History: The Conquest Song of the Victors

[shortlink: bit.do/azhcsv] As explained earlier in “The Conquest of Knowledge”, the deadliest effect of colonization was not the loss of wealth and resources from which we suffered. Far more important is the mental colonization, when we learned to see the world from European eyes. First, let me provide the standard “Eurocentric” story, which we have all learned to believe, due to our Western education, designed by Macaulay to create admiration and awe of the West, as well as an inferiority complex about our own heritage and ancestors. While we have achieved “freedom” by throwing off the physical shackles which bound us, we continue to be mentally enslaved, and the Western system of education continues to produce Macaulay’s children today, just as it did in colonial times. The standard Eurocentric story goes as follows.

According to their accounts, the Europeans were living in the Dark Ages (and also the whole world was similarly in Darkness) when suddenly, without any apparent cause or reason, the Sun of Reason rose in the West. In the light of this new reason the European came to see that religion was just superstition and ignorance, and should be rejected in favor of science and reason. Because, for the first time in the history of mankind, European learned to think logically, they were able to use their rational faculties to make tremendous advances in all fields of knowledge. They invented science, technology, democracy, good governance, human rights, etc. etc. etc. – a never ending list of wonders. In brief, all good things known to mankind today come from Europe, and these things all originate in the Enlightenment of Europe, although they have been carried very far from their beginnings due to the rapid progress of science, and the dramatic increase in knowledge that has come from the use of reason, and from the rejection of superstition (that is, religion).

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Countering European Myths about Knowledge

[shortlink bit.do/azemk] This blog is an extension of my main website “Transforming Knowledge” — which refers to knowledge which has the power to shape the world. This is the knowledge which was given 1400 years ago to Arabs, which transformed their inner lives, and filled them with the burning desire to carry this message to every human being on the planet. They succeeded in this mission, which changed the course of human history. Unfortunately, today Muslims have forgotten this history, the revolution that Islam brought to the world — as prophesied, Islam came as a stranger, and will become a stranger. For a deeper discussion of the radical differences between Western and Islamic conceptions of knowledge, see An Islamic Approach to Knowledge.

One essential component of the knowledge we need to change ourselves, and to change the world around us, is re-learning this history. One of the best sources for this is the book by late Syed Abul Hassan Ali Nadwi RA– What the World Lost Due to the Decline and Fall of the Islamic Civilization.  This book was originally written in Arabic ( Ma za Khasr Al-Alam bi Inhitatil Muslimeen). The Urdu Translation has the title: Insani Dunya per Muslmanon Kay Urooj Aur Zawal ka Asar; Students are strongly urged to download and read this book during their vacations, as it will open their eyes to realities which have been suppressed from our educational processes. This loss of knowledge — our forgetting our identities, who we are, where we come from, what was the vision that was given to us, and the history of our successes and failures in accomplishing the task of spreading the good throughout the world, and uniting mankind in pursuit of the highest goals  — occurred during the period of our colonization, which not only destroyed our institutions, but also reshaped our minds into believing in the superiority of the English civilization — see The Conquest of Knowledge.  Our poets and scholars sensed this loss of the greatest treasure — our Islamic identities — and made great efforts to REMIND the muslims of their past, which was being erased from our minds. Two of the most successful efforts in this direction were the Mussadass-e-Hali, and also the Shikwa/Jawab Shikwa by Allama Iqbal. These poems spoke to the hearts of the Muslims living under British rule, and inspired them to give great sacrifices for the cause of freedom.

Today, even though we have achieved physical freedom, our mental enslavement not only continues, it has actually increased. Even the messages of Iqbal and Hali, and many other reformers, have been forgotten. We are like the slaves who have fallen in love with their chains, and wear them and display them proudly. The main reason for this is that our traditional educational systems were destroyed, and instead, a colonial educational system was put into place — which continues to this day — which shaped our minds according to the principles devised by Lord Macaulay: “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 colour, but English in tastes, in opinions, in morals and in intellect.” Our education is designed to create bureaucrats who are unable to think creatively, and only think second-hand thoughts, who are deeply impressed by the West, and deeply ignorant of the heritage of the Islamic Civilization.

There are so many poisons that we have swallowed in the course of our Western education that it is hard to know where to begin the process of de-toxification — the cleansing of our minds and hearts.  We need to completely re-vamp the educational systems, to focus on development of personality and character, rather then the technical education designed to shape us into interchangeable parts which fit into the capitalist machine for production of wealth. However, this step will not be possible until we can raise our heads from our collective prostration (sajdah) to the idol of Western knowledge. Today we are all so impressed with West and Western knowledge that we have forgotten the warnings of Allah: “Do not be deceived by the apparent pomp and splendor of the non-Muslims.”  Even though the Quran (10:58) assures as that: “In the bounty of Allah and in His mercy (the Quran) – in that let them rejoice; it is better than all that they (the non-Muslims) accumulate.” today the Muslims believe that what has been gathered by the West — in terms of wealth, knowledge, culture, everything … — is better than what has been given to us. This inferiority complex creates a huge spiritual barrier to progress. Those who do not respect and value the treasure which has been given to us in the form of the Quran and the associated teachings of Islam, will not be able to derive the benefits which are contained in this treasure. We should recall that this is the SAME knowledge which took Arabs from the bottom pits of ignorance to the top civilization in the world — Even though this knowledge has the same power today, Muslims no longer believe in this. Instead, Muslims think that to progress today, we must follow the ways of the West. As per Hadeeth, we will follow the ways of the Christians and the Jews, even if they crawl into holes of lizards.

Before we can make any progress towards the acquisition of genuine knowledge — the type which enters our hearts, and transforms our lives — we must free ourselves from the grip of Western knowledge on our hearts and minds. Allama Iqbal expressed it as follows:

My eyes were not dazzled by the brilliance of Western Knowledge — they were protected by the dust of Medina and Najaf.

We need to follow in the footsteps of Iqbal, and protect our eyes from the dazzle of Western knowledge. The first steps towards knowledge require UNLEARNING a vast number of wrong ideas that have been implanted in our minds and hearts as a result of our deep training within a Western educational system. The one hour you-tube lecture linked below described some of the major myths that we must unlearn BEFORE we can start our journey towards knowledge. For those with less time, a quicker way to go over the main concepts that we need to unlearn is given in the slides: Unlearning Jahilliyah and Re-Learning Islam.







Foundations for Islamic Economics

This is a continuation of the discussion of Dr. Mabid Al-Jarhi’s proposal for a new syllabus for Islamic Economics. For the original sequence of emails in this discussion, see Discussion of Syllabus for IE: part I, and Discussion of Syllabus for IE: Part II,

Defining the term “Islamic Economics” is of course of paramount importance in creating a syllabus for the study of this subject. Furthermore, this is a hugely divisive task. In my paper on Re-Defining Islamic Economics, I have surveyed several definitions, and noted more than 20 versions exist. Over the course of thirty years, no agreement has emerged in the field as to what we mean by “Islamic Economics”. In my paper, I explain that this is because all the versions that I have examined define economics as a MIX of Western and Islamic concepts. This approach fails because Western conceptions are diametrically opposed to Islamic ones when in comes to economics. It is like the attempt to mix fire and water. Instead, I propose a definition based purely on Islamic sources, which is:

DEFINITION: Islamic Economics is the EFFORT/STRUGGLE to implement the orders of Allah pertaining to economic affairs in our individual lives (Micro), in our communities (Meso), and at the level of Ummah (Macro).
The paper UNPACKS this definition at several levels, and shows that it is diametrically opposed to conventional economic theory in ten different dimensions.
Another way to think about how to define Islamic Economics is in terms of usage — since language is used to communicate, the meaning terms carry depends on social convention and consensus about how they are used within a community. In my paper on Reviving the Promise of Islamic Economics, (presented at 11th ICIEF) I show how this convention has change radically. Initial use of the term, by first generation Islamic Economists, was in terms of a radical and revolutionary alternative to Communism, Socialism, and Capitalism, as an economic system. For historical reasons and necessitiies, described and explained in the paper, the vision was lost and abandoned by the second generation thinkers of Islamic Economists, dating from the mid 1970s. Instead, the second generation accepted the false claims of modern economics, that this is a positive and objective science, and sought to build a discipline within its umbrella, as a BRANCH of neoclassical economics. This attempt failed because to dramatic contradictions between the civilized vision of Islam, based on cooperation and generosity, and the vision of neoclassical econ, which seeks to create a society under the laws of the jungle, based on competition and greed. After the shock of the Global Financial Crisis, which destroyed claims of neoclassical to the status of a science, the possibility and hope of rejecting neoclassical, and building a new Islamics true to the vision of the original founders, as a radical and revolutionary alternative to conventional neoclassical economics has been revived.
I am copying below a short abstract I have submitted for the 12th ICIEF, which explains how foundational concepts on which neoclassical economics rests are radically different from the concepts which lie at the foundations of an Islamic approach to economics.
ABSTRACT submitted for 12th ICIEF:  Transformation of Human Behavior as a Central Strategy for Islamic Economics
All social sciences consist of three distinct dimensions. The first is a positive description of human realities. The second is a normative description of an ideal state of affairs. The third is a prescription of what needs to be done to transform the current state to the ideal state. Conventional economics describes humans as being homo economicus, motivated solely by the desire to maximize pleasures obtained by consumption (of goods and services). The ideal state of affairs is for all people to be able to satisfy all desires, but this is not possible due to scarcity. The transformative strategy is economic growth – we increase the amount of production in order to be able to remove scarcity and achieve plenitude. The pursuit of economic growth at all costs, prescribed by conventional economic theory, has caused massive economic injustice, and put the future of mankind in peril, by destroying resources in the mad rush for growth.
Islam differs from conventional economics in all three dimensions. The description of human beings is substantially more complex, and closer to realities of human behavior. Humans have a wide variety of different goals, and they have conflicting desires and motivations. he human heart is a battleground between the forces of good and evil. The human being has been give the capabilities for excellence in both directions, for the greatest good as well as the greatest evil. The ideal state to strive for has been described theoretically in the Quran and Hadeeth, and the perfect model for behavior has been sent to us in the form of our Prophet Mohammad SAW. The strategy for transformation of human beings is Tazkiya, or purification of the heart from idle desires.
Conventional economic theory takes the nature and desires of man as exogenously given, and works on producing goods to satisfy all desires. Islam works on changing the hearts of men to purify them of the greed and competition for worldly goods, and replace these by the higher norms of cooperation and generosity. The Prophet Mohammad SAW created a revolution in history, transforming ignorant and backwards Arabs to become leaders of the world, and to launch a civilization which dominated the world for a thousand years. Today, the central strategy of an Islamic approach must be to work on the hearts of men.
The paper will go on to explain why ALL THREE dimensions, the POSITIVE, the NORMATIVE and the TRANSFORMATIVE of conventional economics are DEEPLY MISGUIDED and wrong, while Islamic Economics provides us with far superior viable alternative, which have a chance to save humanity and the planet from the destruction towards which it is rushing.
For an older article, which explains some elements, see On Islamic Economics.

Introduction: Islamic Approach to Micro

In Fall 2017, I taught the standard Ph.D. first semester course on Micro-Economics using an Islamic Approach. The first lecture, summarized below, explains why an Islamic approach makes a huge difference to the study of Micro. The whole set of 30 lectures for the entire course, together with slides, references, notes, and supporting materials (link: Advanced Microeconomics)    is freely available for ANY teacher who would like use and adopt this approach for their own courses in Microeconomics. I would be happy to provide any necessary support to teachers would like to try this novel experiment. I can promise that the students will very much enjoy this approach, because it speaks directly to the heart, and can easily be understood — in contrast to conventional micro, which just involves memorizing math, and learning things about human behavior which are patently false. [shortlink: bit.do/aziam]

90min English Video-Lecture on YouTube. 2500 Word English Summary is given below:

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On Islamic Economics

Published in Express Tribune, 10 June 2010; See bit.do/azoieu for Urdu translation. Version below has been simplified and expanded. Nonetheless, it was written 8 years ago, just after the Global Financial Crisis, and does not cover many important developments which have taken place in the current decade.

Modern finance is based on trading of debt, and on the use of interest. Both of these operations are prohibited in Islam, making it difficult to “Islamize” finance. Secular mindsets dazzled by glories of the West think that we need to abandon archaic laws, and emulate the West, in order to develop and progress. Apologetic supporters of Islam believe that we need to revise and update Islamic laws, to bring them into harmony with needs of modern times.  Much effort has gone into finding loopholes and stretched interpretations of Islamic law which will permit creation of the equivalents of Western financial instruments within the framework of Islamic Law.  Very often, these efforts seem to stretch the Islamic laws to the breaking point or beyond. For example, Sukuk provide a very complex three part structure which provides a near exact replica of the very simple Western bond — Since the bond is clearly and directly based on interest, it cannot be used in Islamic Finance.

The general public, and many specialists, have expressed a lot of doubts about these efforts to re-create Western financial instruments within the framework of the Islamic law. It seems that the effort is being made to re-shape Islamic laws in order to bring them into conformity with Western ideas about finance, rather than re-shaping finance to bring it into conformity with Islam. The resulting instruments, like Sukuk, seem like they are pointlessly convoluted ways of imitating western ideas about finance. The general public remains skeptical as to whether or not these attempts lead to genuinely Islamic products.

This scenario changed with the occurrence of the Global Financial Crisis (GFC) of 2007. Suddenly, there was a radical realization, surprising to all parties, that instead of being obstacles to progress, the Islamic laws provide barriers against financial disaster. Many western commentators have remarked that adherence to Islamic economic principles would have prevented this crisis. Challenges, a French magazine, went so far as to say that the 7th century text of the Quran offered better guidance than the Pope on financial matters.

It is amazing that Islamic sacred texts, from the days when even the simple financial innovation of paper currency did not exist, offer guidance on how to prevent modern financial crises. How can ancient rules be suitable for modern problems, when nothing remotely resembling modern finance, paper currency, central banks, fractional reserve banking, stock markets, etc. existed in the era in which they were sent down. In the recent past, more than hundred big and small financial crises have occured due to speculation and transactions of types prohibited by Islam. Furthermore, ancient Islamic rules offer guidance on the architecture of a system that would both be proof against such crises and provide a more fair and equitable income distribution. The innovations which are the need of the hour are not in adapting Islamic law to modern institutions, but in changing these modern institutions to bring them into conformity with the ancient laws. In broad outline, six principles of Islamic law which would suffice to prevent financial crises like the GFC 2007, are listed below.

  1. Islamic law prohibits the trading of debt. It was the trading of collateralized debt obligations (CDOs) which triggered the global financial crisis of 2008.
  2. Islamic law insists on clarity regarding the product and the price as a condition for a valid sale. According to the famous financial wizard George Soros, complex instruments like CDOs are “so esoteric that the risk involved may not be properly understood even by the most sophisticated investors.”
  3. Islamic law prohibits interest. There is obvious injustice in a system which requires interest payments of billions of dollars annually to wealthy countries from the heavily indebted poor countries, which cannot afford to feed their own malnourished. The economic consequences of this injustice are apparent in the numerous financial crises resulting from debt defaults in both rich and poor countries. The book “House of Debt” by Mian and Sufi provides an entirely secular argument showing both how debt is extremely unjust and exploits the poor, and creates a crisis prone system. Islamic equity based contracts would avoid many of the problems created by debt, including the global financial crisis.
  4. Islamic law prohibits gambling. An incredibly large proportion of financial transactions are pure gambles. For example, while real international trade is only about $100 billion daily, foreign exchange transactions amount to $ 4 trillion. Thus the vast majority of such transactions are purely speculative gambles about the freely floating exchange rates.
  5. Islam requires every financial asset to be backed by a real asset. The value of paper issued on real world assets cannot exceed by much the real world value of the real assets. Western finance is based on violating this Islamic principle. Today firms do not get rich by doing honest productive work, contributing real value to society. Instead, when the firm incorporates and lists its shares on the stock exchange, financiers inflate the value of the stock to around twenty times the value of the firm.  If the ground real value of the firm is a Thousand Dollars, stockholders have paper which gives them shares of ownership in the firm — these shares are worth Twenty Thousand Dollars. An illusion of wealth is created which does not exist in reality.  The global value of financial derivatives was more than ten times the total GDP of the entire world in 2008, when the crisis occurred.  The financial system is based on deceptions created by using speculation, gambling, and other  financial gimmicks to create value on paper which has no existence in reality. This illusion often collapses, causing distress and misery to millions.
  6. Islam does not allow the OWNERSHIP of wealth to be considered as a productive activity, entitled to earning of returns. This is precisely what the prohibition of interest accomplishes. Today, in Western countries, more than half of the total production of a nation goes to people who contribute nothing to this, but are owners of the wealth needed to lubricate the wheels of production. Mere possession of wealth entitles one to earn more returns than anyone can earn by labor and production, not just due to interest, but also due to many other sophisticated techniques developed by the wealthy to capture a big share of the production pie.

Western financial methods have created a topsy-turvy world where financiers juggling papers make tremendously more than the honest laborers who work hard to produce industrial or agricultural products. This is the source of major problems facing the world today, where financiers who contribute nothing to real world production, can create wealth for themselves and the top 1% purely on the strength of the wealth they already own. This leads to the extreme and increasing concentrations of wealth we are witnessing today.

At the World Economic Forum in Davos, many remarked on the need for radical reforms to solve deepening global economic problems. Currently, producers of goods and services get only about 10% of the total output while 90% goes to bankers and financiers. Applying Islamic laws would channel a far bigger share in the output to the producers and laborers. It should be obvious that more incentives for producers would lead both to greater production and greater wealth for those most in need as well as most deserving of it. Islamic laws in the economic realm are explicitly designed to produce circulation of wealth, alleviation of poverty, and equitable income distributions. These ancient laws are the radical reforms needed to remove the massive injustices created by the current economic system designed to transfer wealth from the poor to the rich, both on an individual as well as the national level.

POSTSCRIPT: For original article, and link to references cited, see: On Islamic Economics

Guidance for Research for M.Phil/Ph.D Economics

A lecture on general guidance about research work was given by Dr. Asad Zaman on Jan, 2017 to MPhil Students at PIDE.  In this lecture, he emphasized the students to get to know their true potential and how to use their energies in right direction. Main points that were discussed in lecture are given below. For a more recent lecture of advice to Ph.D. scholars who have cleared comprehensives and are starting work for their Ph.D. thesis, see: Guidelines for Ph.D. Students starting work on their thesis. The video lecture in URDU/English is linked below — an ENGLISH SUMMARY of the lecture, with links to related materials, is below the video [shortlink: bit.do/azgrm]

A 1200 Word ENGLISH summary of the lecture is given below

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Understanding Macro III: The Rule of Corporations

Preliminary Remarks: Our main goal in this blog is to understand the extremely deceptive nature of Western education. Someone can get a Ph.D. in Macroeconomics by learning about purely mathematical models, having nothing to do with reality. The simple facts of history and politics discussed below would come as a surprise to students who study Macro-economics in conventional Economics courses throughout the world. YET, we cannot understand what macro-economics is without knowing these basic facts about how macroeconomic theories shaped the world that we see around us, in ways that were very favorable to the rich and powerful. Understanding this history is ESSENTIAL to understanding both the real world, and the nature of economic theory, but this is NOT TAUGHT in any conventional course on Macroeconomics.

Understanding Macro III: The Rise of Corporations

In previous parts of this article (Understanding Macro I & Understanding Macro II), we have described how strict financial regulation and Keynesian prescriptions for full employment brought prosperity for the masses, but reduced corporate profits. This last part describes the successful counter-attack by corporations which reversed this state of affairs, causing a massive rise in the income shares of the wealthy 1% and a decline in the fortunes of the bottom 90%.

In the mid 70’s, when I was studying for my Ph.D. in Economics from Stanford, Keynesian economics ruled the roost; pre-Keynesian free market economics was confined to the Chicago School, and not considered intellectually respectable. This situation was reversed in the 90’s, when the Chicago School became dominant, while Keynesian economics was no longer considered respectable. The multi-dimensional strategy used to create this revolution on the academic front is described by Alkire and Ritchie in “Winning Ideas”, while the global strategy to transform socialistic economies into capitalistic free markets is described by Naomi Klein in The Shock Doctrine: The Rise of Disaster Capitalism. A common thread between the two is the patient preparation of detailed plans, while waiting for a crisis, which provides an opportunity to implement these plans.

The intellectual crisis that Chicago had been waiting for occurred in the early 70’s when the Arab Oil embargo, in retaliation for US support of Israel, led to stagflation in the USA. The simultaneous occurrence of high inflation and high unemployment was said to be in conflict with Keynesian theories, while the Chicago School theory of Milton Friedman was said to provide an explanation for the unexpected phenomena. This became widely accepted, and led to a substantial rise in the prestige of the Chicago School, and a blow to the Keynesians. The 1% capitalized on this by providing funds to Sveriges Riksbank, the Central Bank of Sweden, to create a simulated Nobel Prize for Economics, named the Sveriges Riksbank prize in honor of Alfred Nobel. The Nobel family protests against this appropriation of the prestige of the Nobel Prize were ignored, and the public was fooled into accepting this just like the genuine Nobels. In quick succession, roughly half of all the Nobel prizes were awarded to Chicago economists, interspersed with 50% going to randomly chosen others to create a semblance of neutrality. This led to a rapid rise in the academic prestige of the Chicago school.

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