Reversing the Great Transformation

{bit.ly/AZrgt} This is Lecture 6 of A New Approach to Islamic Economics. For the lecture slides, previous lectures, and more information about the course, see Drivers of Social Change. The video of the ZOOM lecture is followed by a brief summary.

One of the deep insights of Karl Polany’s Great Transformation is that the capitalist economic system requires a market society, which makes markets central to our lives, and subordinates traditional social institutions. Markets exploit all planetary resources for the pursuit of wealth, and are on the verge of destroying the planet as a habitat for humans and other plants and animals. Many solutions are being sought within the market framework, but this seems to be an impossible task. Instead, in this essay, we will analyze how a market society works, and how we can disrupt this and attempt to reverse the Great Transformation.

A society is defined by a network of relationships, and assigns roles and responsibilities to all members. In a traditional society, members do not need markets for basic needs; these are provided by social networks. The concept of the society as a single body ensures social responsibility – the society must collectively provide for all members. A market society must break or weaken these networks, so that a labor force can be created – people willing to sell their lives for money, so that they can buy essential needs from the market. Natural social tendencies to help those in need must be reduced or suppressed so that the baker does not give bread to the beggars in need of it; otherwise, the motivation to labor would be diminished.

In terms of understanding how capitalism shapes society, the labor market is the key. See Boonjubun and Zaman: How Theories Shape, and are Shaped by History for a detailed discussion of how the labor market came into existence, based on Polanyi’s analysis. Briefly, a labor market makes it necessary for the vast majority to put up their lives for sale. This automatically ensures that money is prized as the most valuable possession – it can be used to buy human lives. It also leads to setting the value of human lives in terms of the money they can fetch in the labor market. This has far reaching consequences, ramifying into all dimensions of society. We will discuss a few of relevance to our lecture.

Market societies came into existence as a consequence of the industrial revolution, which created the possible of massive excess production, far beyond the needs of the entire society. For our exposition, it will be useful to separate goods produced into two types N(eeds) and W(ants). As per Islamic principles, we define needs generously to include comforts and beautification of life, but exclude excess and wasteful consumption. A very precise delineation is not needed for our discussion, and we may think of W-goods as positional goods, which are not of intrinsic value, but are valued for social status. In these terms, market societies produce W-goods far in excess of N-goods. Accommodating this excess requires a complete reconfiguration of traditional societies, which prize self-sufficiency and simplicity in life-styles. This creates the central problem a market society must solve: how to sell massive amounts of W-goods which no one wants in a traditional society? This is closely related to the problem of Aggregate Demand, which is central in Keynesian economics, but our treatment will be very different from Keynesian.

In order to sustain the production of W-goods, demand for these goods must be manufactured along with the goods themselves. Demand for W-goods among laborers is created by advertising, which ties social status to possession of these goods. This creates a vicious cycle at the heart of capitalism. Laborers desire W-goods. They labor to earn wages required to buy the W-goods. Their labor produces the W-goods, which capitalists sell at profit to the laborers. All of this production is a complete waste of time and energy, because if laborers did not desire W-goods (which are of no intrinsic value), they would not need to labor for them. Without labor, these goods would not be produced, and the entire society would be much better off.

Islamic teachings provide us with a powerful antidote to positional goods. The Quran tells us to eat, drink, enjoy comforts, beautify our lives, but to avoid wasteful and excess consumption. Working to acquire money for our needs and comforts (N-goods) is permitted and encouraged, but pursuit of idle-desires (W-goods) is prohibited. Prohibition of envy leads to a prohibition of conspicuous consumption, at the heart of a capitalist economy. Aggregate Demand in an Islamic Economy would be substantially lower than that in a Capitalist Economy. This would save substantial time and energy, since positional goods (or conspicuous consumption) is a pure negative externality — complete waste of collective efforts. What would one do with time saved from laboring to produce waste, in order to earn money to buy waste? One possibility is to invest this time and energy in industrialization – heavy investments in future productive capacity. This possibility was pursued by Russia and China, behind the iron curtain, and the bamboo curtain. The curtains were necessary to shield people from the desire for W-goods, generated by Western media as an essential ingredient of capitalism. By saving this time and labor, both countries were able to industrialize, unlike all other countries under influence of capitalism. Capitalism seeks to destroy economies it cannot subordinate to exploitation, so an important component of the industrialization process in Russia and China was advanced weaponry and defensive capabilities.

The question under discussion is: how can we transition from a market society to an Islamic society? Thinking of a market society as a network of social relationships, the first step would be to weaken our attachments to our market roles as laborers and consumers. Lowering the demand for W-goods would also reduce our need to labor, and thus our engagement with market society. Lowering this demand would require using internal motivations against pursuit of idle desires from Islamic sources, and also external protection from Western media which generate this demand – some form of iron or bamboo curtain. Creating an Islamic society would require building another network of social relationships, based on Islamic principles, to replace the market relationships.

As we lower our attachment to, and our engagement with, market societies, we must also redefine our identities, and our goals in life. A market economy is designed to turn us into human resources. Our identities are defined by our careers, or our place in the market economy. Our sense of self-worth is created by our salaries. Our education is designed to turn us into interchangeable and standardized parts within the capitalist machine for production of wealth. Recognizing these chains, which bind us to capitalism, helps in the process of removing them (see: Learn Who You Are!). We must learn to become human beings, instead of human resources. Our identity as a Muslim, a part of the Ummah, and a follower of the Prophet Muhammad SAW, must take precedence over our market careers. We must set our sights on the success of the Akhira instead of worldly success. We must work on building the network of social relationship which are central to Islam and strongly emphasized in the Quran and the Hadeeth.

Market societies work hard on anonymizing us. Stripping us of our connections to family, society, and history, in the name of individualism and authenticity, creates the raw materials which are ideal fodder for the capitalist machine. Families have already been destroyed in the West, where more than 50% of the children are born to single mothers. They are under severe attack in Islamic countries, as Hollywood glamorizes pursuit of freedom and pleasure, and defiance of social norms and responsibilities. Protecting and strengthening families in the Islamic world must be of the highest priority in our efforts to build an Islamic society. Unfortunately, this front is not even on the radar for most Islamic reform groups. The family is the nucleus upon which larger communities are built. We must build our relationships with neighbors, kinfolks, fellow workers, and any other kind of social circles to which we belong. The Islamic source materials are full of encouragement to build such relationships, as well as strategies for doing so. “The believer loves, and is loved. There is no good in someone who is not loved.”

One of the key insights of this lecture is that the driver of change must be the community, and not the nation-state. We must build communities, link them internationally, and use them to create the desired change. This is actually aligned with the historical experience of Islamic societies and also the theoretical framework furnished by our intellectual traditions, based on the Quran and Sunnah. In Western social theory, communities dropped out of the picture. In a secular society, all individuals have their own religions, there are no communities with collective goals, and the only possibility for collective action occurs at the national level. Hegel theorized that morality is created by the nation, because it is the only entity capable of creating the consensus upon which secular morality is based. Absorption of Western theories through colonization and education has led our reformists and intellectual to focus on the government as the only means of creating social change. While there is no doubt that if we could control the government the job of creating social change would be much easier, this is a heavily contested arena. Control of governments is essential to capitalism, and attempts to wrest power at this level would be, and have been, resisted with all the power capitalism can muster. Therefore, we must work on a different level, where our efforts are more likely to bring fruit. Also, building of communities is strongly aligned with the message of the Quran. The lecture describes some specific strategies we can use to build local communities, and to link them globally.

LINKS: This is lecture 6 of an ongoing course on A New Approach to Islamic Economics. The next live lecture will be on Sunday 7th May, on “Needs, Wants, and Scarcity: East and West”. Complete course materials are available from the course website: Islamic Economics 2023. You can also register of the online course on the Al-Nafi Platform, for complete access to all course materials in an organized form. To join our weekly mailing list for Islamic Economics, sign up at: http://bit.ly/AZIEML