How are Islamic financial principles better than conventional market finance?

This is summary of Dr. Asad Zaman’s Interview with a Radio channel from South Africa.

              As existing models of capitalist systems have proven to be failures creating disasters after disasters and now an environmental collapse looms upon us due to maximal extraction of profits without any regard for social and human considerations or for future generations. This is because they teach at Harvard that your job is to maximize profits regardless of social consequences. There is an increasing interest for Islamic sharia principles of finance. However, If we try to mold Islamic Economics under any pressure to match current conventional finance practices, it will take away the crux and true beauty of Islamic Economics Principals. This is the main issue facing the Islamic world today that there are two versions of Islamic economics ideas which are at battle with each other. In fact one of them is the group of Islamic economists say that we need not use the word Islamic we can just call it ‘ethical finance’. It is the cost benefit analysis and involves social accounting. So in essence what they were saying is that Islamic ideas are nothing new and these ideas already exist in western finance. This idea is emphatically false but unfortunately Muslims are so under the spell of the Western ideas and institutions that they try to modify Islam to make it fit into Western models. To understand true Islamic financial models we first need to go to the underlying spirit of the transactions. It is not the form but the spirit that matters. In markets there is actually adversarial mentality. For example for interest based transaction you give a loan to a person to buy a house. The mortgage loan uses house as a security. If the person doesn’t pay back the loan then you cease the house. In this situation the bank is perfectly safe and it can give loan to anybody at all. And this is exactly what is happening. Their interests are exactly opposite to each other. The global financial crisis occurred because the banks gave the loans to the people knowing that they will fail to pay back and then bank would cease both the house and the deposits. This was an adversarial transaction. Opposed to this if we made a diminishing musharika type loan where both the parties; the bank and the buyer own the house jointly so that if the housing market collapses both will suffer then the bank no longer has the interest to give the loan to someone who will fail, because they will also lose if there is a problem.

Similarly Takaful and insurance also show the difference between adversarial (market) and cooperative (Islamic) transactions. In insurance a company which is selling insurance is actually gambling against you that if you sell them a claim the company will try to minimize the damage you have suffered, on the other hand you will try to maximize the damage. Here again their interests are in crossword position. This kind of transactions creates hostility and animosity in the society. As opposed to that Takaful is a group of people who get together in order to try to help each other in the time of need. Everybody puts in some money in a common pool. If one suffers damage in an Islamic framework, people in the cooperative will try and convince him to take the money from the common pool and he will use it sparingly so as for other brothers to have in time of need.

‘Bank and waqf’ is another example. A person in a capitalist society puts his money in a bank to try to make even more money but a person who has excess money in an Islamic society tries to make it available to the others via ‘waqf’. So if you have 1 million $, capitalism says make another million with it. In Islam, Prophet Muhammadﷺ was approached by someone that I have a lot of money. Heﷺ said create a ‘waqf’, you will do good and this good will last until the ‘waqf’ lasts.

So this is the key difference between the spirit of transactions in Islamic finance which is ‘cooperation, generosity and social responsibility’ and the spirit behind capitalism is ‘greed, competition, individual pursuit of pleasure and hedonism.      

Going Backwards?

Are we going backward as a natural consequence of contemporary economic ideologies that are thriving defiantly? This question requires to be asked as an organic reaction to the nature of atrocities and crisis emerging one after another. Climate crisis, Religious persecution, the Refugee crisis, political instability and income inequality are not the dilemmas to be overlooked because the nature of such problems, very accurately, depicts that we are not in the right headspace as humans. How and when did the humanity died, when 7.7 billion people are residing on the face of this planet? This is not by mere accident. Humanity has not been subjected to this brutal fate all of a sudden. It began by slowly poisoning it with the falsely built narratives that directly targets the nature on which humanity is supposed to thrive and fortify. Horrific unrests are followed by the enactment of so-called rational and sophisticated policies whose hidden agenda is to maximize the utility of the top 1% in the economy, who have grown 20 Trillian dollars richer as an offering of the Neo-liberal era. How is the Neo-liberal ideology morally and economically corrosive? The answer to this lies in the foundation of what it is built on.

Neoliberalism, a term coined in 1938 remained at margin till the 1970s despite having significant funding from cooperation’s trying to avoid regulation and taxes. After the crisis of the 1970s, the ideology officially took charge in the 1980s with the conservative governments of Margaret Thatcher in the UK and Ronald Reagan in the US. Henceforth, IMF, the World Bank, the Maastricht treaty and WTO served as political channels to impose neoliberal policies.

As Naomi Klein documents in The Shock Doctrine, neoliberal theorists advocated the use of crises to impose unpopular policies while people were distracted: for example, in the aftermath of Pinochet’s coup, the Iraq war and Hurricane Katrina, which Friedman described as “an opportunity to radically reform the educational system” in New Orleans – theguardian

Finding its roots in the laissez-faire economics, which advocates free-market economy & leave alone/to allow to do as a guiding principle, Neoliberal policies steer the economy away from spending, regulation and public ownership. The market concentration of 3 to 5 firms in the industry based on sales, employment or any other relevant indicator suggests that the treatment of the free market is fair to the producers based on their capacity to contribute to the GDP of the economy. This is basically to say that the free market rewards the rich because they deserve it by producing more and poor people earn rather poor treatment for themselves because they are less productive. And this is completely justifiable given the laws on which market organically operates. Moreover, market mispricing saves the economy from unemployment as higher wages lead to the business buying less of it and this makes the economy prone to adverse outcomes. And finally, Homo-Economicus narrates to us that humans are by nature selfish, perfectly rational and self-maximizing. Which suggests “competition” and “greed” as ideal proponents of the economy.

These man-made assumptions, on their terms, are objectively false. If we ponder deep, it takes no time to realize that economics is not an “unchangeable Natural Law”. This is an ideology to which we agree to out of choice. Market concentration shows nothing but the power of the rich to negotiate and exploit resources as they see fit. No moral credibility or social responsibility is taken into account before determining the worth of a production unit. Which is why we see that corporations, despite a big market share to make profit out of, they also hold a big share in prevailing environmental and social crisis. Workers are paid less not because they produce less but because the rich have become entitled to exploit more. Reasonable wages make a worker self-sufficient and to be able to afford more which is good for any business. Most importantly, the behavioral model on which the economy runs on is nothing but a projection of bogus imagination that protects the interests of few. In response to Homo economicus, Homo Islamicus suggests that “human” lie at the center of economic progress and individuals are guided by commonly shared Islamic values in his or her decisions. Morals consideration protects the interest of not only a community but an economy as well. This suggests Empathy and cooperation as ideal proponents of the economy.

West now realizes the need for an ideological replacement that is not yet properly named or documented but is emerging as “New Economics”. Hereby narrating five rules of thumb underlying the ‘new economics. Firstly, it says, Successful economies are not jungles, they are gardens and must be tended (social norms and democratic regulations required). Secondly, Inclusion creates economic growth- cooperation ensured prosperity. Thirdly, the purpose of the cooperation is not merely to enrich shareholder, rather it is to be socially & economically responsible. Fourthly, Greed is not Good-self maximization should not prevail. Lastly, Unlike laws of physics, laws of economics are a choice (changeable unnatural law). All this is aptly put forward by Nick Hanauer, who himself is a venture capitalist and belongs to the top 0.01% of the capitalist class. It is now objective to make sense of these claims coming directly from someone that has successfully been at play at the forefront of the capitalist structure.

As much as the theorists and policymakers are at fault for feeding us with malicious narratives, we are equally responsible for digesting and accepting things the way they are put forth. That also for not days or months but for years. It is important to act mindfully of the fact that the crisis at play is not ‘naturally occurring events’ destined to happen in due time. Instead, they are the results of unconstrained and unregulated human desires. Islam teaches us to regulate our “Nafs” and behavior for the sake of society and prosperity. But we chose to rely on the western ideology that experimented with regulating the infrastructure before human behavior. After failing for many years, the discussion has now finally come to what Islam proposed as a guiding principle decades ago. It takes more than just being a Muslim-that is the intellectual honesty-to regard the ideology manifested in Islam.

Please visit Imparting Knowledge for short lessons on the subject

Re-enchanting the world

Max Weber wrote that “The fate of our times is characterised by rationalisation and intellectualisation, and, above all, by the ‘disenchantment of the world’. Precisely the ultimate and most sublime values have retreated from public life …”

The disenchantment of the world leads to the modern view of the heart as merely a pump for circulation of blood. The ancients had deeper understanding; as Pascal said, “The heart has its reasons, which reason does not know. We feel it in a thousand things. It is the heart which experiences God, and not the reason. This, then, is faith: God felt by the heart, not by the reason.” Elevation of the head above the heart has led to a loss of wonder at the myriad mysteries of creation which surround us, and also caused deep damage to human lives in many dimensions. As our poet laureate Allama Iqbal emphasised: “At the dawn of Judgment, Gabriel told me, never accept hearts which are enslaved by the mind.”

To make the best of the few moments that we are granted on this amazing planet, we must learn to appreciate the multiple paradoxes of this precious gift of life. On the one hand, “All we are is dust in the wind” — within the grandeur of the universe, and as just one among billions of people currently alive, my life is an insignificant speck. On the other hand, my life is all that matters to me, and the entire universe is contained within, and created by my imagination. This simultaneous awareness of both truths diametrically opposed to each other is not accessible to reason. However, poets have no difficulty with it; as Rumi said, “You are not a drop in the ocean, you are the entire ocean, contained within a drop.”

When the heart and soul are removed from the picture, reason reduces man to a material object, just a drop in the ocean. Then it becomes possible to say that the value of a man’s life is the sum of his lifetime earnings. Initial statements to this effect by secular and materialistic philosophers like Hume caused shock and horror. Nowadays, it has become widely accepted. The effects of this reduction have been profound in all dimensions of human life. Instead of recoiling with horror, we eagerly accept as the latest wisdom the idea of the ‘human resource’. Economists discuss human beings as inputs into the production process. The goal of the economic system is seen as the production of wealth, and the worth of a human being is calculated according to his ability to contribute to this goal. This comes from looking at only one side of the picture, the insignificance of a human life.

The other side of the picture is to realise that human lives are infinitely precious. Each human being is unique, with experiences and history like no one else. Each moment in our lives is new — no such moment has even existed before, and no such moment will ever arise in the future. Every moment presents us with unique opportunities to progress towards the infinite potential for growth planted within our souls. If we can grasp these opportunities, we can reach to heights that have never been scaled before in human history.

Consider the miracle of the seed, which defies all logic. The tiny seed has no arms, legs, eyes or moving parts. Buried within the ground, it seeks out, and extracts from the soil, the hundreds of different chemicals required to manufacture roots, trunks, leaves, fruits, etc. It unerringly sends roots downwards towards water, and the shoots upwards towards the sun, though it has no mechanisms to perceive directions. Within the seed, the Creator has implanted not just the design, but the full capabilities to manufacture not just a tree, but a forest. The potential planted within a human being is far greater. Those who realise it can achieve marvels. With training and discipline, humans can walk barefoot on fire, slow life processes down to survive being buried, break bricks with bare hands, accomplish incredible athletic acts, write literature and poetry of enduring excellence which inspires millions, and even greater spiritual feats which cannot be witnessed by others. To put it in more prosaic and less poetic terms, the purpose of wealth is to provide the opportunity for all human beings to fulfil this potential, which cannot be measured in monetary terms. This reversal of the ‘human resource’ idea is the central contribution of the capabilities approach to development, which emerged from the emphasis on human development pioneered by Mahbubul Haq. This focus on the intangibles of human experience, which lead to the development of capabilities, is precisely what has gone missing from economic cost-benefit calculations.

Disenchantment, as reflected in the banishment of the ultimate and sublime values from the public domain, has resulted in impoverishment of human lives in many dimensions. We have learned the false and misleading lessons that our lives should be devoted to careers, production of wealth and the pursuit of pleasures. Recent research shows that while we are attracted by material possession and short-term gratification, long-run happiness comes from seeking enriching experiences, and emphasising experiences over possession and consumption. Bringing back the magic into our lives requires paying heed to the wisdom of the ancients. Most important to our personal happiness is investing time on the social threads with which the fabric of our lives is woven. Generosity, acts of kindness, service to others, even at personal cost, contribute more to long-run happiness than selfish maximisation of short-run pleasure. It is a central lesson of Ramazan that abstaining from desires, as well as other vices, and striving to do virtuous deeds, leads to spiritual growth, which is the core component of the development of character and capabilities. Let us use this opportunity to make a commitment to improving ourselves as human beings, as this is the most effective way of making the world a better place for all.

This article was written by Dr Asad Zaman and published in in The Express Tribune, June 20th, 2016.

Morality and Spirituality

A Harvard professor by the name of Julie Reuben has documented in her book, The Making of the Modern University: Intellectual Transformation and the Marginalization of Morality,

the historical transition in the life of US universities over the period 1880-1930. She points out the developments that led universities to leave their tradition of building character along-with imparting knowledge and the negative impacts on society of this change of approach.

Most colleges in the US started out as religious seminaries and eventually embraced scientific and technological material in their curricula. Many difficulties arose for them in the execution of their new educational programs and Reuben argues that the educators tried to create something that may be called a ‘modern’ approach to moral education. She concludes that the process largely was unsuccessful and the universities eventually chose to focus solely upon providing technical knowledge and abandoning moral goals.

Keeping Reuben’s conclusions in perspective, we see now and in the past, graduates, even from elite universities, taking part in perpetrating miseries around the world, committing financial fraud, engaging in lies and deception, largely without recognition or remorse. One may ask, that how does one reconcile the morally reprehensible acts and one’s conscience? The fact is that people develop justifications, in sophisticated or unsophisticated ways, for their actions, and that is part of human nature. As one sinks deep into corrupt behavior, insensitivity also sets in and the act does not seem wrong anymore. An excellent work by Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism, documents the actions of the ‘educated’ which caused great physical, psychological and emotional harm to many. Similarly, Jonathan Glover’s book, Humanity: A Moral History of the Twentieth Century documents genocide, mass killings and levels of barbarism unparalleled in human history. At the level of an organization, we see that despite elaborate corporate governance structures, rules, and checks, fraudulent behavior is becoming common-place. People bound primarily by external rules tend to look for loopholes, workarounds, whenever they have an economically rewarding opportunity to do so.

The events of the past century and now, are evidence of the failures of the mainstream education system in inculcating lasting moral values in individuals. The failures seem intuitive if one contemplates a little. In the absence of a spiritual basis for moral values, there is no firm foundation for the teaching of values and its implementation in the real world. The realization that we are created for a purpose, and will be held accountable for our actions after we die, creates an internal moral compass which is more powerful than any external control. The institutions of learning in the Muslim word in the past combined, what Islamic scholars identify as ta’lim (imparting of knowledge) and tarbiyah (the imparting of values). Tarbiyah, derived its core curricula from primary Islamic sources, the Quran and Sunnah (the narrations of what the Prophet Muhammad SAW said, did or approved of) allowing humans to understand their place in this world and their responsibilities towards it.

A final point to consider is the increasing specialization and fragmentation of knowledge which have become the norm for a university education. What this does is that it creates a situation where most are only considered or know of what they are doing in the larger scheme of affairs. People then often justify their link in the wrong ‘ends’ by saying that they are just doing their job which is not wrong in itself. In the Islamic moral framework, one cannot participate in an activity leading towards a wrong end and moreover as a general principle, the means don’t justify the ends in Islam.

To sum up, it is pertinent to understand that external controls have their place, but without a spiritually-rooted value system, nurtured in an individual from an early age and incorporated into our mainstream education system, the world would be a chaotic and unsafe place to live. In each and every one us, there is a tremendous need for purpose, let’s try and make sure our purpose aligns with our worldview, the Islamic worldview. There is no understanding of this world that is true and holistic, but that given to us by our Creator.

The inspiration for the above post is the following article by Dr Asad Zaman published in the Express Tribune (June 15th, 2015) titled “The Marginalization of Morality

What is Islamic Economics?

If economy is called back bone of the society, it may not be wrong. However, it is vital to understand upon what belief systems the foundation of economy is based. This will lead to the understanding of how the economic agents behave while performing their economic activities, be it employment, business, economic legislation or anything related to economics of the society or nation. In the modern world the nations are facing challenges in prospering their countries. as a solution set, along with other economic systems, the name of the Islamic Economic System also surfaces, nonetheless with little common person understanding. This post deals with the question of What is Islamic Economics. The answer to this apparently simple question is surprisingly complex. This article can only provide a brief sketch.

Early in the 20th century, about 90 per cent of Muslim lands were colonized. The two world wars substantially weakened the European powers, and enabled liberation movements to succeed all over the globe. At the time, there were two competing models for organizing economies: capitalism and communism. Revolutions are driven by ideologies, and leading Islamic thinkers like Maududi and Baqir Al-Sadr offered a third alternative as the natural option for newly-liberated Muslim countries. They argued that Islam had its own distinct economic system, and this system was superior to both capitalism and communism. For reasons to be discussed, this idea of constructing a radical alternative to dominant economic systems was not realized in the post-colonial period.

Colonial educational systems had explicit goals to create a buffer between the rulers and the colonized, as described by Lord Macaulay in his famous Minute on Education: “We must at present do our best to form a class who may be interpreters between us and the millions whom we govern; a class of persons, Indian in blood and color, but English in taste, in opinions, in morals, and in intellect.” These intermediaries were called ‘compradores’ in Latin America, Black Skins with White Masks(Frantz Fanon) in Africa, and Brown Skins with White Masks (Hamid Dabashi) in Asia. They ran the vast administrative and bureaucratic structures on behalf of the colonizers, and naturally came into power following independence. These compradores were trained to believe in the superiority of the colonizers, and to treat their heritage, ancestors and indigenous society with contempt. Plans for an Islamic economic system were put on the back burner as Islamic groups engaged in the struggle to wrest control from secularized and Westernized compradores. For complex sets of reasons, these struggles were unsuccessful and the compradore class succeeded in retaining power throughout the colonized lands.

Second generation pragmatists saw that the required revolution did not appear to be forthcoming. They abandoned the grand vision of the founders for a just and equitable alternative to both capitalism and communism. More limited goals were targeted. Instead of rejecting capitalist institutional structures, the new Islamic economics (nIE) attempted to tinker with capitalism in order to make it conform to Islamic principles. A popular formula for defining the subject became: nIE = Capitalism – Interest + Zakat.

Large numbers of second generation Islamic economists acquired professional training in modern economic theory. In the course of their study, they came to believe in the epistemological claims of the discipline. Economic theory claims to be a positive discipline, on a par with the physical sciences. The second generation was unable to see through these claims, and came to regard economic laws as being on a par with physical laws: objective, factual, indisputable and without normative elements. The laws of supply and demand were seen as having the same validity as the law of gravity. This misconception was fatal to the project of developing a genuine Islamic economics. Whenever the second generation saw a conflict between Islamic principles and economic theories, they assumed the validity of economic theory, and sought to rationalize or modify Islamic principles so as to remove the conflict.

This attempt to harmonize Islam with economics has been abandoned only recently, after the global financial crisis revealed that economic theory, the ‘emperor’ of the social sciences, has no clothes. Nobel laureates were led to ponder why the entire field has gone astray, leading economists responsible for crafting policies which led to the crisis confessed to making huge mistakes, while the US Congress set up a committee to investigate the failure of economic theory to provide warnings about the impending crisis. The root cause of this failure is that modern economics claims to be an objective description of reality, while in fact it is a normative and prescriptive theory. Economics assumes that everyone acts selfishly to maximize lifetime consumption, without any concern for others. Furthermore, this is rational behavior, which leads to optimal outcomes for society. For example, Nobel laureate Milton Friedman vehemently rejected the idea that businesses have social responsibilities and asserted that their only responsibility is to maximize profits, regardless of social costs.

Evidence has accumulated from many different fields of study that the economists’ description of human behavior is not empirically accurate. Human beings are naturally inclined to be cooperative and generous, even to the extent of giving their lives to save strangers. Describing competition and greed as natural and rational actually creates these behaviors, so the economists learn to be more selfish than their classmates in other disciplines. The global financial crisis was caused by the greedy behavior of the financial industry, which sold mortgages to unqualified people, making profits from a process that wiped out lifetime savings of their customers. Such behavior was enabled and created by standard MBA teachings, which place the bottom line above all other considerations.

Instead of a jungle, with survival-of-the-fittest as the ideal form of social organisation, Islamic economics prescribes generosity and cooperation as the behavioral bases for an ideal world. The Holy Quran is full of encouragement to spend generously on others. Just like economic theory prescriptions of selfishness and competition create such behaviors, ideals of generosity and cooperation also create such behaviors. Throughout the thousand-plus years of dominance of the Islamic civilization, basic needs of the population were recognized to be a social responsibility. Education and health needs were not commodities to be sold in the marketplace to those who could afford them. Rather, society arranged to take care of these needs for all members. Everybody can see the outcome of the competitive jungle of modern economics in the form of stark inequality, misery for billions, combined with luxury for a select few. At the core of Islamic economics is the idea of social responsibility — as a society, we are collectively responsible for the needs of all members, and not just for those who can earn enough money to purchase these needs in the marketplace. Is this not an ideal worth striving for?

Published in The Express Tribune, January 17th, 2016.

Talk & Conference Paper presented at 11th ICIEF, KL, Malaysia, Oct. 2016 by Dr. Asad Zaman: author page on LinkedIn. Links to Other Works: Index.

Beyond capitalism: A wisdom economy

Written by Dr. Niaz Murtaza

The co-evolution of capitalism, democracy and science since 1800s has unleashed unprecedented progress but also enormous problems, some which threaten life on earth.

Around 1800, people globally were overwhelmingly poor. Today, 40% still live in poverty. Inequality, which breeds social and economic problems if excessive, has grown five-folds since 1800. The richest 10% own 85% of global assets. Proponents claim that free markets will solve these problems. Poverty has reduced recently but mainly in China and India. This is not due to free markets though, as both rank as ‘mostly unfree’ under the US-based Heritage Foundation’s Index of Economic Freedom.  Jeffrey Sachs of Columbia University shows that rank on this index and economic success are not correlated.

Around 40% have attained middle class status, often through routine jobs and long commutes. Thus, many middle-income people spend 10-12 hours daily in boredom. This undermines their self-worth and causes social problems. Finally, 20% are rich today but also often face social problems. Over 50% Americans report high and 30% extreme stress. Half of adult Americans may become obese and unhealthy by 2018. Divorce, anomie and crime are high in rich countries.

The move of just 20% to prosperity is causing climate change, which threatens life on earth. Recurrent recessions display the inherent instability of capitalism, as investors chase risky ventures for high profits, and the helplessness of even rich governments before them. Recessions undermine the welfare of all classes as well as capitalism’s claims of high allocational efficiency.

Though higher than under totalitarianism, freedom of thought under capitalism is still compromised. Freedom of thought requires easy access to a variety of perspectives. Paradoxically, capitalist, democratic societies curtails it significantly too, as there is an information overload, mainstream media emphasize market perspectives and 10-12 hours of intellectually-crippling work leaves no space to search for alternatives.  Market monopoly on thought undermines freedom the same covert way as traditions.

In summary, the rich, middle-class, poor, other species and future generations all suffer in some ways. Clearly, there is huge material progress too due to these three. Capitalism creates wealth by mobilizing enormous energies around self-interest. Science enhances wealth through inventions. Democracy helps spread it. However, scientific advancements are the most important cause of material progress. Without increased productivity through science, increased self-interest among people would have likely created more conflict than wealth. Thus, the positives emanate from all three, especially science.

However, the negatives spring mainly from capitalism—from its claim that the pursuit of self-interest ensures both the individual and societal good. The social problems among the rich undermine the first claim; the other existential problems above undermine the second. Since self-interest mainly depends on the consumption of material goods and scarce resources, its pursuit soon creates conflicts with other people, communities, species and generations. This causes personal stress, poverty, inequality, environmental destruction and other existential problems. Its pursuit to a certain level is necessary for survival. However, its excessive pursuit undermines the quality of life for all.

So the benefits come from all three, especially science, the negatives mainly from capitalism, meaning its benefits-cost ratio is low. In fact, its co-evolution with democracy and science masked its shortcomings. Otherwise, it may have fulfilled Marx’s predictions about its demise long ago. Science and democracy cry for a worthier partner that possesses capitalism’s mobilizing strengths without its weaknesses.

Ironically, its proponents now invoke technology (science) and regulation (democracy) to solve the problems created by capitalism. Both fail given capitalism’s dominance. Increasing regulation even modestly is difficult, as revealed by the current right-wing backlash in America even while the recession caused by deregulation persists. Some portray the greater environmental regulation in rich countries as proof that capitalism protects nature. However, rich countries are the biggest per capita emitters of CO2, which causes climate change. Resources saved through technology soon get consumed through increasing overall consumption.

So what is the alternative? Scattered for long across several social sciences, the outline of a viable alternative is gradually emerging from fields like economic psychology and ecological economics. Communism’s failure suggests a change not to state ownership but in values. Humans must discover a better life goal. Psychologists, such as Maslow, identify nine human motivations. Physical needs, security and self-esteem (wealth and status) represent self-interest. Relational motivations (belongingness, group contribution and altruism) help humans transcend self-interest. Cognitive motivations include aesthetics (enjoying arts and nature) and exploration (science).

Finally, self-actualization is about deeper meanings in life or wisdom which is achieved through transcendence (relational motivations) and reflection (cognitive motivations). It is the ultimate human motivation, emphasized so by most eastern and western philosophies and religions. No wonder, Homo sapiens means the wise beings.

History shows that the higher motivations are capable, more than self-interest, of mobilizing enormous energies from millions to produce huge individual and societal benefits. Their pursuit means retaining the mobilizing strengths of capitalism without its weaknesses, as they depend less on material goods and scarce resources and more on free, social and public goods. Research shows that people derive deeper satisfaction from them than from self-interest. By circumscribing self-interest within their ecological footprint and mainly pursuing higher motivations, people can simultaneously enhance their own life quality and of other people, societies, species and generations, and eliminate all the existential problems.

What will a system driven by self-actualization look like? Property will still be private and enterprises for-profit.  Consumption will be much lower as people spend within their ecological footprint, creating a steady-state economy with constant per capita consumption, first in rich countries and in poor countries once they become middle-income.  Markets will not dominate society, unlike today. Will this system still be capitalism? Since wisdom, not capital, will be its main goal, capital-ism is a misnomer for it. Wisdom economy or Sapienism represent better names. Thus, Adam Smith was wrong. The pursuit of self-actualization, not self-interest, leads to personal and societal good. Homo sapiens can so justify their species name and make Homo Economicus extinct.

The writer is a Senior Fellow with UC Berkeley and heads INSPIRING Pakistan, a progressive policy unit. murtazaniaz@yahoo.com www.inspiring.pk @NiazMurtaza2.

A longer version of the paper is available here:

https://www.sciencedirect.com/science/article/abs/pii/S0921800910004519

Pursuing self-interest or self-actualization? From capitalism to a Steady-State, Wisdom Economy

The Use of Research Knowledge

Major damage caused as a consequence of the conventional academic structure is the eradication of Questioning culture. The thought of uttering a single word “why” during a class session haunts the student. What was once used as a pedagogical tool is now often heard during a meaningless converse. Moreover, the institutes meant to impart knowledge have become a natural habitat for cramming culture, where the environment leaves no room for critical thinking.

Verily, the beauty of a question is half of the knowledge (Al-Bayhaqi)

For a person who finds the easy way out by becoming a ‘follower’ can hardly gather the courage to stand out as a ‘leader’. This Fear of taking the risk and questioning the troublesome & unknown is one of the main reasons why we have become submissive to the secular dogma over time. Depriving youth of the basic ingredients of a character and moral uplift is the best way to strip the Muslims or any other ethnic group of their identity & culture. The presence of a systematic scheme of this kind is a smaller problem relative to the problem of the existing mindset that is not realizing the presence of it. It’s like the whole society is forced into wearing a blindfold.

One of the byproducts of such ignorance is the handing over of the authority to the ignorant. How can a person who is oblivious to his own rights, voice the concerns on behalf of the society? Chances are zero to none and that’s exactly the attitude which wins bread for the plutocrats accentuating excess production at the expense of social welfare. We are being presented with the standards to measure the progress of the society that has nothing to do with reality and to this, we bow our heads as we do not think highly of ourselves as a critical thinker. GDP (gross domestic product)-Most widely used measure of economic activity is one such example. The value of final goods and services within a country’s border is no longer a standard measure of performance for a world that’s facing issues like climate change, ethnic cleansing, war, inequality, poverty, corruption, etc.

In the book Beyond GDP: Measuring What Counts for Economic and Social Performance, Joseph E. Stiglitz , a Nobel laureate in economics writes- What we measure affects what we do. If we focus only on material well-being – on, say, the production of goods, rather than on health, education, and the environment – we become distorted in the same way that these measures are distorted; we become more materialistic. Addressing the issue, OECD has now constructed Better Life Index.

 In 2010, similar concerns were highlighted in a report by the International Commission on the Measurement of Economic Performance and Social Progress _“The [financial] crisis is teaching us a very important lesson: those attempting to guide the economy and our societies are like pilots trying to steer a course without a reliable compass.” —from Mismeasuring Our Lives

Such metrics are the result of an intellectual effort, which then helps policy maker’s device policies. What if someone tells you that you are constantly being fed with sweet lies on how to run the world? Because this is exactly what the reality is. The information passed on in the name of advancement and revolution is nothing but an illusion to steer masses away from reality. This plan serves & preserves the interests of the elite and does absolutely nothing to improve the living standard of the unprivileged ones. Well-Produced research creates room for intellectual honesty and can take things forward both in societal and economic setup. Students should quit doing things as an academic requirement and start being mindful of the fact that their academic input actually makes a difference to the world. Research or thesis writing is one of them. The following lecture sheds light on the flawed economic structure at play & elaborates on the steps students must take in the face of all the lies we are living by.

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