The Growth Imperative of Capitalism & The Islamic Alternative

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Presentation by Mr. Jamal Harwood (Economic Analyst & Lecturer at University of Wales) at Sharia Economics Conference 2013, with the topic: "The Growth Imperative of Capitalism & The Islamic Alternative".

Paper can be accessed at: http://jistecs.org/content/economic-growth-imperative-within-capitalism-and-islamic-viewpoint

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The Growth Imperative of Capitalism & The Islamic Alternative

  1. 1. First Plenary SessionSharia Economics Conference 2013Hannover, Germany – February 9, 2013 Jamal D. Harwood Economic Analyst / Lecturer, University of Wales Sarfraz A. Wali Economics commentator / Community Speaker THE GROWTH IMPERATIVE OF CAPITALISM & THE ISLAMIC ALTERNATIVE
  2. 2. Current Context Property booms 80’s, 90’s and 2000’s Consumer booms 80’s, 90’s and 2000’s Stock Market booms including dot.com bubble early 2000’s Bond Market bubble to date Unprecedented money creation, cheap credit Unprecedented growth of derivatives Unprecedented budget deficits in the developed world Policy of Central Banks to reduce interest rates to close to zero “Non-conventional” funding policies of Central Banks (QE, Operation twist) Non-conventional and widespread changes to metrics (inflation, employment) Negative real rates of interest Growing inflation problem Banking crisis Sovereign debt crisis Growth crisis – crisis of confidence – lack of trust in Politicians09/02/2013 First Plenary Session: Jamal D. Harwood 2
  3. 3. Capitalist Failures = Growth Imperative• Role of Interest based monetary system Debt service = Money Supply growth Growth in output needed to avoid hyperinflation• Inability to survive deflationary environment Penalization of debtors Monetary policy becomes ineffective Delaying Consumption in deflationary environment• Negative Effects of the Growth Imperative Growth of debt industry due to Consumerism Consumerism = Planned and perceived Obsolescence Resource depletion and unsustainability09/02/2013 First Plenary Session: Jamal D. Harwood & Sarfraz A. Wali 3
  4. 4. Recovery in Growth?09/02/2013 First Plenary Session: Jamal D. Harwood 4
  5. 5. Can you trust the numbers?09/02/2013 First Plenary Session: Jamal D. Harwood 5
  6. 6. Adjusted for real inflation rate09/02/2013 First Plenary Session: Jamal D. Harwood 6
  7. 7. Money Supply Growth09/02/2013 First Plenary Session: Jamal D. Harwood 7
  8. 8. Growth in Money Supply09/02/2013 First Plenary Session: Jamal D. Harwood & Sarfraz A. Wali 8
  9. 9. Debt Created and Taken by the Federal Reserve09/02/2013 First Plenary Session: Jamal D. Harwood 9
  10. 10. What happened in 1917 and 1971?09/02/2013 First Plenary Session: Jamal D. Harwood 10
  11. 11. US Debt is not Sustainable RED – Public Debt (US) Black – Public Debt plus Federal Debt (US)09/02/2013 First Plenary Session: Jamal D. Harwood & Sarfraz A. Wali 11
  12. 12. World Debt Crisis09/02/2013 First Plenary Session: Jamal D. Harwood 12
  13. 13. The Casino Market09/02/2013 First Plenary Session: Jamal D. Harwood 13
  14. 14. Islam’s Vision re Growth "In case it (wealth) circulates solely among the wealthy from amongst you." [Translation of the meaning the Quran surah Al-Hashr, 59:7] Notion of wealth circulation to ensure a robust economy that meets the needs of the people Growth is not a core objective of the economy but a pleasant outcome Environment which encourages spending and investment Gold/Silver currency the most stable currency and non-inflationary system Wealth oriented taxation – shunning income and consumption taxes Non interest coupled with anti-hoarding provisions Direct Investment and involvement within company/partnerships09/02/2013 First Plenary Session: Jamal D. Harwood 14
  15. 15. Despite money printing money velocity is poor09/02/2013 First Plenary Session: Jamal D. Harwood 15
  16. 16. Strategic Growth Advantages of Shariah 1 Gold Silver based Currency o Currency stability over millenia and a level playing field between Nations o Only mild instances of deflation and inflation o No counterparty risk, with manageable growth in currency o Universally accepted, promotes sound and low cost trade policies Non Interest Economy o Low cost risk based investment model without banking intermediaries o Debt based creation of money out of control and grossly destabilising o Advantages of G/S currency can only function with non-interest system o Perversely Central Banks effectively moving to zero interest rate policies Non-Hoarding of Wealth Provisions o Key to circulation of wealth – connected with explicit textual evidences o Compare with the banking system which withdraws capital during downturns o Investment, charitable giving, consumer spending – positive outcomes o Business cycle downturns work against investment and spending09/02/2013 First Plenary Session: Jamal D. Harwood 16
  17. 17. Strategic Growth Advantages of Shariah 2 Wealth based taxation policy o Zakat (2.5% on non-utilised wealth) Kharaj/Ushr on capacity of land, Jizyah o No Income, Consumption, Business, Rates, Council, Transport taxes o Wealth taxes are proportionate to wealth – fair on all (natural redistribution) o Strong incentive for investment and spending and full employment Equity/Partnership financing o Direct investment with responsibility – no stock market o No start-up barriers (bureaucratic) and small business employment driver o Corporate scandals engendered where Directors are not owners (body) o Maximum corporate transparency Absence of Limited Liability o Risk profile reflects what business owners can adopt o Leveraged risk taking difficult due to non interest and full liability o Encourages trade with clear counterparty responsibility for all transactions o No government bailouts of companies09/02/2013 First Plenary Session: Jamal D. Harwood 17
  18. 18. Strategic Growth Advantages of Shariah 3 Prohibition of Gambling o All gambling including most derivative contracts forbidden o Derivatives increasing volatility in markets at higher risk levels o Gambling in all forms take wealth out of circulation/trade o Unacceptable losses to society via moral hazard Intellectual Property Rights o Knowledge purchased along with the good or service where obtainable o Faster product development and innovation Flexible Labour Markets o Wages can go up and down based upon the value of the work/service o Equal pay for the same value of work for male/female and age of employees09/02/2013 First Plenary Session: Jamal D. Harwood 18
  19. 19. Strategic Growth Advantages of Shariah 4 Land Reform o Use it or lose it (3 years) o Revival of dead, unused lands promotes widest ownership among masses o No leasing of agricultural land o Land tax encouraging full utilisation o Laws against price fixing Ethical Trade Rights o Clear annulment and set-aside provisions where trade is not fair o Full trade descriptions required o Protections for young and vulnerable (orphans, disabled) Regulatory Framework o No monopoly, strong anti-fraud provisions o Stable regulatory environment – laws consistent over 1400 years o Lobbying unlawful09/02/2013 First Plenary Session: Jamal D. Harwood 19
  20. 20. ContactRecent publication (freely downloadable): thegoldreport.co.ukTwitter: jamal_harwoodDaily Blog: 2nights3days.infowww.breakthrougheconomics.blogspot.comwww.newcivilisation.com09/02/2013 First Plenary Session: Jamal D. Harwood 20

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