The Free Market Fallacy

The theory of Capitalism is presented as a Utopia of what is to be but never is. It is the bailout from its intrinsic corrupt motives and every free market advocate will offer “pure capitalism” as the solution to actual Capitalism. For every corruption mentioned for the reality of Capitalism, the utopian view of Capitalism will be presented; the utopia that never was and never can be.

So the mention of the huge disparity of wealth between the rich and poor; the license for private entities and banks to produce currency out of thin air; the ability for powerful wealthy businesses to influence legislation in their favour; the theft of wealth from the working class; the corruption and exploitation through a fiat based currency; the running of a huge virtual economy functioning in the background much like a casino; the enslavement of third world countries through debt and compound interest and the manipulative “compassionate” face of Capitalism which offers Foreign Direct Investments and IMF loans – these are all exploitations and realities that are implemented in full function due to the extremists of Capitalism who have hijacked the ideology from the moderates; such is the plea and claim of the “moderate” Capitalists who seek the implementation of the Utopia of Free Market.

The Utopian theory of Capitalism is very much like the concept of infinite – it cannot exist in reality and it merely exists in mathematical axioms and engineering. Likewise, the solutions that are presented from the perspective of Free Market are impractical and the irony remains that colonial nations like Britain which seem to advocate the Free Market theory so strongly, only managed to attain their status through pillaging, conquering and destroying markets, as they continued to betray the very Free Market theories they would preach to their colonised victims.

It is important to look beyond the curriculums imposed through western educational institutions and it is naïve to assume that one can attain an enlightened view for any given subject matter, strictly utilising the ideological tools of Secular Liberalism. The education system on all levels is merely an ideological tool to nurture the ideas propagated from the very ideology in question.

So in this context, it is not a surprise that the study of history seems to conveniently ignore Britain’s colonial oppression throughout. The study of Milton Friedman’s neo-liberal theories are also propagated in a selective fashion, while conveniently ignoring the little success these theories have had through practical application, or the fact that Friedman was educated in the University of Chicago, only to then propagate economic theories and ideas that seem to only benefit a select rich few. 

The true purpose of Capitalism is to pursue capital by any means necessary and to ensure that the people remain unaware of its true motives – this is achieved through the use of complex jargon and terminologies that ensure that the common man remains bamboozled as to how the system truly operates to exploit the masses. It is within the remit of Capitalism to maintain the huge disparity in wealth between the rich and the poor, while selling dreams of distant glories to give hope while suffocating any potential for public rebellion. 

This is achieved through the enforcement of many techniques and legislation.

Fiat currency and the licence for private institutions and banks to create credit out of thin air, effectively allow the rich to steal wealth from the working class. For every unit of currency produced, the value for this unit is stolen from the existing currency in circulation. This is a system that normalises mass inflation under the pretext of numerous Quantitative Easing projects that are supposedly benefiting the public for every recession that is ultimately built into the model. This is nothing but a hidden tax upon the people, for every instance of credit creation is really the theft of wealth from the average worker.    

There is a clear disconnect from the theories of Capitalism as compared to the reality that is imposed. In fact, there does not seem to be any example of a complete Laissez Faire system ever existing in harmony with the political and philosophical dimensions of any given society. The utopian theories can offer no real life practical examples.

One is lead to question the foundational roots of “textbook Capitalism”. There does not seem to be a coherent method of jurisprudence or any real applications of cases to analyse or benchmark against. The utopian success remains in the pages of books with theories that were never able to actualise.      

Islam offers a system that has a comprehensive robust framework and principles to reference its rulings against the practical realities that exist in the real world. Hence, it has a history of being implemented in two thirds of the world and it has proven itself beyond a mere textual theoretical paradigm. In essence, there should not be a disconnect between the text and practical implementation. The Islamic Economic System is not separate from the ideological, legislative, social and political dimensions in which it must exist.

There is no fiat currency in Islam but rather a gold standard which eliminates the ability for governments and private institutions to produce currency in an attempt to exploit and steal wealth from the working man. This offers stability in prices and the strength of the currency maintains its resilience. This results in a constant cycle of minimal inflation and deflation, which in the long run is equal to zero.

With the non-existence of conventional banking and a lack of an interest based economy, investors are given incentive to form partnerships to initiate business through profit and loss sharing contracts, instead of hoarding wealth and assets. The Capitalist banking model is one that rewards individuals with interest for keeping their savings stagnant and economically redundant in bank accounts. The Keynesian techniques of adjusting interest rates and inflation in an attempt to stimulate the economy in times of stagnation have largely resulted in failure.

The slavery of income tax that exists in Capitalism, does not exist in Islam. Any percentage in tax on income is slavery, for it takes a portion of the fruits of labour without payment. In Islam, Income tax does not exist but rather, it is wealth that is subject to taxation. The opposite formula is applied in Capitalism where income is subject to taxation before considering the living costs and basic necessities of an individual and his dependants.

There are five main sources of revenue for the state in Islam and these are through the administration of public resources, zakaat, head tax (Jizya), land tax (Kharaj) and the spoils of war. In the existing model, there are a hidden variety of taxes that are essentially a stealth robbery programme to ensure that wealth of the working citizen is in truth taxed at a cumulative of about 50%-60% when considering VAT, Income tax, National Insurance and the many other hidden taxes.

Much of the costs of living, which much of the time are artificially engineered that exist as part of the package of Capitalism are simply minimised or non-existent in the economic model of Islam:

Rasul Allah (sal Allahu alaihi wa sallam) said: “The people are partners in three things: water, pastures and fire.” [Abu Dawud]

The people being partners in water, pastures and fire insists that these are public resources in which private companies cannot take ownership. The privatisation of these resources will lead to exploitation as these are resources that the people are in need of. The hadith is subject to Qiyas Istinbataan (analogical deduction in consideration of other complementing evidences) and fire is representative of other energy resources like gas, fuel or coal. These are all classed as public resources in Islam and these cannot be used to exploit the needs and vulnerabilities of the people in an attempt to charge the public extortionate prices.

This allows more disposable income for the masses, which they are able to expend to fulfil their basic needs, as well as purchase and utilise the goods and services that Allah(swt) has made halal. The fulfilling of organic needs and instincts are only so that the individual can continue with that which pleases Allah(swt). The major costs of living in a western society are from housing, fuel/travel costs, energy costs and a variety of taxes that the citizen is obliged to pay.

Uthman ibn Affan reported: The Prophet, peace and blessings be upon him, said: “There is no right for the son of Adam except in these things: a house in which he lives, a garment to cover his nakedness, a piece of bread and water.” [Sunan At-Tirmidhi]

The Islamic system is one that considers housing, clothing and food as basic needs and necessities for the human being, whether they be Muslim or Non-Muslim. Mismanagement of resources are not left to the free market, the price mechanism, the trickle-down effect or Adam Smith’s invisible hand to resolve. It is the right of the people that the Khalifah fulfils the needs of the people as far as the borders of Islam extend. The “survival of the fittest” mentality that the Capitalistic Economic Problem viewpoint seems to propagate is not one that is accepted or tolerated in the model that the Prophet(saw) taught to humankind.

A large aspect of consumption of goods and services are for the fulfilment of the basic instincts and organic needs of human beings. So, the drive to purchase property is linked to the survival instinct; the drive to consume food in linked to the fulfilment of organic needs and the drive to establish relations with the opposite sex is linked to the procreation and social instinct.

The Capitalist system is one that exploits even the basic instincts and organic needs of human beings to oppress, subjugate and exploit the people; in exchange for profit and the transfer of wealth from the rich to the poor. Beyond this, it has deceived the people into believing that the sole purpose of life is the fulfilment of basic instincts and organic needs through materialism, pop culture and the so called “American Dream” that was sold to oppose Socialist propaganda.  

This is the very reason why it has become normality and an issue of little contention for a person to be tied to a lifetime mortgage and a work cycle that dominates more than half of a person’s life. As for the procreation instinct that is present in the human being in order to maintain the continuation of the human race; Capitalism will even utilise this to maximise profits, in exchange for the dignity and honour of the future generations. Essentially, it is a lens that views absolutely everything as mere commodities in which its price mechanism is the arbitrator.

From the very ideology of Secular Liberalism, materialism is utilised as the very engine to feed and facilitate this vain purpose for the masses – i.e. the sole purpose of the human being is to maximise the fulfilment of instincts and organic needs for the sake of pleasure. So it becomes incumbent to compete through social media and other means to share and display a life of untold gratifications to continue to reiterate this very purpose.

Capitalism does not exist in a vacuum and it is impossible for it to function without its counterparts. It is this lack of separation that extends a “block chain” which allows for any given economic policy to be traced to the very ideological roots of its formation.

In 1833, the proposal to ban child labour in England was followed with many discussions in Parliament, where many opposed the ruling insisting that it contradicted with the idea of Free Market. Many argued that it was wrong to impose restrictions on the freedom of labour – as long as children were willing to work and employers were prepared to pay a wage. It was through the legislative framework that the law was finalised before it became an economic boundary which would regulate the minimum age of labourers. The same process was followed through in Britain when slavery was abolished in 1833 through the Slavery Abolition Act.

All policies and laws around Economics operate under their respective authorities based on the ideological roots. There is no such thing as Economics that operates in an isolated vacuum. Economics cannot be separated as “Political Economy”, for it is a study that is intertwined with the very philosophy (Aqeeda) of an ideology as well as the legislative and political paradigm in which it operates within.