise to us to learn that the emergence of capitalism has been a disaster for mankind, and for the planet. A capitalist education paints itself as the greatest success story of human history. This is accomplished by focusing on the strengths of capitalism, the accumulation of wealth, which has shot up dramatically over the past century. But taking into account the side-effects created by the massive exploitation of human and planetary resources leads to the realization that the costs paid for this growth have been much larger than the benefits; see “Hockey Stick or Growth Illusion?”[http://bit.ly/AZstick]

This propaganda is necessary for the survival of capitalism. If the enormous costs were clear to all, the system would collapse. Creating the illusion of miraculous success is achieved by focusing resources on propaganda, and in particular, on the educational system, which is designed to produce human resources, for sale for money. To overcome this illusion, we must replace “increase in wealth” by “human development” as our criterion for measuring progress; see   “Rejecting Eurocentric Concepts of Development” [http://bit.ly/AZrecd]

False Ideologies Created by Capitalism

Some of the central myths required to sustain a capitalist economic system are listed below:

  • Human lives can be bought and sold for money.
  • The value of my life is the amount of money I can earn.
  • Helping the poor is harmful to productivity, and ultimately to everyone. Motivation for work is created by poverty.
  • The goal of life is to maximize pleasure, power, and profits – without concern for society.
  • Money is central to the acquisition of all the pleasures that life has to offer.

Fundamental Myths of Economic Theories

One of the principal tools used to implant these myths into the minds of the masses is “economic theory”. Since this theory is designed to justify and glorify capitalism, it is necessarily mythical, not factual. This mythology changes over time as myths get exposed, and replaced by new myths. While “money” is central to capitalism, it disappears almost completely in economics textbooks, making it impossible to understand the capitalist economic system. Here are some of the myths perpetuated by economics textbooks in use around the globe:

  • Goal of life is to maximize pleasure from consumption of goods and services.
  • Money is a means of facilitating exchange of commodities.
  • Money is a veil – it does not matter for the real economy, which consists of commodities.

The Antidote: M-C-M’

Galbraith noted that excess production is central to capitalism. Thus, advertising to create demand for unnecessary goods is essential to its survival.  We are conditioned to desire more and more goods not because it is beneficial for our welfare, but because our consumerism creates and wealth and power for capitalists. This idea was succinctly expressed by Marx as follows. A traditional economy uses money as a means for trading goods. Symbolically C => M => C’  expresses the idea that we start with some set of commodities C, trade them for money M, and then use the money to purchase a different set of commodities C’. It is worth noting that labor is commodity in capitalism, and the laborers sell their labor to acquire money, so that they can purchase other commodities they need for survival. However, the capitalists who run the economic system are in the game for money, not for more commodities. Capitalists start out with a stock of money M, and use it to purchase commodities C – these would be labor, and raw materials required to produce finished goods. Sale of these finished goods leads to more money M’ which was the goal of capitalist production. This can be written symbolically as M => C => C’ => M’; the initial stock of money is used to purchase commodity inputs into the production process, which create finished goods C’, which are sold to get more money M’.  

A Monetary Economy

Superficially, it seems that we have two classes of agents, and one of these classes (the laborers) are working to make money only for the sake of consuming goods. Symbolically, C-M-C’ holds for these laborers. But we have seen that most of the goods they desire are superfluous. Both the goods, and the desire for these goods, is manufactured by the capitalists. Excessive consumption creates a rat-race. Pleasure from consumption over and above basic needs, comes from comparisons to average standard of living, which keeps rising. When necessary, laborers can and do reduce their consumption of superfluous goods. This leads to a reduction in Aggregate Demand, a source of great difficulties for the capitalist economy. The production of superfluous goods, upon which a capitalistic economy depends, must be reduced, causing a loss of profits. We will cover these topics in greater detail later. For the moment, our purpose is to note that in addition to pursuing excess consumption, laborers also desire to build up savings, which play a critical role.

Laborers in a capitalist economy suffer from uncertainty regarding their future wage incomes, due to the vagaries of the market. Thus, laborers, like the capitalists, are motivated to pursue wealth, in the form of savings, to protect them in lean periods in the future. Thus, capitalism creates a monetary economy, where everyone – capitalists and laborers alike – are motivated to accumulate wealth. The capitalists seek greater profits, while the laborers seek more savings. The characteristics of a monetary economy, where everyone is motivated to make more money, are dramatically different from those of a real economy, where everyone is motivated by the desire for higher levels of consumption.

Concluding Remarks

Every society is defined by a network of social relationships, which include roles, duties, and responsibilities for the social classes which make up that society. This knowledge of the defining characteristics of a society must be transmitted to the succeeding generations, in order for the society to reproduce itself. Generally speaking, the rulers of the society create the ideologies – narratives, myths – which define society, and educate everyone to be satisfied with their assigned roles within the social structure. However, our religion Islam has the unique feature that the structure of our society has been defined by Quran, and remains constant, and beyond reach of change via social consensus. This has dramatic implications for our topic of Islamic Economics.  

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The Transition to Capitalist Society

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{bit.ly/AZnaie47} This is section 4.7 of A New Approach to Islamic Economics. We discuss how the transition to capitalism destroy traditional class structures and replaced them with new ones. These changes created changes in all dimensions of society, some aspects of which are studied in this section. For previous section see How Markets Condition Our Minds and Hearts

In his book entitled The Great Transformation: Political and Economic Origins of Our Times, Karl Polany describes The Great Transformation in European Thought. Some specific aspects of this transformation are discussed in this section.

In a Feudal Society, land was biggest source of wealth. Landlords were the most powerful class. Social responsibility of the rich for the poor was an essential philosophy for this class structure. Markets were peripheral to society, and strictly regulated. Intuitive understanding of the threat posed by markets to social structure.

The transition from Land to Capital is discussed by Eric Hobsbawm in the Age of Capital. He shows how growth of trade and commerce led to rising power of the trading classes, which overtook the traditional landed aristocracy. This led to major changes in society. The landed aristocracy became marginalized and secondary, while the capitalists became the most powerful class. Their power depended on the creation of a labor class. The peasantry was transformed into this labor. This was a complete social transformation.

Creation of a Capitalist Class:

Hobsbawm argues that the rise of industrial capitalism created a new class of capitalists who were distinct from the traditional landed aristocracy. These capitalists were defined by their ownership of productive assets and their control over the means of production, rather than their ownership of land or their position in the feudal hierarchy. This new class was able to accumulate wealth on an unprecedented scale, and its members became some of the most powerful and influential individuals in society.

Creation of A Labor Class

At the same time, the expansion of capitalism also created a new class of industrial workers who were defined by their dependence on wage labor. Hobsbawm argues that this new class was characterized by a distinct culture and consciousness, which was shaped by their experiences of working in factories and mills. This new working class became a powerful force in society, and their struggles for better wages and working conditions played a key role in the development of the labor movement and the formation of socialist and communist political parties.

Karl Marx analyzed these classes created by the Industrial revolution in the following way. Capitalist economic system makes labor a commodity for sale. Because there is a lot of surplus labor, competition for jobs drives wage to subsistence levels (the so-called “iron law” of wages). Capitalists exploit labor, which allows them to accumulate wealth and power.  The dynamics of capitalist competition require increasing exploitation.This will eventually lead laborers to revolt, to create a more just and equitable system. One of the keys to creating justice is the public ownership of capital.

Polanyi’s book on The Great Transformation provides a higher-level perspective. He argues that the birth of economic theory took place in this period, when society was in transition. Marx, Ricardo, Mill, Malthus – they all analyze a society which is caught in conflict between traditional and capitalist social norms.     Economic theory was born in this period, and is saddled with conceptual frameworks which are now obsolete.

Max Weber’s book on The Protestant Ethic and the Spirit of Capitalism raised and answers a critical question: why did the early capitalists accumulate wealth, without benefitting from this wealth in the form of luxurious life styles? He argues that protestants in general believed in predestination, and salvation by grace alone, not by works. In particular, Calvinists believed that worldly prosperity was a signal of favor of God, and a sign of being predestined for eternal salvation (Note that this is explicitly rejected in the Quran – see Surah Al-Fajr).  This led protestants to strive for worldly success, without seeking to benefit from accumulated wealth for worldly pleasures. This led to accumulation of capital, which created the dynamic growth of capitalism. One important idea is the “Iron Cage” of Weber: People were trapped in this way of thinking and acting even after loss of faith in Christianity.

R H Tawney: Religion and the Rise of Capitalism (16th to 18th Century) pursues themes very similar to Weber. He notes that religion as central to all human pursuit in the 16th century. But, by the 18th century, it was marginalized to personal belief system. The social norms of a Market Society replaced Christian Religious norms. A central symbol of the change was the replacement of the Biblical maxim: “Love of Wealth is root of all evil”, by GB Shaw’s “Lack of Wealth is root of all evil”

Concluding Remarks

Social Transitions are complex and multidimensional. The parable of the Elephant and the Blind Men, describes how each blind man identified a part of the elephant incorrectly because they lacked the picture of the whole. We can get a holistic picture of social change only if we look at all dimensions together. This is an illustration of “Multiplexity” of Recep Şentürk. He argues that a key problem with Western theories of knowledge and social science is reduction of a Multiplex worldview by a Uniplex view. Decolonization of Social Sciences requires going back to the multiplex view which is central to the Islamic intellectual tradition. There are many video lectures, articles, and books, where he has explained this in greater detail. For our purposes here, we note the multiplexity is an English translation of Maratib ul Uloom, and other similar Arabic terms commonly used in the Islamic intellectual tradition.

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How Markets Condition Our Minds and Hearts

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{bit.ly/AZnaie46} Capitalism, or a market economy, requires a market society. Living in a market society conditions our minds to think in terms of market transactions. Some specific implications are explored in this section 4.6 of A New Approach to Islamic Economics. Previous Section 4.5: Emergence of A Market Economy

Gifts Versus Commodities

Living in a market society, we lose sensitivity to the strong conflict between market mechanisms and social mechanisms. Polanyi says that in a traditional society, markets are embedded within society. In a market society, social relations are embedded within the market. In a recent work on “Gifts and Commodities: Exchange and Western Capitalism Since 1700” Carrier says that in traditional societies, people produced what they needed and traded within social network for other needs. These transactions build social relationships, and connect us to our environment. In contrast, in market economies, vast majority of transactions are impersonal market transactions, that are often adversarial. These transactions detach us from society and environment.

Illustration: Blood Donations

Because we have been de-sensitized to this conflict, it is useful to provide one specific illustration. All over the globe, Blood Drives call for donations on basis of social incentives. What would happen if we offered to PAY money for blood donations? This has been done, and it has been seen that entirely different class of donors emerges. Drug Addicts, and those who are driven by need to sell their blood for money, rather than the usual class of donors. This difference in donors shows the strong conflict between monetary and social incentives. It is important to note that Economists, more deeply conditioned to think in terms of the market, have failed to understand this. Nobel Laureates argued that offering money incentives would INCREASE blood donations, because they thought the two incentives would add to each other. But actual experiments proved that offering money actually reduces the amount and quality of blood donated.

The Battle between Markets and Society

One of the main messages of Polanyi is that a Market Society came into existence after a battle with traditional society. Things considered sacred and out of reach of the market, were reduced to commodities for sale on the market. Capitalist style labor markets – selling lives for money – cannot exist, without cheapening human lives. This REPLACEMENT of social mechanisms by market mechanism causes great harm to society. Polanyi provides a history of how markets won this battle against society.

Polanyi uses the term “Double Movement” to describe the opposing tendencies of markets to expand, and for society to resist and counter such attempts at expansion of markets. Polanyi argues that the history of emergence of capitalism cannot be understood without looking at this double movement. We have already discussed why society resists expansion of markets because of the harm to social institutions caused by the market. There are internal dynamic of an industrial society which make expansion essential to the survival and growth of markets – these will be discussed later in this course.

Three Artificial Commodities.

Polanyi notes that operation of markets requires three artificial Commodities

  1. Land
  2. Labor
  3. Money

These commodities are artificial, in the sense that they are not produced by labor:

  • Land is our environment and habitat, in symbiotic relationship with humans.
  • Labor is the material of our lives, not for sale at any price.
  • Money is a social convention, created by consensus on use of tokens for claims on goods sold in the marketplace.

Treating Land as a commodity cheapens Land – reduces its value as a gift from God, which sustains our lives, and routinely performs miracles of turning seeds into plants. It changes our relationship with the planet from “mother earth”, to commodity for exploitation for maximal profits. This change in spirit is the root cause of the current environmental crisis

Treating Labor as a commodity means that human lives are for purchase and sale. It cheapens human beings to human resources.  At the same time, it massively increases the value of money, since it can buy human lives! Labor markets first became possible because of the desperation created by Enclosures. But gradual change in social norms caused by this led to the incorporation of this market idea into modern social norms.  So, to free ourselves from this illusion, it is important to reflect on how un-natural this idea is: the idea that we are commodities for sale in the labor market, and the worth of our lives can be measured by the price we receive in this market This is among the most important elements of how our minds and hearts are shaped by capitalism.

Money as an Artificial Commodity: Money is a social institution that has been created to facilitate economic exchange, and that it is therefore subject to the same social and political forces as other institutions. The creation of money as a means of exchange was a deliberate act of government and that the value of money is therefore determined by political decisions rather than by natural market forces.

Capitalism Conditions Our Minds and Hearts

Awareness of how we have been conditioned to think leads to the possibility of liberation:

  1. Realize that our lives our precious, beyond the possibility of purchase.
  2. Realize that we are unique – not interchangeable parts in the capitalist machine for production of goods and services.
  3. Realize the enormous and irreplaceable gifts given to us on the planet – flora, fauna, seas, mountains, forests. These cannot be brought or sold for money.
  4. Money is the market substitute for trust. Building genuine trust in social relationships leads to deep life satisfaction. In contrast, market exchanges weaken social relationships, and also our connection with our environment and the planet.

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Emergence of A Market Economy

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{bit.ly/AZnaie45} Section 4.5 of A New Approach to Islamic Economics discusses the emergence of capitalism, and how it shaped economics, politics, and our society. Previous Section 4.4 Knowledge and Pedagogy

Economic Theory are NOT Scientific Theories: In the conventional “scientific” approach to economics, theories are regarded as universal laws, which operate in all times and places. In our historical and qualitative approach, which gives substantial room to human agency, theories can only be understood within their historical context. Theories represent human efforts to understand the process of social change, principally by finding the causes of change, and how these causes operate. Because historical processes are always complex, and a large number of factors changes at the same time, it is quite difficult to correctly characterize the causal factors. There is always a multiplicity of theories, and different theories represent the interests of different classes.

Mercantilism and Physiocracy

As an illustration of this understanding, we consider two economic theories prior to the industrial revolution: Physiocracy and Mercantilism. The physiocrats believed that agriculture was the sole source of wealth, whereas the mercantilists emphasized the importance of trade and manufacturing as well.

From the “scientific” perspective, we might ask which of the two theories is “true”. This is not very useful for study of human societies, because most social theories are mixtures of normative judgements with positive factual hypotheses. Instead, from the historical perspective we adopt, it gives us far more insight to ask who (which social class) proposed and advocated these theories, and to what end?

The physiocrats represented the interests of the traditional landed aristocracy. They saw agriculture as a productive sector that provided the necessities of life. They measured the wealth of nations in terms of the value and quantity of the produce of land, and not in terms of gold and silver. The mercantilists represented the interests of the commercial classes – traders, merchants, and producers. They saw agriculture as a source of raw materials for manufacturing and a means of generating exports. They advocated measuring the wealth nations of in terms of gold and silver.

Over time, physiocracy lost appeal as increasing commerce brought greater wealth and power to the commercial (bourgeois) classes. An illustration of this shifting configuration of power is given by Corn Laws and the Poor Laws. The repeal of the Corn Laws and the Poor Laws in 19th-century England represented a shift in economic and political power away from the landed aristocracy towards the rising commercial classes.

Rising Power of the Commercial Classes:

The Corn Laws, which were enacted in 1815, placed high tariffs on imported grain in order to protect domestic agriculture and the landed aristocracy, who were heavily invested in the agricultural sector. These laws were seen as detrimental to the commercial and industrial classes, who relied on cheap imported grain to feed their workers and maintain their industries. The wages being paid to labor were closely tied to the price of food grains in that period. The commercial classes, therefore, were strongly in favor of the repeal of the Corn Laws, as it would open up new markets and reduce the cost of living. The repeal of the Corn Laws in 1846, for example, was supported by a coalition of manufacturers, free traders, and working-class radicals who saw it as an opportunity to break the power of the landed aristocracy and promote economic growth.

Similarly, the Poor Laws, which were enacted in the 16th century, provided relief for the poor but also reinforced the social and economic hierarchy of the landed aristocracy by requiring recipients to perform work on the estates of wealthy landowners. The commercial classes saw the Poor Laws as an impediment to economic growth and social mobility, as they discouraged the poor from seeking work outside of agriculture and reinforced the power of the landed aristocracy. The repeal of the Poor Laws in 1834 was largely driven by the growing power and influence of the commercial and industrial classes, who were able to use their economic and political clout to push for reform. Taking away support for the poor created a large labor pool which would be available to work for low wages under harsh conditions at that time.

Overall, the repeal of the Corn Laws and the Poor Laws represented a significant shift in economic and political power from the landed aristocracy towards the rising commercial and industrial classes, who were able to use their economic and political influence to promote their own interests and challenge the entrenched power of the landed elite. However, it was the industrial revolution which led to the triumph of the commercial classes over the landed elite, and also led to entirely different configurations of economic, political, and social systems of English society. It started with the process of Enclosures, which led to an Agricultural Revolution, dispossession of peasantry, and creation of a labor class.

The Enclosures:

Since the 16th Century, landed aristocracy of England had been attempting to create “enclosures” – sealing of large area of land for their personal use, preventing public access to this property. This was strongly resisted by the masses, which derived a living from these natural resources. The monarchy would generally support the masses against the aristocracy because they feared giving too much power to the aristocracy, who could rise up in rebellion with sufficient power. The English Civil War of 1642 led to the execution of King Charles 1, abolishment of the Monarchy, and the establishment of a Republic headed by Oliver Cromwell. After the death of Cromwell, his son was unable to hold together the republic. The royalists restored the monarchy, and placed the son of Charles 1 on the throne. The power of the monarch was substantially weakened, and the landed aristocracy were able to set privatize land and set up enclosures on a huge scale throughout England.   

The enclosures have rightly been called a revolution of the rich against the poor. The lords and gentlemen appropriated the common lands of England, and destroyed the livelihood of thousands of peasants and cottagers, who were left without work and without means of subsistence. The countryside was filled with vagrants, and the towns with unemployed workers. The removal of the cottage industry accelerated the process of proletarianisation and created the industrial working class. The enclosures were a turning point in English social history, for they produced the first industrial workers of England, and created the preconditions for the Industrial Revolution. At the same time, however, they disrupted the traditional social order, and gave rise to social and political tensions that would come to a head in the 19th century.

Some Consequences of Enclosures:

  1. Enclosures allow large scale farming, which creates surplus food, wool, and other agricultural products. This was necessary to support a labor force in urban areas which would be unable to produce their own food. It also provided raw materials for use for industrial production.
  2. Enclosures also deprived peasants and cottage industries of access to means of livelihood. This led to the creation of a labor force, required by the Industrial Revolution.
  3. This also led to the creation of Poverty! Peasants – detached from social and environmental relationships – appeared in the cities in search of livelihoods, and intruded on public consciousness. See for more details

Industrial Revolution in England.

“Industry and Empire: The Birth of the Industrial Revolution” by Eric Hobsbawm that presents a suitable description of the Industrial Revolution:

The Industrial Revolution was the transformation of a society based on agriculture and handicrafts into a community of machines and factories. It was a revolution in the sense of a complete change, but it was not a political revolution, although its impact on politics and society was enormous. It was essentially an economic and technological revolution, involving the extensive use of steam power, the application of science to industry, and the mechanization of production. It began in Britain in the late eighteenth century and spread to Europe and North America in the nineteenth century. The Industrial Revolution had far-reaching consequences for the structure of society, the nature of work, and the environment, and it marked the beginning of the modern world.

Consequences of Industrial Revolution

Our goal in studying the process of social change is not to learn about a sequence of historical events, but to learn about the internal logic which governed the process, so that it evolved in predictable directions. The trigger of social change was the industrial revolution. We have described some of the unique set of pre-conditions which led to the industrial revolution in England. But the consequences were far reaching. The Industrial Revolution led to the capability for the creation of massive amounts of surplus goods – far above and beyond domestic demand or needs. This single fact can be considered as the driver of the other changes which were required to accommodate and enable this possibility of excess production.

We can summarize these changes by saying that the Industrial Revolution led to the replacement of a traditional, social economy by a Market Economy. This change was not a smooth and gradual evolutionary process. Rather, the two types of economy are extremely different from each other, and there was a violent battle which led to the replacement of the traditional economy by the Market Economy. Karl Polanyi’s Great Transformation provides a detailed description of this transition. Here we just note a few key points of contrast, for our current discussion.

In a traditional economy, the masses live close to subsistence level for economic needs, although the wealthy can enjoy enormous amounts of surplus. Basic needs of the masses are met by a network of social relationships, not by the marketplace. Normally the poor operate with very little or nothing in the form of money, while the wealthy can have large amounts of money. Markets take the form of seasonal fairs, where only non-essential goods are sold – people can survive without recourse to the market. Markets are a peripheral adjunct to society. Because survival depends on social networks, placing social needs above individual is natural – and required for survival. A traditional society prizes the natural virtues of generosity, cooperation, and social responsibility. Markets cause harm to traditional social mechanisms by replacing a social transaction of gift-exchange by a market transaction of sale for money. Therefore, traditional societies put strong regulations on markets. All of these traditional values are washed away with the emergence of a market economy, which is a necessary accompaniment of an industrial revolution. We will study this in greater detail later.

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Knowledge and Pedagogy

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Section 4.4 of A New Approach to Islamic Economics: http://bit.ly/na2ie Free Online Course on Al-Nafi Platform: http://bit.ly/IEalnafi Register for weekly email list: http://bit.ly/AZIEML  Previous Section 4.3 Social Change: From Hunter-Gatherers to Nation-States

Islamic theory of knowledge is radically different from the Western one. According to a Hadeeth, Useful Knowledge Enters the Heart. Islam is a religion founded on the knowledge given by Allah T’aala to humankind – this is a knowledge they could not have acquired on their own. Islamic teachings place central emphasis on acquisition of knowledge. Pre-Islamic Era is known as “Jahiliyya” or period of ignorance. Knowledge given by God to the ignorant Bedouin transformed them into leaders of the world, and launched a civilization which enlightened the world with knowledge for more than a thousand years. Because of the central importance of knowledge in Islam, Islamic scholars have enormous amounts of writings, discussions, debates about the nature of knowledge.

Western Epistemology Built on Radically Different Foundations

The Influx of knowledge from Al-Andalus via reconquest was strongly resisted by Catholic Church. This ultimately leads to Protestant-Catholic split. More than a century of religious wars between the two factions led to rejection of religion as a basis on which to build society. Rejection of Bible, Theology, and the Scholastic approach to social organization, led to a search for new principles on which to found knowledge. Knowledge was defined to be based on observations and logic. This excludes (deliberately) the heart and intuition as sources of knowledge.

A deeper discussion of the contrasting views of knowledge is deferred for later. For now, some central points are sketched briefly here:

  • Islamic Knowledge is built on Heart and Intuition, on the foundation of certainties provided by Quran.
  • Human knowledge is ALWAYS prone to error. These errors multiply when our hearts are blinded by worldly desires.
  • Tazkiya – purification of heart – is a first step to knowledge.

In contrast,

  • Western Knowledge excludes heart and intuition as sources for knowledge.
  • It uses reason and observations (of external reality, not of our internal world) as sole sources for knowledge.
  • It strives for a certainty, which cannot be obtained for significant truths.

This discussion of of central importance to how we do Economics. Modern Economics excludes our internal subjective human experience as a source for knowledge about human beings. Instead, it uses a “rational” analysis – depending only on logic and scientific knowledge – excluding emotions and spirituality. This leads to the homo economicus model: a picture of humans who are cold, calculating, callous, and cruel. The superstructure of modern economics is built on these toxic foundations.

Instead, in Islamic Economics, we replace this model by an understanding of human behavior based on our direct intuitive and experiential understanding of humans. An immediate consequence is the understanding that mathematics cannot be used to describe our behavior. Many other deep insights, not accessible to Western economists, about human behavior follow.

Because knowledge is defined differently by Islam and the West, the approach to learning must also be different. We have discussed some differences in earlier lectures, and will provide some more later. Here we focus on just one point, which might seem to be in direct conflict with what we have said a bit earlier. Since knowledge is based on accumulated human experience, a student must learn from the experience of others. To learn points-of-view of others, we must first abandon all personal views and emotions – our personal feelings will block our understanding of the experience of others. We must seek to see things from the point-of-view of those committed to it. We must attempt to understand arguments and counter-arguments while SUSPENDING judgment on right and wrong and attachments to certain views we favor. When the Prophet SAW asked questions, the Companions would often respond: “Allah and His Prophet SAW know best”. That is, they lay aside all prior knowledge and judgments to try to listen and understand.

In other places, I have taken and advocated what appears to be the opposite view. This relates to stages of growth in understanding. Initially, one must start with the student’s perspective – no UNINFORMED judgments. After mastering multiple perspectives and understanding strengths and weaknesses of different positions, one can venture on to evaluation.

A Larger Lesson which emerges from the brief sketch of social change discusses earlier is that increasing levels of unity lead to increasing strength. The Nation-State, which is currently the most powerful level of unity, has been enormously harmful to human welfare, leading to continuous warfare. Islamic ideals require unity at the level of the Ummah, and ALSO at the level of humankind – we are all brothers and sisters, sons and daughters of Adam and Hawwa. This unity comes from the hearts, not from rationality. It is only by opening our hearts to the message of God that we can strive for this unity at the level of the Ummah, which is more precious than all the wealth of the planet:

8:63 (Allah T’aala) united the hearts (of the believers). Had you spent all that is on earth, you could not have united their hearts. But Allah did unite their hearts. Surely, He is All-Mighty, All-Wise. 

Concluding Remarks: This segment on contrasting theories of knowledge and pedagogy is a side-note for our current lecture on How Capitalism Shapes Our Minds and Hearts. There is one important reason for including it. We do not plan to study the impact of capitalism by doing mathematics and by reasoning about it. RATHER, look at our hearts  to see how they have been infected by the desire for wealth, and the worldly goals of pursuit of pleasure, power, fame, glory, etc. – these are essential to capitalism and anti-thetical to Islam.

LINKS: Next Section 4.5 Emergence of A Market Economy Online Course: A New Approach to Islamic Economics: http://bit.ly/IEalnafi Course Description: http://bit.ly/na2ie http://bit.ly/AZnaie43 Weekly Mailing List on Islamic Economics: http://bit.ly/AZIEML

Social Change: From Hunter-Gatherers to Nation-States

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{bit.ly/AZnaie43} Section 4.3 of A New Approach to Islamic Economics (http://bit.ly/na2ie) applies the methodologies developed in earlier sections to the study of social change across time. In particular, we study how hunter-gatherer societies changed to agrarian feudals, and then to city-states and nation-states. These changes were driven by natural dynamics that can be understood qualitatively, not mathematically. Previous Section 4.2 Methodologies for Studying Social Change

Pedagogical Principle

We have described some key methodological differences between the Uloom-ul-Umran approach, based on Islamic epistemological principles, and the conventional Western Social Sciences. Now we will provide an illustration of these differences within the context of some specific social changes which have occurred historically. Before going on to do this, we would like to highlight an epistemological principle which is not made clear in Western pedagogy. We have laid out some methodological principles but we can understand these only within the context of an application to a particular historical example. This illustrates some general aspects of knowledge, sketched briefly below:

  • Every particular is an instance of a universal.
  • Every universal is comprehensible only via its manifestation in particular instances.
  • How we grasp a universal from a particular depends on our intuitions – which can often be wrong.
  • How we assimilate a particular to a universal is generally easier, and less subject to error. But, errors can also be made in this direction.
  • This process of acquisition of knowledge is different from the standard Western categories – induction, deduction, transduction.

Hunter-Gatherer Societies

A hunter-gatherer is a human living in a society in which most or all food is obtained by foraging (collecting wild plants and pursuing wild animals), in contrast to agricultural societies, which rely mainly on domesticated species.

Anthropologists tells us the early human societies were all hunter-gatherers. As per Marxist Analysis, this economic mode of production would lead to certain characteristics in the society, listed below:

  1. Environment: Exhaustion of local supplies => Nomadic Society.
  2. Philosophy: Mother Earth: We take care of environment, as it takes care of us. (Urban life leads to detachment from nature.)
  3. Politics: Egalitarian Societies – easy exit for discontented subgroups. No slaves; not enough surplus food to keep one for service.
  4. Property: No private property. Illustrative Attitude: Cherokee Constitution of 1839: “The lands of the Cherokee Nation shall remain common property.”

We can see how characteristics of the society, and ways of thinking, would be strongly influenced by the economic systems designed to provide for the people. It is worth emphasizing that these are trends, and not deterministic. People have agency and reshape and counteract these natural tendencies by developing different philosophies and ways of acting.

Social Change Process

Feudalism: The transition from a hunter-gatherer society to a feudal society was triggered by the cultivation of land. The nomadic lifestyle that characterized hunter-gatherer societies had to be abandoned in favor of settled agriculture. As people started to cultivate land, private property emerged naturally – when we invest time and effort in planting seeds and watering the plants, we need to create the right to harvest the fruits of our efforts. It would be natural for the gatherers to become the farmers within this society. This shift also led to a change in the role of hunters, who became soldiers. With the emergence of private property, robbing farmers became easier than hunting. To protect themselves, farmers needed the protection of soldiers, which led to the emergence of feudal lords who provided protection in exchange for food tributes. This feudal system created a class structure with the feudal lord at the top, followed by knights, peasants, and serfs.

City States: The transition from feudalism to city-states was driven by the need for alliances among feudal lords. Stable local alliances were created in order to ensure mutual protection and prosperity, which led to the emergence of cities. The growing economic power of these cities allowed them to maintain armies and created the need for governance. The history of Europe is marked by continuous wars between city-states, which were fought to protect their economic interests and territorial boundaries. Machiavelli’s The Prince provides insight into the political and military strategies used by city-states during this time.

Nation-States: The transition from city-states to nation-states was driven by the formation of alliances between multiple cities, which eventually led to the emergence of a unified nation-state. This process also involved the creation of national identities, which were facilitated by the spread of print media, as Benedict Anderson famously argued in “Imagined Communities.” Cheap and widely distributed newspapers created a common perspective and helped to forge a sense of shared identity among diverse populations. Development of a national identity also required explicit efforts, such as the promotion of national symbols and the cultivation of a sense of pride in the nation’s history and culture. The national identity had to be strong enough to live for, and to die for, in order to motivate soldiers to fight battles for the nation. In this way, the transition from city-states to nation-states involved not only political and economic changes, but also a cultural transformation that was driven by the development of a shared national identity.

Iqbal-Madani Debate on Nation: The idea of the nation-state has been of central importance in contemporary Islamic political thought. Allama Iqbal expressed his strong antipathy to the nation in the couplet:

Among these newly minted gods, the biggest is the Nation. The clothing it wears is the coffin of religion.

He argued that allegiance to humanity must supercede allegiance to Nations. National Identity has been a source of constant warfare and violence in human history, by dividing man against man – against teachings of the Quran.

Shaykh Hussein Ahmad Madani was on the opposite side of this debate, and favored using the creation of a national identity in the Indo-Pak subcontinent, as a tool and a pragmatic strategy to oust the British and achieve liberty. Detailed discussions between them showed them to be in ultimate agreement about the conflict between the Western concept of Nation-State, and Islamic ideals of unity of mankind.  

This debate continues to be extraordinarily divisive in Muslim thought. The vast majority of Muslim political efforts take the nation-state for granted as the highest source of power in the modern world, and seek to capture political power for the revival of the Islamic Civilization. However, Wael Hallaq in “The Impossible State” has taken the line of Allama Iqbal. He argues that the concept of the nation-state is fundamentally un-Islamic. Nations of Middle East created as part of a divide-and-rule strategy – see Fromkin: A Peace to End All Peace: The Fall of the Ottoman Empire, and the creation of the Middle East. This strategy has been very successfully in keeping Muslims engaged in internal political power struggles, preventing them from emerging as a global power. We cannot use un-Islamic means to pursue Islamic goals.

The take-away conclusions from Section 4.3 are the following. Economic, Political, and Social Institutions are entangled with each other in all societies. Changes in technology, environment, or political alliances, can become drivers of large scale social change and transformation of society. What is most important from our Islamic perspective is that the economic and political aspects create tendencies towards certain types of philosophies, but human agency can counter these trends. Specific historical case studies do not show a uniform progression and evolution. Rather, within the overall trend there is substantial diversity created by different choices made by different societies in response to the pressure to change.

Prediction Versus Explanation and Understanding: Whereas Western Social Science seeks to predict the movements of society, when we take into account human agency, prediction becomes a secondary goal. Our primary objective is to understand the social change process, and to be able to explain why changes occurred, without necessarily being able to predict them.  

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Methodologies for Studying Social Change

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This is section 4.2 of A New Approach to Islamic Economics. Register for free online course at http://bit.ly/IEalnafi. Join a weekly email list for Islamic Economics at http://bit.ly/AZIEML. For previous section 4.1, see Uloom-ul-Umran vs Eurocentric Social Science

The process of social change involves all dimensions: political, economic, social, educational, environmental. These must be studied together. No one dimension can be isolated. This differs radically from current Eurocentric social sciences which assume it is possible to separate them, and study economics in isolation from politics, society, history, and environment. To signal the difference, and to indicate the intellectual heritage, we propose a new name: “Uloom Ul Umran”. Briefly, this is a historical and qualitative approach to the study of social change.

Modern Social Sciences were created in early 20th Century on the basis of a triple mistake:

  1. Science is the only valid source of knowledge
  2. Scientific methodology, as understood by Logical Positivists, involves study of observables, and does not go beyond them, to the unobservables.
  3. Scientific methodology CAN be used to study human societies.

All three statements are false. This leads to a need to rebuild the social sciences on sound epistemological foundations. Some Key Differences between Uloom ul Umran and Social Science are:

  1. A “scientific approach” assumes that there are universal laws which apply to all societies across time and space.
  2. Our historical and qualitative approach assumes human freedom to chose goals and to strive for goals.
  3. Social change is driven by collective human responses to change – giving agency to human beings is generally not allowed in social science, and especially so in economics.
  4. Human struggles to create change are shaped by theories about causal factors responsible for the change.
  5. Causal Factors are never observable; different groups can always create different theories. Theories which come to dominate depend on Power, rather than Truth.

The dominant view which led to the Western social sciences is Material Determinism. This is the theory that human thought is shaped by material forces, primarily the economic system. External material forces determine our thoughts, feelings, and spirituality. Taking this point of view reduces human beings to passive actors within a deterministic world, and creates the possibility of a “scientific” approach – the study of laws of motion for a society.   

This is an enormous methodological blunder. European intellectuals made this mistake due to the trauma of loss of faith, caused by a century of religious wars between nearly identical religious factions. With the loss of the certainties of religion, they turned to science as the new source of certain truth. Newton’s Laws of Motion made a tremendous impact on European intellectuals. Colin Turbayne: The Myth of Metaphor explains how the metaphor of the world as an organism abandoned and replaced by the metaphor of the world as a dead machine, under the influence of Newton’s Laws. According to Newton, initial conditions determine trajectories of ALL particles: we live in a deterministic world. The philosophy of materialism said that there is nothing other than matter in the universe, exorcising all non-material and unobservable substances, extending their rejection of Christianity. Philosophers set themselves the problem of “explaining away” our internal subjective experience of free will. In accordance with this “scientific” worldview, two materialist methodologies for study of social change emerged:

  1. Modern Economics: Human Beings and Historical Events are all subject to universal laws of motion, just like physical objects – “SCIENCE”.
  2. Marxist: Human lives are bound within the economic relations of production and distribution. These relations are subject to laws of motion.

Whereas modern methodology treats human beings as robots, Marxists have a more sophisticated approach. They acknowledge the inner world of human experience, and even allow a certain amount of personal freedom. But large scale social change is shaped by material forces.

Our third alternative, Uloom ul Umran, assumes entanglement of Man and Matter, just like the entanglement of our souls and bodies. Material forces shape our thoughts, feelings, and spirituality. But also, our thoughts, feelings, and spirituality shape the material world. A primary illustration is furnished by the rise of Islam. The knowledge given by God to man, accompanied by the spiritual training given by the Prophet SAW to the companions, dramatically changed the course of history. This unprecedented change was not created by any change in the material conditions; rather it was the change in the hearts of men which changed the world. See: What the World Lost Due to the Decline of the Islamic Civilization. http://bit.ly/azrdm 

To summarize and conclude, we will analyze the process of social change using the following template:

  1. Exogenous Events, outside human control, create social change.
  2. Humans respond – collectively, in groups – to the change.
  3. Responses are mediated by theories about causal factors which created the change.
  4. Responses are also mediated by class interests and relative power of different classes which are affected by the change.
  5. Collective human responses to change shape the course of history

This is actual a natural methodology, but it was abandoned by European intellectuals for complex reasons due to specific historical events which shaped their thoughts. Prior to secular modernity, the Scholastics studied Society based on the Bible & Theology. However, A Century of extremely destructive Wars between Protestants and Catholics led to the  Abandonment of Scholastic Approach. This created the necessity of rebuilding a theory of society on secular – non-religious foundations.

The entire theory of knowledge had to be rebuilt from scratch. After abandoning the Bible, all traditional sources for knowledge became suspect. Reconstruction of knowledge was to be carried out on basis of observations and reason alone.  This led to the deification of science as the only route to certain knowledge. It also led to the abandonment of heart and soul as basis for knowledge; these had led us astray by pointing to the truth of God. Europeans removed the heart as a basis for knowledge. This explains why it is essential for us to develop an alternative to Western knowledge: The Quran says that it is not the eyes that are blind but the hearts.  

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Uloom-ul-Umran vs Eurocentric Social Science

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{bit.ly/na2ie41} This is section 4.1 of Chapter 4: How Capitalism Shapes Our Minds and Hearts, or A New Approach to Islamic Economics; it explains the key methodological differences between our Islamic approach and the conventional Eurcoentric approach to social science. For the previous Chapter, see Gratitude, Contentment, and Trust

The approach to study of economics adopted in this course is radically different from that of conventional courses around the globe. Our perspective can be labeled as “Uloom-ul-Umran”, which is the study of how societies change over time. We will follow the methodology first created by Ibn-e-Khaldun for this purpose. It is historical and qualitative, as opposed to mathematical and quantitative.

For more information, see: Uloom-ul-Umran: An Islamic Approach to Western Social Sciences – http://bit.ly/AZUUU  We will describe it greater detail later, after first describing Western methodology for economics.

Battle of Methodologies:

A battle of methodologies took place in Europe, where this natural historical and qualitative methodology was replaced by a quantitative and mathematical methodology which currently dominates. For more details see: Method or Madness? http://bit.ly/WEAmom BRIEFLY: A century of religious wars led to rejection of religion as a basis for organizing society. Social Science emerged as an alternative. Rejection of religion led to its replacement by “science” as the sole valid source of knowledge. The scientific method was to be applied to the study of human society in “social science”.

Consequence of “scientific” approach: 

Science is study of external world. Objective: Factual knowledge was prioritized. Internal Subjective experiences were no longer regarded as knowledge. Our internal experience is “subjective”; it cannot be studied scientifically. This was discarded by economists using scientific method. The  unobservable utility of consumption (an internal feeling of pleasure) was replaced by the observable choices we make. Christian morality was replaced by rationality. Rationality Axioms were used to define behavior, in a way  not related to our internal subjective experience of the world.

These axioms are built on rejection of God, Afterlife, Judgement Day. It is rational to believe in the unseen. They depict human behavior to be maximization of pleasure. Also, humans are animals, engaged in cut-throat competition, governed only by survival of the fittest.

The Alternative: An Islamic Methodology

Reject Axiomatic Behavior theory: This is wrong both normatively and empirically. See:The Strong Conflict Between Human Behavior and Economic Theory: http://bit.ly/AZconflict  Start with Islamic Theory of Human Behavior. Great Strides have been made in Islamic Psychology. For a recent summary, see: Abdallah Rothman: Developing a Model of Islamic Psychology and Psychotherapy Islamic Theology and Contemporary Understandings of Psychology – Routledge 2021.

The model of human behavior, developed by articulating the conceptual frameworks within the Islamic intellectual heritage, can be diagrammed as follows:

Concluding Remarks:

A theory of human behavior is FUNDAMENTAL to construction of social sciences. Excluding subjective human experience as “unscientific” leads to a dramatically wrong picture of human behavior. Islamic intellectual heritage offers a rich and complex understanding of human behavior, which can be used to create an alternative theory of economics, and also rebuild the social sciences. The Key Difference: Modern Economics is theory of the spiritually stunted Nafs-e-Ammara; Islam’s Gift is an Economy of Spiritual Progress. See: http://bit.ly/AZgift

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Foundations of Islamic Economics Part 2

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{bit.ly/AZfoie2} In the first part of this talk, we explained that one of the biggest obstacles to creating an Islamic Economic system is the mythologies created by capitalist economies to justify oppression of the poor and wealth inequality. In addition, there is the myth that capitalism is more-or-less compatible with Islam. It is only after rejecting both that it becomes possible to think clearly about what an Islamic economics system would look like. The video below is a follow-up lecture to this talk, which was delivered (in URDU) at Karachi University on Feb 23rd. The video is followed by a writeup of the 2nd Part of the original English lecture. The slides of the original lecture provide an outline of the lecture:  Slides for both parts (bit.ly/SSFOIE).

WHAT CAN WE DO?

 What can we actually do now? So I have listed some of the obstacles in the path of creating an Islamic economic system, but there are many more which I have not listed. We have to understand that whatever obstacles we face today are far less than the obstacles faced by our Prophet Muhammad (PBUH). The hostile environment that he faced was much worse than what we face today. But the teachings of Islam transformed ignorant and backward Bedouin into leaders of the world created a civilization which enlightened the world for more than 1000 years. The final message of God to humanity is complete and perfect guidance for all times. It is just as revolutionary today as it was 14th century (see Islamic Knowledge: Still Revolutionary after 1440 Years!).

If we take this as an axiom of faith, we do not have to do very complicated calculations and sophisticated analyses to learn what to do. We have the solution in front of us, but we’re just not looking at it. Today when we have economic problem, we call in the experts from Harvard. Similarly, in all dimensions of our lives, we’re looking to the western books for solutions. When I was VC of PIDE, we had a course on Business ethics. I assigned the course to a teacher who was a bearded man and a very sincere pious Muslim. I looked at his course outline and he was basically teaching business ethics from a western text. Even on our own home grounds of ethics, we are borrowing from the West, instead of looking for solutions from our own intellectual heritage.

DECOLONIZING OUR MIND

To start the process of decolonizing our mind. We need to follow Iqbal who says that

My eyes were not dazzled by the brilliance of Western knowledge – they were protected by the dust of Madina and Najaf (two Islamic centers of learning).

We all have basically prostrated to the gods of Western Knowledge and we need to lift our eyes and look at God and his book for his guidance. This requires decolonizing our minds. What is decolonization? The most fundamental is that the colonized mind believes that the most important knowledge that exists today was produced by the West over the past three centuries: Physics Chemistry Biology Political Science Economics Mathematics. This colonization is automatically created by western education where we study for four years in a university and these are all the things that are taught. No mention is made of the Quran and Hadith, and the Islamic intellectual tradition, so the student can only conclude that these are irrelevant to our modern lives.

Anybody who gets a bachelors or even high school diploma in western education — which is everywhere in the muslim world — you end up with the automatic idea that knowledge is produced by the West and the Quran and Hadith are irrelevant for the modern world. Part of this knowledge is economic knowledge it tells us how to conduct our economic affairs. Modern economics seems entirely unrelated to anything produced by the Islamic intellectual tradition, leading to the automatic conclusion that this tradition has nothing to say about our economic affairs today.

WHAT IS THE GOAL OF OUR LIVES?

If you want to break the spell of western knowledge we have to start with the fundamentals and ask what is the goal of our lives? If you look at economics texts they say that the goal of our life is to maximize pleasure. Why? If you reject God, Afterlife then this is the natural conclusion. In contrast, Islam teaches us that real success is the day of judgment. Economic theory tells us that society should try to maximize wealth because its goal is this world. But Islam tells us life of this world is pursuit of an illusion (for confirmation, see: The Coca-Cola Theory of Happiness). Allah SWT created us to see who can do the best of deeds in adverse circumstances. Another significant difference is that economic theory  is outcome oriented – it says that if you eat something then you get pleasure. The process by which the outcome came about doesn’t matter. Allah SWT say this world is meant only for struggle while the reward are in the hereafter. The fact that our circumstances are adverse is not a serious concern to us because we are here only to struggle and to show Allah T’aala what we can do. The outcomes that rewards are waiting for us in the hereafter.  So Islam is strongly process oriented, in contrast to economics, which is outcome oriented.

INTERNAL GOALS: SPIRITUAL PROGRESS

We start the process of change by setting our internal goals and  spiritual progress instead of making money.  Many Muslim students come to ask for advice on which career should they pursue what discipline should they study economics, computer science etc. To make the most amount of money.  They have already been indoctrinated into believing the purpose of life is to make money the purpose of life is really that we are given Nafs e Ammara is in fact the exact description of the homo-economics which is the goal which, which is the rational human being of economic theory. Our goal is to go from Nafs e Ammara to Nafs lawwama to Nafs e Mutmainna. And discussion of how this works is given in my paper so this is actually what we call the work of the night. See Islam’s Gift: An Economy of Spiritual Progress

EXTERNAL GOALS: COMMUNITY BUILDING

There are also external goals. Economic theory and social science mindset tells us that the the government runs the society, so collective action is only possible through the government. Basically this is a misconception created in a secular society. European religious wars led to the idea of individual freedom, where everyone can pursue their own goals, and collective action is done by the government. The possibility that we can take collective action as a society was erased from the conceptual framework. This has not been the case in Islamic society. In Islamic society the driver of change is the community. Our target for action is the local community, the family, kin folks our neighborhood. The values are taught at the mothers’ lap, within families and within the larger circle of extended family, and within neighborhood communities. Strong families are central to the develop individuals and communities. Today the worship of self, which is being promoted all over the world by Hollywood and by social media this is damaging love, commitment, sacrifice and responsibility which is at the heart of the family we need to actively counter this because this poison is spilling into Islamic societies and it is having effects on our souls.

UNIQUE FEATURES OF ISLAM: NO MONASTICISM

As said that there is a need of putting the effort on our individual self and then there is the effort needed by community. Sometimes people get the wrong idea that one must go and sit in a cave for forty days and then can come out and work on the community.  If you work personally becoming a saint first, then this will never happen and so you will never be in the position to actually make change. So Islam actually does not teach us monasticism and this is a unique feature, that we work on our soul by struggling to change the community. The efforts of the night (on our selves) are complementary with the efforts of the day (on the Ummah), the two go together.

CREATING STRONG COMMUNITIES

Shaikh Abdul Hayy once said that the remembrance of Allah and prayers that is like the petrol for the car and the activity is like the driving of the car. So without any petrol you cannot drive but if you just keep filling petrol in the car and never drive it that’s also useless. You need to create spiritual energy by worship, and use the energy to struggle with transforming the world in the directions desired by Allah. So how can we create strong communities? This is one of the keys to Islamic revival. To support families, to prevent them from breaking up in this environment, which is toxic to family values. We have to especially support mothers, who have been emphasized heavily in Islam, because that’s the basic training ground for the society tomorrow. If all mothers ruined their children today our society will be gone tomorrow. In contrast if all mothers train their children well the society would be wonderful tomorrow. The men have the job of using the mosques to build neighborhood communities. Today we have lost this. The mosques are there but it is not acting to create the community. Today we go and pray in mosques for ten years but we are not aware of the name of the person sitting next to us even though we recognize them by face. So we have to work on creating good communications at the community level and using this information to transform the community.

COMMUNITY BANKS

So the community banks are the things that can be create without the government intervention. Basically one of the thing I am saying is that because of the secular mindset people are thinking that first we need to capture the government position then we can do anything this is not true there are many opportunities that are open at lesser and local levels. By thinking about, and working on, levels outside the reach of our capabilities, we lose the opportunities to create change in our communities, which is where the change process starts.

MULTILAYERED COMMUNITIES: UMMAH

The concept of nation was invented in Europe after the dissolution of the concept of a united society. In the religious era the society is United on the basis of religion. But after an artificial imagined community was created at the nation level. As Iqbal says “The greatest of the new gods of mankind is the Nation; the clothing that it wears is the coffin of religion”. Wael Hallaq has given the same message in a less poetic, and more articulate way; see The Impossible State. The nation state has created  enormous amount of bloodshed unparalleled in the history.

KEY TO PROSPERITY: COMMUNITY DRIVEN DEVELOPMENT

So instead of looking to the nation to change and to transform the world and instead of seeking to capture national government in order to bring about Islamic change we have to work with communities and create change at the community level.

PART 3: STATE LEVEL INTERVENTIONS

State level interventions — which is exactly contrary to what I have just said earlier – In the long-run we cannot use the nation state as a strategy for Islamization, but as a part of any transitional strategy, because nation states play such an important role today, we have to deal with them. We cannot ignore them and we cannot bypass them but we have to recognize what these things are these are creations of European politics. They are responsible for enormous amounts of bloodshed and violence all over the Islamic world Nation states were explicitly created as a part of the Divide and Rule strategy.  There is a very important book by Wael Hallaq which should be read by everyone: ‘The impossible state’ he says basically the fundamental foundational basis of the national state is contrary to Islam and cannot be reconciled with it. So the Islamist strategy that we want to capture state power to implement Islam cannot succeed because state itself is in conflict with Islamic ideas. Nonetheless, as I said you still have to deal with the state.  with the understanding that state is not a permanent solution this is part of a transitional strategy you have to deal with the state because they are so powerful but hopefully we will evolve beyond that stage and limitiation. Today, nation-states are dividing the Muslim ummah and so they are causing very great harm to us. With this warning we go into study how and what happens at the state level. So again we deal with economic myths and one of the most popular is that export promotion the path to development and economic growth also that the government must raise money by taxes and borrowing to finance its expenditure, banks do not create money, inflation is due to money creation all of these are totally false ideas.

LIBERATING TRUTHS

The truth is that path to development requires development of local productive capacities and if anyone wants to build an industry in Pakistan today we have to protect it from foreign competition first because it will naturally be weak and imperfect. Free trade which is recommended by economists benefits the strong economies and destroys the weak. See Free Trade and Economic Development.

THE DEBT TRAP

Today Pakistan is caught in a debt trap,  having exports of 30 billion and imports of 60 billion. So we need to borrow 30 billion USD to finance our imports. When we borrow, we become enslaved by the lenders. Lenders are happy to lend even if they know that this will never get repaid because they get power to control our  policies and using this control they can get enormous advantages — much more than the money they  lend us, and the money they lend is just paper. It cost them nothing to lend any amount of money.  Jason Hickel (Aid in Reverse: How Poor Countries Develop the Rich) has calculated that data was available for 2012 shows that two trillion dollars were sent by poor borrowing countries to rich lending countries and a large portion of this is in terms of interest rate so this interest based financial system is a tool for trapping the poor countries into eternal slavery.

THE WHY OF THE DEBT TRAP

Why we are in this debt trap? This is basically because of false policies recommended by economic theory. There was no significant trade deficit until large BOP deficits that started from 2003.  In 1995 Pakistan joined World Trade organization and started lowering the tariffs until they reach at this critical point of  15% and now they are around 8%  when our tariffs are low import come in heavily because imports are cheap and so there was a point at which we were importing oil seeds from Brazil. Pakistan is an agricultural country why it should be importing oil seeds from Brazil? Because both our duties and our for exchange policy made the dollar cheap and so basically this destroyed local industry — (see Taimur Rehman slides on Protectionism) . It is important to understand the history of free trade theory. It was invented by England after England acquired 50 year lead over Europe via the Industrial Revolution.  The European countries implemented free trade this created a recession in Europe and growth in UK. German economist Friedrich List invented the infant industry argument and he protected the German industry via trade barriers. Today WTO which enforces free trade on the weaker nations had brought great benefits to the rich countries and caused losses to the poor countries. Free Trade and low tarriffs ensure that the poor countries never develop their own industries to compete with the rich, and remain locked in dependency forever.

WHAT CAN BE DONE ABOUT DEBT-TRAP?

Pakistan is really caught in a big crunch now and so there is a short run solution which has to be political, medium term  solution can be to develop self sufficiency in energy and agriculture products. This can be achieve in 3-5 years. In the long run there is a need to develop local industry. Self reliance strategy is necessary. There is a drastic policy change in which we can go full Islamic and we can renounce the interest payments of foreign debt but this will have massive political implications (which can be managed there is a report of council of Islamic ideology on elimination of interest in 1980 which mentions this idea and provides a detailed step-by-step transition plan. It needs to be updated but the outlines are there.) Now in a short term transition to an interest free economy modern Islamic banks are the only available option; see A New Vision for Islamic Banks and Islamic Monetary Policy. But these revolutionary strategies are not currently feasible because of political constraints.

So, how else can we resolve the short-run burning problems facing the Pakistani economy? The main problem is actually Political. We have power struggles between the bureaucracy, politicians, army, and foreigners powers pursuing with their own agendas with huge amounts of money. So the solutions requires engineering a united front, defending Pakistan and at the same time protecting local industries from collapse, which is happening daily today. In the medium term we need to put all our efforts into creating energy and agricultural self-sufficiency. This will prevent us from needing so many imports, so we will not need to borrow dollars. Once we do not need to borrow money then we can craft our own economic policies. It is worth noting that we had industries in small mobile, electronics, large electronics telecommunications, aviation industry. Nearly all of these industries (except aviation, protected by the government) have collapsed due to competition free trade and other factors. This has caused massive damage to producers confidence. We need to understand that all of these magic tricks that we are trying to follow – coming from the Washington Consensus – lower corruption, better governance, lower tariffs, encourage free markets, privatize – all of these are nonsense and meaningless distractions, which prevent us from doing what is necessary. What we need to do is to develop local productive capacity, protect them from foreign competition, and stimulate them to grow into world-competitive industries. This can be done and there are a number of methods which have been used effectively in other countries.

Zero Inflation Required For Zero Interest

In the long run if you want to create an Islamic economy we have to eliminate inflation. Because if you want to have zero interest then you need to have zero inflation. The problem is that economists have no understanding of inflation; see Modern Money and Inflation. One way to prove this is to note that around the world that they have been unable to control inflation, despite their best efforts. There is a school of thought, not part of orthodox economics, known as Modern Monetary theory. MMT is the intellectual heir to Keynesian Economics. They have a clear understanding of inflation and they have a policy recommendation for zero interest and zero inflation economy. MMT’ers have the policy recommendations for how to create it. MMT gives us the framework for how we can create a zero interest economy. Of course, this is only one element of an Islamic Economic system. Another central  element of MMT is the Job Guarantee program, which ensures that anyone who wants to make productive contributions to society can get a job. This is also in line with Islamic ideas. For more detailed explanations, see MMT for Pakistan. So, how can we get from here to there? That is a difficult problem. What is the transition process? We can’t just destroy capitalism today and build on the ruins. We have to go smoothly, prevent major problems. Some aspects of this have been worked out and can be done, but the problem is the implementation stage. Who will create change? One has to look at the political and power aspects. There is no point in sketching a plan for transition if it cannot be followed. But some aspects which are worth mentioning. There are things which we can do without making a revolution in the government, and without actually changing very much. One of the key things that comes out of the recommendations of MMT  and also coincides with Islamic ideas is that the Islamic bank should have the motive of providing public service not the motive of maximizing profit – see A New Vision for Islamic Banks. If banks are motivated by performing public service, this doesn’t mean that they work for free. This means that everybody gets salaries everybody gets paid gets car and bank profits go into research – But the job of the bank is, instead of trying to make money for speculation on stocks and real estate, you put money into socially valuable products. There are many ways to do this, but the first thing is to change the hearts of people. To make public service more valuable and to make success in the hereafter more valuable then this worldly life. Islamic banks are supposed to be like that we have to make them live up to their name.

 SO WHAT CAN BE DONE ABOUT THE DEBT-TRAP?

There two specific suggestions: 1. Islamic banks can get into the business of providing training loans they can take people and finance them enable them to either run their own business or find jobs and they can finance them and then get repaid from the profits that they make. 2. A more ambitious version of this is life loans where every child born gets financial support that he needs until he becomes a productive member of the society and then he can repay this loan. MMT theory which is very much aligned with Islam not perfectly but sufficiently provides the theoretical framework about how we can operate in the modern world and how we can implement Islamic ideals. Islamic economics therefore is not just making interest rates to zero. It talks about the right to basic needs for all, provision of equal opportunities such as education so everyone who wants to contribute productively to society must be given the opportunity to do so.