Fundamentalist of Islamic Econmic System

Capital is the third factor of production. It is that wealth which assists in the production of further wealth. It is “produced means of production” or in other words “man-made instrument of production”. It includes all those goods which are produced not for consumption but for use in future production. Machines, tools and instruments, transport equipment’s, irrigation projects like canals and dams, stocks of raw materials, cash invested in business, etc. are some of the examples of capital. Thus capital is the wealth which man acquires by his own labour and then uses it for producing more wealth.

The above mentioned meaning of capital distinguish it both from land and labour because both land and labour are not produced factors but are gifted by nature. Therefore, land and labour are called primary or original factors of production whereas capital is man-made or produced factor of production.

Capital is generally classified into fixed capital and working capital. Fixed capital comprises durable-use produce goods which are used in production again and again till they wear out. Plant and machinery, tools and instruments, tractors and trucks, etc. are examples of fixed capital. Working capital comprises single-use producer goods like raw materials which are used up on a single act of use.

Fixed capital does not mean fixed in location. It is called so because money spent upon durable-use goods like plant and machinery becomes ‘fixed’ for a long period whereas money spent on raw materials is released as soon as goods manufactured with these raw materials are sold in the market.

[Back to the start of this chapter]

II- Importance of Capital :

Capital plays a vital role in production as production without capital would be very hard to achieve. If man does not use tools and machines in farming, mining and manufacturing sectors and works with his own hands, productivity would be very low. So man has been using some sort of tools and equipment’s to assist him in his work of production. Even primitive man made use of bow and arrow for hunting and fishing-net for catching fish. With the growth of science and technology, man has invented heavy and complex machines to assist him in every field of production such as agriculture, mining, manufacturing, transportation, communication, etc. In the modern age production without aid of capital can hardly be achieved. Economic development of the countries like USA, Japan, Germany, France, UK, is largely due to extensive use of capital.

Capital occupies a pivotal position in the process of economic development as well as in creation of employment opportunities. Besides escalating production, employment is also enhanced when capital goods like plant and machinery are produced and when these goods are used for further production.

Thus capital is indeed like blood in human body which runs into the veins of industry and keeps it going. Because of vital role of capital in production, Islam has given much importance to capital. Al-Qur’an, the revealed book of Islam, in the following verses talks of the use of cattle wealth as capital goods of production :

- And the cattle hath He created, whence ye have warm clothing and uses, and whereof ye eat…….. And they bear your loads for you unto a land ye could not reach save with great trouble to yourselves……… And horses and mules and asses that ye may ride them……….

-(16:5-8)

- And Lo! in the cattle there is a lesson for you. We give you to drink of that which is in their bellies…….. pure milk palatable to the drinkers.

-(16:66)

- And Allah hath given you in your houses an abode, and hath given (also), of the hides of cattle, tent-houses which ye find light (to carry) on the day of migration and on the day of pitching camp; and of their wool and their fur and their heir, caparison and comfort for a while.

-(16:80)

Thus in the above mentioned verses, the Holy Qur’an has referred to various uses of cattle and horses as factors of production such as in transportation, in production of milk, wool, fur, hides for tent-houses, and so on.

Umar a great companion of the Prophet and second right guided caliph of Islam used to impress upon some of the recipients of state allowances and stipends that they should purchase goats or other cattle so that they could increase their capital and leave after them for their children something to fall back upon.

[Back to the start of this chapter]

III- Capital Formation: Capital formation means increasing the stock of real capital in the country. It involves production of more capital goods, encouraging savings and investments, etc. In modern economics, capital formation is encouraged through many fiscal and financial measures such as rebates and exemptions from taxes, high dividends on investments, attractive rates of interest and above all protection of capital. Islam believes in all such measures except interest on investments as interest is prohibited. Islam in fact, took measures for capital formation in Islamic state much earlier such as condemnation of hoarding of wealth, tax exemption on productive goods and avoidance of extravagant spending. Some of the steps taken by Islam in ensuring capital formation are that :

1. Zakat has been imposed on hoarded wealth in the form of gold and silver, bank deposits, cash, etc. If this wealth is put into productive channels, its Zakat would be paid out of its income and thus the wealth would grow despite Zakat. But if the wealth is kept hoarded and idle, the regular payment of Zakat out of it every year would reduce it and ultimately diminish it. That is why Prophet Muhammad asked the guardian of the wealth of orphans to put their wealth in business that Zakat should not consume it. Thus Zakat forces a hoarder of wealth to bring it out of idle channels and to invest it in production. This helps in capital formation.

2. Wealth employed in production has been exempted from Zakat. For example agricultural land is exempt from Zakat; cattle employed in farming are exempt; horses used for riding, transport and jihad are exempt; plant and machinery used in factories and farms for production of goods are exempt; tools and instruments used by a professional or an artisan are exempt, and so on. Thus exemption of capital goods from Zakat Tax is a great fiscal measure which helps capital formation in an Islamic society. And don’t forget that this measure was taken by Islam some fourteen centuries ago when there was no concept of fiscal incentives for capital formation.

3. Those who dispose of their capital assets like house or land have been enjoined upon by the Prophet (PBUH) to re-invest the cash in the purchase of some other land or house. The Prophet is reported to have said: “God may not bless the price of that land and that house which is not again re-invested in land or a house”.

4. Squandering of wealth on extravagant spending has been strictly prohibited. Spending on luxuries is strongly forbidden and ostentatious living has been discouraged. The Qur’an says:


- Eat and drink, but be not prodigal. Lo! He (Allah) loveth not the prodigals.

-(7:31)

- ……….. and squander not (thy wealth) in wantonness. Lo! the squanderers were ever brothers of the devil……..

-(17:26-27) Since moderation in expenditure and simple living is the golden rule of Islam, so wastage of wealth stops and wealth starts flowing into productive channels. This also helps in capital formation

Usury: The Forgotten Terrorism

'If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.' Hitler’s Henchman Joseph Goebbels

'See, in my line of work you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda.' G. W. Bush

Chilling as the above may sound, many will argue that these statements can be applied to the rhetoric on the war on terror; the so called imminent danger, the potential loss of many innocent lives.

But how real is this threat? How many of us Brits actually wake up in fear? How many of us are directly suffering from the consequences of terrorism? Not many. Unless of course you pay attention to the propaganda machine that spews a climate of fear, who fraudulently attempts to traumatise the masses by depicting images of hundreds of thousands of innocents dying while knowing very well that it is a war of want and not terror. So behind the veil of lies and deceit it seems that we have seemingly forgotten who the biggest killer is. Who is the real terrorist with a history of murdered millions, a history based on the destruction of nations? The answer is neither a race, religious group nor political party, but a force that has mass support across the political spectrum. This terrorist is the weapon of debt, the most efficient killer in the third world.

'Relieved of their annual debt repayments, the severely indebted countries could use the funds for investments that in Africa alone would save the lives of about 21 million children by 2000 and provide 90 million girls and women with access to basic education.'
UNDP Human Development Report 1997, p. 93

Merely by the fact that we are in 2007, we must accept that the 21 million people referred to by the UNDP died 7 years ago. Ten years after the UNDP report, it is still evident that politics hasn’t changed and severe debt repayment remains, the sum of which is approaching astronomical realities. If the drive behind the war in Iraq and Afghanistan was a ‘revelation from god’ (based upon Bush’s statement, 'God told me to strike at al Qaida and I struck them, and then he instructed me to strike at Saddam, which I did, and now I am determined to solve the problem in the Middle East '), one can only ask as to what his god has to say about the biggest and bloodiest form of terrorism whereby the millions of calls for help fall upon deaf ears. This forgotten terrorism also has its own form of propaganda, for fifty years the poorest nations have been duped into believing that the only cure for poverty is the loaning of money which may consequently be invested back into their own economies. However, due to usury the debt has kept on growing.

	1980	1990	2000
Developing country debt ($bn)	525.4	1259.8	2140.6
Actual payments of interest plus principal ($bn)	73.4	140.6	337.8
IMF World Economic Outlook 2001

To add to the propaganda, economists have continued to inform the world (the eager poor to be precise) that there will be enough growth in wealth for everybody, and they are right, everyone can be fed and provided with shelter and clothing. However, the reality is so very different,

'225 people own more wealth than the poorest 2.5 billion people.'
UNDP Human Development Report 1998

So who is the driving force of this terror, this method of mass indiscriminate killing?

'There is a very broad consensus among African governments that the IMF and World Bank terms are often harsh and unsuitable, generating severely adverse effects on the overall economies of these countries especially with regard to agriculture, manufacture and foreign trade'

Conference of the Institute for African Alternatives, Onimode, B. [ed.], The IMF, the World Bank and African Debt, Zed Books, 1989.

The IMF and the World Bank, as well as the economic system they represent aim the weapon of debt at vulnerable and unstable economies. The philosophy of self-interest, profit maximisation, greed and the insensitive selfish approach of governing the financial affairs of humanity is the driving force of this sad state of affairs. So what can we do? What is the solution?

Well first off, charity pop concerts are not the solution. The good willed people of Britain attending charity concerts to end poverty have been used as pawns. The millions raised are barely enough to pay off the usury Africa has accrued for a few hours.

Some $700 million per day now flows in debt repayment from the developing world to the developed world (UNDP Human Development Report, 1997)

Evidently, even if we had a concert a day, it would not be enough. We would need at least 700 concerts a day. If you attempt to transform a system from within, the system changes you. Therefore, a new model, a new paradigm, a fresh perspective on this issue is needed. If we all want to stop this forgotten form of terrorism that is responsible for the equivalent of 21,000 9/11’s and over a million 7/7’s, then we must provide a sincere and valid solution.

'…and give up what remains of your demand for usury… Deal not unjustly and you shall not be dealt with unjustly' al-Baqarah 2: 278-279

'…Freeing a slave or feeding on a day of hunger an orphaned relative or a poor man in the dust; then to be one of those who have iman (faith) and urge each other to steadfastness and urge each other to compassion…' al-Balad 90:13-17

'…that is because they say, 'Trade is the same as usury.' But God has permitted trade and He has forbidden usury.' al-Baqarah 2:275

'Give your relatives their due, and the very poor ….' al-Isra' 17: 26

Many may argue that the abolishment of usury in order to relieve world debt is merely logical and we do not need a ‘God’ to tell us what to do. Be it an individuals belief, I would rather accept this much needed advice rather then listen to Bush’s hidden psychosis (which he calls god), the result of which has killed millions. But who is listening? If it is true that the rhetoric on the war on terror is starting to fall on deaf ears, I can only suggest that we now alter our current bearing and pay attention to the pain and suffering of millions of our fellow human beings. This ruthless form of terrorism has taken more lives and inflicted more pain than anything we have experienced before. Is it not time that we set the political agenda straight and put the real terrorism on top of the list?

An article

A few reflections regarding Iqtisaduna by Ayatullah Sayyid Muhammad Baqir al-Sadr
Muhammad Baqir al-Sadr's work Iqtisaduna ("Our Economics") is constituted by a comparison between different economic systems, namely capitalism, Marxism and Islamic economy in the light of the author's conception of these systems.
Sadr's point of departure in his work can be regarded as ideological, however it is beyond question a scholarly method with footnotes, with a usual account of sources and the text enables the reader to follow the author from his reasoning to the conclusions he draws.
The point of departure that Sadr presents above all is the fact that there is no other framework within which to find solutions to the problems of backwardness in Muslim countries with the exception of the framework of the Islamic economic system. Further reasoning regarding this standpoint constitutes a dominant feature of Iqtisaduna.
Another important element is the reasoning about what the Islamic economic system implies and its position in proportion to economic systems like capitalism and Marxism. Sadr establishes the fact that it is not possible to choose the same methods used by Europeans in the building-up of their modern economy. The Islamic world has tried two economic systems developed by Europeans: market economy based on the capitalistic ideology, and planned economy based on the socialistic ideology. The results weren't encouraging. (The author uses the notion Marxism and socialism alternatively. The distinction between these two notions isn't always clear and, in several cases, they can be understood as synonymous notions). The author points out that it is not possible to just withdraw an economic system from its historical and social context and apply it in a society with totally different conditions. He emphasizes the fact that there are close links between, on the one hand Marxism and capitalism, and on the other hand European traditions and social conditions. These economic systems cannot be applied in societies based on religion. Not even if religion was suddenly abolished in an Islamic society would that be possible since ethics, traditions and institutions were formed by a centuries old Islamic influence.
It is easy to agree with Sadr's opinion about Marxism in that it is an ideology applicable in European conditions in the first place. This becomes obvious when one studies Marxian analyses that were for example carried out by Soviet researchers. It concerns awkward attempts to find "the Asian way of production" in Muslim societies. In view of that, Islam is often presented in deprecating wordings in these studies. (Brattlud, Asa - Samuelsson, Jan: Islam English folkrorelse. Muslimer i Svenskt Samhallsliv. Skelleftea 1991. Page 19).
Sadr presents political and psychological aspects that go against the application of Marxism and capitalism in Muslim societies. The Ummah must base its modern revival on a social organization and culture whose origin is not related to the countries of the colonialists. Why? Well because there is a psychological dislike to methods, ideas and institutions that are directly associated with Europe. This in itself worsens the possibility of applying these methods successfully.
Sadr describes Europe as a unit. Likewise, non-Muslim writers perceive the Muslim world as a unit. Generalizations like "Islam" and "Europe" are of course uncertain in certain contexts. However they can be regarded as being conventional within the frames of scientific literature that concerns these fields. See for instance Bernard Lewis: Islam and the West, New York 1993, as well as other works by Lewis.
When Sadr tries to capture what denotes a typical European human being, he becomes more ideological than scientific. "Europeans always look at the earth, not at heaven". Pious Catholics in Spain for example or Italy would certainly lift their eyebrows before such a description. The author also means that Europeans are freedom-lovers, both in a positive and a negative sense, in that they strive after freedom from moral responsibility. The European has also a tendency of perceiving existence as a struggle situation. This has been expressed in European science and philosophy through Darwinism, the class struggle of Marxism and the struggle between contrasts in the Hegelian viewpoint. But for someone who perceives the presence of God in the creation, that is to say Muslims, the perspective is different. The interest for material advantages is not so dominant. According to Sadr, the interest for individual and moral freedom also gets impaired. Sadr wants to show here that Muslims and Europeans are generally constituted by two different types of human beings without further explaining why so is the case. The reasoning constitutes a link in the author's argumentation that the European way of thinking cannot successfully be applied in Islamic conditions.
A few conclusions can be drawn from Sadr's apprehensions. First of all, it follows from the author's reasoning that the Islamic economic system can barely work in Europe for the same reasons that economic systems like Marxism and capitalism cannot completely work in Islamic conditions. Another question is, in my opinion, whether individual Islamic economic institutions, like the Islamic bank, can work in a non-Islamic context like Europe. One can object to this question by claiming it is not correctly formulated. Europe can simply not be considered as a non-Islamic context. Nowadays, Europe embraces several considerable Islamic minorities even though their influence on the political process is humble. As a matter of fact millions of Muslims live in Europe. More than 300,000 Muslims live in Sweden alone which counts a relatively small population (Samuelsson, Jan: Islam i Sverige, Stockholm, 1999). These Islamic population groups in Europe should be considered as a sufficient basis to establish more Islamic banks in Europe. The question can be asked in a different way. An economic institution like an Islamic bank attract non-Muslims and in addition to that work in a satisfactory way even for non-Islamic customer? If this is the case, one cannot by reason exclude the opposite, at least in principle, namely that individual institutions within the capitalistic or Marxian economic system could work in an Islamic context.
Some debaters within the field of Islamic economy have vindicated that an Islamic bank cannot work well in a non-Islamic economy. In issues in Islamic banking, Leicester 1983, M. N. Siddiqi vindicated that the Islamic bank could only be successful in countries where the interest institution was forbidden and where interest proceedings were a penal action. However, this doesn't seem to be the most common opinion. Most Islamic economists and persons conversant with the legal system in Islam think that it is both possible and recommendable to act even in countries where Islam has little influence. It is also considered that Islamic banks can successfully compete against institutions based on interest and even attract customers who are not Muslims. For instance, the management of A Baraka Turkish Finance House in Istanbul stands for such an opinion. Al Baraka's management think it is possible thanks to the high profitability produced by the bank and because of the fact that even non-Muslims can be attracted by the link between ethics and economy that the bank stands for. (Samuelsson, Jan: Islamisk Ekonomi, Lund 1999, p. 67).
Another observation from Sadr's reasoning is whether other reasons than those mentioned can be at the bottom of his dissociation from Marxism and capitalism as European systems. Such a theological, and perhaps also psychological reason with elements from a magical thinking, is what I would like to call "the conception of the European contagion".
Bernard Lewis points out that the Islamic habit, historically provable in several cases, to define innovation (bidah) as deviation from tradition. Tradition is regarded as being good and as containing God's message to mankind. Therefore, deviating from tradition is a priori something negative.
A particularly repudiable variation of bidah is when one imitates the unfaithful person's habits. A tradition attributed to Prophet Muhammad(S.A.W.) says that "whoever imitates people becomes one of them". It has sometimes been interpreted as follows: whoever enters the unfaithful person's habits and behaviors commits a heretical action and an action of treason towards Islam, in other words one becomes unfaithful himself. (Lewis, Bernard: The Muslim Discovery of Europe, London 1982, p. 224).
This interpretation was done frequently by persons conversant with the Qur'an in the Ottoman Empire in order to stop certain phenomena like scientific innovations, as for instance the apparition of printing technique and new medicines that originated from Europe. The perception that everything that was European was a priori evil, with a few exceptions like weapon technique, contributed undoubtedly to the destruction of the Ottoman Empire. Are we confronted to another case of the European contagion syndrome in Sadr's work Iqtisaduna?
I have to answer no. Sadr's arguments sustaining the difficulty of applying Marxism and capitalism are based on logical reasoning that is well presented. For the Muslim reader, it is however important, in my opinion, not to generalize in the light of Sadr's opinion concerning economic systems and come to the conclusion that anything of European origin is in principle useless in an Islamic context. However, such a conclusion is very probable with regard to the founded distrust that exists towards the western world within considerable Muslim population groups. Crusades and colonialism, together with not the least aggressive American interventions in the Muslim world in modern times, has prepared Muslims to behold what the western world stands for with skepticism.
Political vigilance towards the West is one thing. From an Islamic perspective, it is well founded and essential. If this skepticism influenced the will to acquire special knowledge from West within the scientific fields, the price would be high from an economic point of view.
For economic and political reasons various writers have often taken pains to find similarities or differences (from separate motives, often of a political nature) between the Islamic economic system and certain other economic systems.
Comparisons have been made with systems based on market economy and planned economy. Political leaders, like the former president Nasser in Egypt, have tried to point out certain similarities between socialism/communism and Islam while the leadership in Saudi Arabia has tried to point out the differences between these systems. The destruction of the Soviet Empire has made certain leaders in the Islamic world less prone to emphasize similarities between socialism and Islam. If there is any tendency today, in the Islamic world, regarding comparisons between Islamic economy and other economic systems, it is in my opinion that the Islamic economy tends to be described, either as a unique system independent from capitalism and socialism, or as the golden mean between the two extremes/poles capitalism and socialism.
How does Sadr describe the Islamic economic system in Iqtisaduna
Although Sadr obviously perceives the Islamic economic system as a unique system, the argumentation itself often tends to follow the fact that this system constitutes what one can call the golden mean. Communism and capitalism are perceived as two antipodes with Islam between them. Islam gets characterized as the rational mean between two irrational extremes. Here are a few examples: When it comes to ownership, the pole socialism stands for collective owning only while the pole capitalism stands for private ownership. As the rational mean, Islam stands for both collective and private ownership. When it comes to economic freedom, the pole socialism stands for no economic freedom while capitalism stands for total economic freedom. According to Sadr, Islam here stands for economic freedom but with limitations. "Islam took a middle stand, banning some kinds of profit like the usurious and permitting some others like the commercial profit." (Sadr: Our Economics, volume one, part two, page 129).
Moderation, balance, adequate are notions that have been applied and experienced as ideals in several Islamic contexts. This is quite obvious in the Islamic medical history. The good life leading to physical and spiritual health is characterized by adequate sleep, adequate food, adequate sexuality, adequate work and adequate prayers. Take for example Prophet Muhammad's attitude against exaggerated praying at the expense of social life. In his description of the Islamic economic system, Sadr can be seen as referring to this traditional adequate/moderation/balance - notion.
The author thinks that the Islamic economy is distinguished by social balance. With its way of thinking turned towards partnership, the Islamic bank confirms the conception that groups within the Islamic society aren't in opposition to one another as are for instance loan takers and loan givers or employees and employers in European societies.
Sadr's perception of Islamic economy can be compared to what Muhammad Umar Chapra has expressed. He thinks that what capitalism and socialism lacks, and Islam offers, is the synopsis between spiritual and material values - the capitalistic and socialistic systems have neglected people's spiritual needs. Every attempt to point out similarities between these systems and Islam shows the lack of understanding for what capitalism and socialism are, namely materialistic systems, Chapra says and, with that, describes Islam more as a unique system rather than a mean (Chapra, M.U.: Objectives of the Islamic Economic Order. Leicester, 1996, pp. 21-27).
In the article Zakat and Social Justice, M.A.Z. Badawi claims that Islam constitutes the right point of balance between the two extremes, capitalism and socialism. He seems thereby to perceive Islam more as the mean (Badawi: Zakat and Social Justice, in The Muslim World and the Future Economic Order. London: 1979).
Muslim writers usually claim that Islamic economy can be seen both as a unique system and the golden mean between capitalism and socialism although one of these two standpoints is emphasized more than the other.
It is, from a logical philosophical point of view important to emphasize the fact that there is a big difference between these two ways of describing Islamic economy. The standpoint that the Islamic economy is a totally unique system implies that the difference between Islamic economy and the capitalistic and socialistic system is basically of a qualitative nature. The standpoint that the Islamic economy constitutes the golden mean implies that the differences in comparison to socialism and capitalism are in the first place quantitative (more collective ownership - less collective ownership, more individual freedom less individual freedom, etc.).
Muslim writers usually claim that Islamic economy can be seen both as a unique system and the golden mean between capitalism and socialism although one of these two standpoints is emphasized more than the other.
It is, from a logical philosophical point of view to emphasize the fact that there is a big difference between these two ways of describing Islamic economy. The standpoint that the Islamic economy is a totally unique system implies that the differences between Islamic economy and the capitalistic and socialistic system are basically of a qualitative nature. The standpoint that the Islamic economy constitutes the golden mean implies that the differences in comparison to socialism and capitalism are in the first place quantitative (more collective ownership - less collective ownership, more individual freedom - less individual freedom, etc.).
According to Sadr, Islam denies the fact that the form of production in a society forms this society's social organization in a decisive way. It is still possible to retain a certain social system even though the form of production changes with time. Sadr asserts here the principle that there is no demanding connection between a social system and a form production. The fundamental postulate of the materialistic historical perception, concerning the significance of the forms of production is brilliantly rejected by Sadr by means of the best conceivable example: The origin of the Islamic civilization. It wasn't the result of a new form of production or of important changes in the prevailing form of production. The most recent revolutionary experiment constituted by Islam can hardly be explained in the light of the socialistic perception of history, the author claims and it is hard not to agree with that. According to Marxism, the idea that men are equal and have fundamental rights is developed with the growing bourgeoisie in Europe and is encouraged by the industrial revolution. However, similar ideas existed in the Arabian Peninsula in Makkah more than 1,000 years before the bourgeoisie revolution in Europe. What was there in this society living on agriculture and commerce (commerce being limited compared to other Arabic societies during the same period), leading to the perception of human equality? To Sadr, the answer is the one of the believer. In my opinion, non-Muslims haven't yet received any satisfactory answer regarding this question.
The politics of equalizing economic conditions among members of the Islamic society (first of all with the help of zakat) that arose in Islam during the 7th century cannot be described as a result of the fairly unsophisticated economic activity that took place in this region during that period. The fact that the trade - development in Makkah required a more organized society cannot explain the origin of the Islamic civilization, a phenomenon that changed the history of the world. Makkah's situation between Yemen and Syria was not unique. The city of Petra had a much more flourishing economy. Another flourishing city with as good of chances as Makkah was Palmyra. Even other cities can be named in this context. "No," Sadr sums up in his reasoning; the Islamic revolution wasn't the result of certain material conditions and commercial circumstances in the region of Makkah.
It is obvious that Sadr approaches the question at issue, with his arguments, in a scientific way. Yet, the reasoning is also ideologically attractive from an Islamic perspective since it leads to the opinion that Islam could be maintained as a social form/system irrespective of the social form of production.
The conclusion is extensive:
Islam can survive or be introduced irrespective of the material conditions existing in a society.
Bibliography:
Al-Sadr, Muhammad Baqir, Iqtisaduna (Our Economics), English translation from the Arabic, Volume One and Two, Tehran: 1994.
Brattlund, Asa - Samuelsson, Jan, Islam - English folkrorelse, Muslimer i Svenskt Samhallsiv, Skelleftea: 1991. (In Swedish).
Badawi, M.A.Z., Zakat and Social Justice, "The Muslim World and the Future Economic Order", London: 1979.
Chapra, Muhammad Umar, Objectives of the Islamic Economic Order, Leicester: 1996.
Lewis, Bernard, Islam and the West, New York: 1993. Lewis, Bernard, The Muslim Discovery of Europe, London: 1982.
Samuelsson, Jan, Islam i Sverige, Stockholm: 1999. (In Swedish).
Samuelsson, Jan, Islamisk Ekonomi, Lund: 2000. (In Swedish).
Siddiqi, M. Nejatullah, Issues in Islamic Banking, Leicester:
1983.

The Credit Crunch: An Islamic Perspective

Over the last few months, it has been widely accepted that the “credit crunch” is the biggest financial and economic crisis to hit the Western world since the Great Depression of the 1930s. Virtually every individual has been affected directly or indirectly by the market meltdown and, for the first time in recent history, leading Western commentators have questioned the viability of the capitalist system and the fractional reserve banking model. This article seeks to explain the root causes of the credit crunch from both a Western and an Islamic perspective, before proposing an Islamic solution.

From a Western perspective, the credit crunch is widely blamed upon the ‘sub prime’ crisis which originated in America, where banks offered housing loans to those known in the industry as ‘ninjas’ (no income, no job, no assets). Such people often had poor financial track records. However these loans were subsequently repackaged into financial products known as ‘collaterised debt obligations’ (CDOs). They were then mixed in with ‘prime loans’ and sold on to other banks via the wholesale market. In theory, this trading in debts was meant to spread the risk of bad loans amongst many different banks, thereby reducing risk. In fact, it lead to the ‘sub prime’ problem infecting not just the banks that offered the dodgy loans in the first place, but a far, far greater number of banks who bought the ‘toxic’ loans via the wholesale markets. The knock-on effect of this was for banks to suddenly become unsure of the value of their ‘toxic’ assets and as a result to stop lending each other money, or to lend money only at much higher rates. As a result the London Interbank Offered Rate (LIBOR) shot up to unprecedented levels, which in turn massively increased the cost of providing loans to the general public.

The Western perspective also argues that this initial problem with ‘sub prime’ debts triggered a secondary problem whereby banks which relied for cashflow principally on accessing funds from other banks via the wholesale market, suddenly found they could no longer borrow enough money to meet their cashflow requirements. This is what led to the crisis with Northern Rock, which, more than any other UK bank relied on the wholesale market rather than its own depositor funds to meet the bank’s day-to-day cash requirements.

The paralysis in interbank lending led in turn to banks drastically reducing the money they lent to customers, as well as dramatically raising the cost of existing loans. This in turn substantially reduced demand for property and led to the ongoing crash in the property market. This is now feeding back to create a yet bigger problem for the banks because property is what they mostly hold as collateral for all the debts people owe them. Evidently this collateral is now worth a lot less than a year ago, and this will inevitably lead to a much higher rate of loan defaults and repossessions.

The innovations in the banking system over the last seven years or so have led to a transformation in the banking model. Historically, banks used only the money they received from depositors to lend to borrowers. They were not able to obtain money from other sources other than depositors. However in recent years, banks were able to rely not just on depositors, but also on the wholesale money markets, where they could borrow money from other banks and then resell it onto their borrowers at a higher interest rate. This secondary market was in part made possible by the creation of ‘credit default swaps’ (CDS). These allowed a bank to effectively insure itself against the risk that a borrower might not pay back a loan. In turn this led to an illusion that loans were now much lower risk and allowed such loans to be bought and sold. This, in sequence, led to the creation of the CDO (collaterised debt obligations) mentioned earlier, which were bought by banks as interest bearing investments.

The net effect of these banking innovations was a massive increase in the amount of money being traded by the banks. Most people are not aware that banks only hold as deposit approximately £1 for every £20 lent out.

The other £19 is created artificially by banks via a process known as ‘fractional reserve’. The last few years has seen the fractional reserve being lowered so that banks typically lend out not just £20 but £30 or even £40 of debt for every £1 of deposits held.

Once the credit crunch started to bite, there began a rush to withdraw deposits from certain banks, notably Northern Rock. This ‘run’ on the banks had a huge impact on the banks’ ability to lend money, as for every £1 of deposits they lost, they had to reduce their lending not just by £1 but actually by £30 or £40! This in turn reinforced the banks’ reluctance to lend money.

Based on such trends it is apparent that if this situation is allowed to continue people will lose all confidence not just in the banks but in the economy itself, as banks will virtually stop lending money to anyone, and will become trapped in a vicious circle in which they refuse to lend money, leading to a continued downward spiral in property prices. Such a problem has already begun to affect house prices, where many banks have begun to repossess homes and other forms of collateral in order to resell them. This allows the banks to reduce their outstanding loans and improve their liquidity which in turn will finance other projects. However, because there are now large numbers of repossessed homes for sale, their prices have now dropped sharply, often many times below their original purchase prices. This means that such commodities will be unable to accrue the original amount of money lent. Such problems will have grave consequences for the wider economy and will reduce the value of the collateral held by the banks, and so on until we find ourselves in a severe economic slump, as was the case in the 1930s.

The above represents a very brief and simple Western analysis of the causes of the credit crunch. The conventional Western explanation for this crisis and how to solve it is quite simple: The banks became too greedy and simply lent out too much without carrying out proper checks. They also created too much artificial money via the fractional reserve system. The way forward is for governments to temporarily replenish the banks' deposits, allowing them to resume lending, and this will slowly allow confidence to return to the system thereby allowing the banks to reduce their reliance on the state. Governments also seem keen to regulate banks better than they have done in the past. This should reduce the banks’ reliance on the wholesale markets as well as new-fangled financial instruments like the CDOs and CDSs.

Having covered a secular analysis, we now turn to Islam which proposes a very different explanation and solution for these problems. Firstly, Islam does not consider money to be a commodity which can be traded at a profit, that is to say a transaction which is interest (or usury) based. Thus the reality of negating this Islamic consideration provides us with the first part of the problem. Interest, known as riba in Arabic, is one of the major violations of God’s law, and when it spreads through society becoming an established norm without any condemnation nothing can be expected but divine wrath. Allah curses those who are involved in the usury process, regardless of whether they are the prime or secondary beneficiaries. Such a strong condemnation is intended to caution people to disassociate themselves from any activity related to this destructive sin. Consequently, He, the Most High, promised to wage war against those who consume riba, and has said:

"O you who believe! Be afraid of Allah and give up what remains (due to you) from riba (usury) (from now onward), if you are (really) believers. And if you do not do it, then take a notice of war from Allah and His Messenger but if you repent, you shall have your capital sums."¹

In addition to prohibiting riba, Islam requires money to be fully asset backed.

This would result in banks only being able to offer loans on a ratio of £1 lent out for every £1 held in deposits. The ability to artificially create another £20, £30 or even £40 would be outlawed and viewed as fraudulent activity. Indeed the reality is that the fractional reserve system allows banks together with the very wealthy entrepreneurs who, on account of their large collateral, are always given the lion’s share of the money available to enrich themselves by devaluing the worth of real assets and diluting the wealth owned by the rest of society. Banks have been criticised of being "too greedy". Does this mean that if they had not been greedy the problem would not have arisen? Does this also mean that there may be some acceptable level of ‘fractional reserve’ whereby £1 can create £10 safely?

An observation of any modern interest based society demonstrates that riba is the enemy of charity and that the two (interest and charity) cannot coexist. Charity here is not in reference to a few coins afforded to a homeless individual, but rather charity that provides liquidity which subsequently contributes towards building societies and ensuring financial stability. Riba ultimately alters society’s morals and principles from value-based ones into exchange-based ones. Inevitably, our ethical and moral values are the primary victims in any interestbased society, and as we have seen with current events, the less fortunate do not have the ability to keep up with such an exchange which ensures that they become victims of a system in which the benefits tend to be in one direction. When the European Committee for Fatwa and Research issued its fatwa (religious verdict) allowing Muslims in the West to buy property using conventional interest based mortgages, many Muslim scholars condemned it and advised Muslims against it. We have never believed conventional mortgages to be a solution for the housing problems facing Muslims in Europe. On the contrary such mortgages will simply increase the scale of the problem such as the proper role of charity being totally neglected as is evident with today's economic system.

Islam neither endorses the capitalist nor the communist financial model, and instead is a belief system that cannot be compared to either, nor rivalled. However, both the capitalist and socialist systems share certain elements (all the while attracting Islamic condemnation for those that are not shared) with Islam such as encouraging people to work, to be productive and earn as much as they can, nevertheless, Islam encourages the aforementioned within certain moral guidelines that are divinely ordained. Furthermore, since Islam promotes an awareness of the hereafter in the hearts and minds of believers, it instructs them not to be overcome by greed being excessively attached to money. If an individual earns a lot, he is encouraged to take part in spending from his earnings. This means that the more he acquires, the more he spends and the more other people benefit from his wealth. Adversely, many people have incurred huge amounts of debt and are now struggling to pay off their monthly instalments for house mortgages and loans. Whilst one can justifiably argue that those who spent recklessly should now face the consequences of their actions, it is also worth bearing in mind that the banks also have a duty to lend responsibly, and that there are large numbers of people who are financially illiterate and in need of greater protection.

To summarise, a banking system based on true Islamic principles would prohibit both the paying or receiving of interest as well as the artificial creation of money via the process of ‘fractional reserve’. So how would the banks operate within such a system? Firstly, the banks would need to fundamentally alter their approach and become much more like investment partners to those who need money to purchase a home or business. The bank would therefore become a joint owner of the property/business and base its returns on the rental income/profits generated by the property or business (akin to the shared ownership schemes a number of housing associations are currently operating). Furthermore, the banks would only be able to recoup their original capital by reselling their share of the property/business at the prevailing market value. However, as real partners, banks should have no objection to owning real assets and hence would be ready to share the consequential risk. {quotes}This scheme, although seemingly inconsequential constitutes a major relief for the bank’s clients as they would no longer live under the burden of debt and fear of repossession.{/quotes}

Sadly however, this type of banking system does not operate anywhere in the world at present although a little progress in the right direction has been made in the last decade by Islamic finance providers responding to demand from the Muslim masses for Shariah-compliant finance. Proponents of Islamic banking contend that by adopting such a system and preventing interest from being charged and money being created artificially, not only would the economic boom and bust cycle become much smoother, but economic growth would become more sustainable, and crucially, the wealth created by economic activity would be shared much more fairly by all of society.

The current crisis has caused many people to question the very principles upon which conventional banking is based, and thus we have before us a rare and valuable opportunity to seriously consider developing much better alternatives to the existing banking model. We do not pretend there to be a ready-made blueprint or a tried and tested alternative model set up and ready to go, but rather the key principles governing the development of this model are very clear, and, just as the current banking model took centuries to evolve, so alternative models will also take time to develop. The current crisis dramatically underscores the need for us all to move away from that which has clearly failed.

Guided by belief in the infinite wisdom of our Creator, we would urge non-Muslims to study the Islamic economic system with an open mind. Intelligent individuals (of whom there are many) will realise that such a perfect system can only be divine in origin. They will also note that such a system provides humanity with actual peace and security both in this life and in the hereafter.

ISLAMIC FINANCE: A WESTERN PERSPECTIVE

Humayon A. Dar and John R. Presley

There is a great deal in Western Literature that focuses upon the major issues in the Islamic
economic paradigm, such as, the prohibition of interest and the causes of the business cycle.
There is much to be gained from utilizing also the empirical approach of Western economic
literature. Rather than develop in isolation from Western literature, Islamic scholars would do
well to exploit the wealth of supportive arguments found in Western Literature.

1. Introduction and Background
The new Islamic economics paradigm has developed almost in isolation of contemporary Western economic literature. Islamic economics and finance has so far failed to capture the interest of Western writers. Unfortunately also Islamic writers have focused upon the Koran and mainly Asian literature without utilising a wide body of literature in the West which would assist with the development of the Islamic paradigm. This article begins to rectify the latter deficiency by exploring three key issues -support for the prohibition of interest in Western literature, the blame attached to interest based systems in the creation of business cycles in capitalist economies and empirical evidence on attitudes towards Islamic finance. In seeking to achieve an economic system based upon fairness and justice, Islam dictates that prohibition of rib a (interest) must be established. All incomes, from whatever source, whether it be provision of land, labour, capital or
enterprise, must be determined by the supply of work effort associated with the factors of production. If money is lent for interest then capital is augmented without effort; money is unable to create surplus value by itself. In the context of money, work effort is defined to include the taking of risk in whatever project that money is invested; hence Islam decrees that it is fairer if the provider, of capital shares in the profit or loss of the project in which the borrower invests the capital rather than receiving a fixed return which is independent of the use to which that capital is put. The Islamic literature employs a number of arguments to justify prohibition of interest, some of which are also a feature of Western literature. First, interest as a reward for saving is not considered to have any moral foundation or justification. Second, abstinence from consuming out of present income is not regarded as being sufficient reason to merit a financial reward. Third, a' distinction is made between money and capital; money in essence becomes potential capital; to transform money to capital requires the application of enterprise, that is the risk taking and the knowledge required to bring factors of production together in order to create profit (or loss). [Presley 1988, pp.68-9]. If the lender provides enterprise in whatever form, he justifies a profit (loss) share, but not a fixed or guaranteed return; the reward, that is the profit share, is determined by contribution in terms of enterprise. The creditor/debtor relationship is redefined in Islam with the creditor becoming a partner in the project, not distanced from the use to which the money is employed. Fourth, it is fairer for both creditor and debtor that they each have a share of profits or losses; a profit share, for example, may exceed the market rate of interest and be more in keeping with the input of the creditor. Therefore profit shares not only serve the debtor more fairly but also the creditor.

 

 ending money represents a transfer of property rights (Presley, 1988, p.70); unless the loan is used to generate incremental wealth there is no claim to additional property rights to either borrower or lender; the creation of incremental wealth justifies a claim from both borrower and lender to a share of that additional wealth, but not a fixed return irrespective of the additional wealth guaranteed.

Economic Justice: Islam Versus Capitalism

Dr. Mohammad Malkawi

March 28, 2002

abutalha@yahoo.com

1. Introduction

The success or failure of an economic system is measured by the direct impact on the humans who live under that economic system. The level of security and satisfaction provided to the people further measures such impact. The security and satisfaction are further measured in terms of:

• Food security
• Health security
• Education security
• Life expectancy
• Moral, ethical, and ideological conviction and trust in the economic foundation

Two major systems have dominated the world arena in the last 100 years, namely capitalism and socialism. Socialism collapsed before the end of the 20th century with a complete failure, and hence will not be the subject of this talk. Capitalism continues to dominate the entire globe, with different flavors and varieties implemented in different parts of the world. The dissatisfaction of people under socialism, and the accompanying pain and suffering have ended, but been replaced by yet another type of pain and sufferings. After the collapse of socialism, capitalism had entered the era of global economy, more officially called globalization, thus impacting most of the people in the world.

This lecture will explore the impact of capitalism on the plight of people in poor as well as in rich or super rich countries. This lecture will introduce a new economic system that the world is yet to explore, understand, and implement. This system is based on Islam.

2.0 The Capitalist Economic System

2.1 Theoretical Foundation

Capitalism deals with man’s needs and the means of satisfying those needs. It addresses the

materialistic side of man’s life and it is established on three principles:

1. Relative scarcity of commodities and services in relation to needs.

2. The economic value of a product

3. The price, and its role in production, consumption, and distribution.

Relative Scarcity:

Man has needs that require satisfaction, so there must exist the means to satisfy them. These

needs are purely materialistic, such as the need for food, clothing, medicine, education, and security.

As for the moral needs such as pride and honor, or spiritual needs such as the sanctification of God’s

will, they are not recognized economically, and are therefore disregarded and have no place in economic studies.

Commodities and services are the means of satisfying the human needs. What makes commodities and services satisfy the needs, is the benefit embedded within these commodities and services. This benefit is an attribute, which renders the thing desirable for satisfying a need. Since the need means the economic desire, then an economically beneficial product is anything desired, whether it is essential or not, even if some consider it beneficial and others consider it harmful. It is considered economically beneficial as long as there is someone who finds it desirable. Products may be considered beneficial from an economic viewpoint even if the public opinion considers them of no benefit, or harmful. Thus wine, tobacco, drugs, guns, and apples are beneficial things since there are people who desire them. Stocks, interest rates are also beneficial as long as there is someone who would benefit from their use.

The capitalist looks at the means of satisfaction, that is, the commodities and services, from

the viewpoint that they satisfy a need, without taking any other factor into consideration. So she considers wine in its capacity of having an economic value because it satisfies the needs of some people, and she perceives the wine maker as one who provides a service, considering this service as having an economic value, because it satisfies the need of some people.

As such, capitalism does not concern itself with the nature of society, but rather with the economic material resources (economic commodities), as means of satisfying human needs. Therefore, the capitalist economic system primary function is to supply commodities and services i.e.

to provide the means of satisfying man’s needs, irrespective of any other consideration. The

commodities and services, which are the means of satisfaction, are considered to be limited relative to man’s needs, which are unlimited and constantly growing. Capitalism recognizes that man has basic needs, which must be satisfied, and needs which increase in number as man proceeds to a higher level of urbanization. These needs multiply and increase need complete satisfaction, a goal that cannot be fulfilled no matter how much commodities and services are produced. This basic principal of capitalist economic philosophy provides the basis for the definition of the economic problem under capitalism. In particular, the problem that capitalism attempts to resolve is the satisfaction of an ever growing human needs using insufficient resources and means of satisfaction. This is the essence of relative scarcity of products.

The inevitable consequence of relative scarcity is that some needs are either partially satisfied

or not satisfied at all. Which needs get satisfied and which are deprived, and whose needs are satisfied and whose are deprived is completely determined by the economic set of rules and policies, which are adopted by any given capitalistic society. These rules and policies define the manner of distributing the limited resources over the unlimited needs. It should be noted, however, that the problem is to make the resources available so as to satisfy the needs in a society, but not necessarily the needs of every individual. It is not surprising therefore, that the main focus of the economy under capitalism is the increase in the national production (GDP and GNP). Economic growth is viewed as a means of solving the problem of poverty. There are serious flaws with the principal of scarcity of products.

1. Correlation between the needs and the means of satisfaction

Under capitalism, the production of commodities and services, which are the means of satisfying the needs, together with the distribution of these commodities and services are considered to be one major subject. Thus, capitalism holds one view towards the economic science and the economic system without differentiating between them. In reality, there is a major difference between the economic system and economic science.

The economic system is a set of rules and regulations, which define how to distribute the wealth, how to possess it, and how to spend or dispose of it. This system (set of rules) is based upon a particular viewpoint in life, or ideology. Therefore, the economic system of Islam is different from that of socialism/communism and that of capitalism, since each of these systems follows its own ideological viewpoint. Economic science deals with the production, its improvement, invention and improvement of its means. Economic science, as is the case with other sciences, is universal to all nations and is not associated with a particular ideology. For example, the rules of possession and ownership under capitalism differ from the rules under socialism, and from those under Islam. On the other hand, the improvement of production is a technical issue, which is purely scientific, and does not depend on a particular ideological viewpoint. The integration between the production of the economic material and the manner of its distribution, is a fundamental fault in the capitalist system which is bound to cause failure in the economy of capitalism.

2. The human needs are not materialistic only

The reference to the needs, which require satisfaction as being purely materialistic, is wrong,

and contradicts the natural reality of human needs. Human beings have moral, spiritual, and ethical needs that require satisfaction, which in turn require commodities and services for their satisfaction.

3. Commodities and services relation to the society

The Capitalist economy looks at the needs and benefits as they are, not as the society should be.Thus, man is viewed as a purely materialistic creature, with no relevance to his spiritual needs, ethical thoughts, and moral objectives. Capitalism does not give weight to any value, except to the material value of the product and the material nature of the human need. Cheating in the economic sense is valuable as long as it leads to profitability (Enron and Arthur Anderson). Monopoly is feasible economically, while it can be maintained and supported (Microsoft). Under capitalism, feeding a poor (wealth distribution) may be done only if it brings a material benefit, such as tax break. But it will not happen in response to an order from God or in pursuit of God’s pleasure and satisfaction. The exchange of resources and efforts among people creates relationships among people, according to which the structure of the society is formed. Thus, viewing the economic commodity as a means of fulfilling a need, without caring for what the society should be, violates a fundamental  rule of society structure. The effect on society should be perceived when considering the economic commodity. Therefore, it is incorrect to consider a thing as beneficial just because there is somebody who likes it, whether it is harmful or not, and whether it affects the relationships among people or not, and whether it is prohibited or permitted in the belief of the people in the society. Rather things should be considered beneficial if they are really beneficial in respect to what the society should be. Therefore, it is incorrect to consider alcoholism, cannabis, opium, explosives and the like as beneficial commodities and to consider them economic commodities just because there is somebody who wants them. Instead, the effect of these economic commodities on the relationships between people in society must be considered when considering the benefit of things i.e. when considering the thing as an economic commodity or not. Things should be viewed in relation to what the society should be. It is wrong to look at a product merely as it is, regardless of what the society should be. By including the subject of satisfying the needs within the subject of the means of satisfaction, and by viewing the means of satisfaction only as satisfying a need, and not by any other consideration, capitalism concentrate on production of wealth more than distribution of wealth.

4. Poverty of individuals is the main economic problem

The importance of distribution of wealth to satisfy the needs has become a secondary issue. Therefore, the capitalist economic system main aim is to increase the country’s wealth as a whole, and it strives to achieve the highest possible level of production. The achievement of the highest possible level of satisfaction for the members of society should come as a result of increasing the national income, or the gross national product. This should be achieved by raising the level of production in the country, and by enabling individuals to acquire the wealth as they are left free to work and produce. So the economy does not attempt to satisfy the needs of the individuals and to facilitate the satisfaction of every individual in the community, rather it is focused on satisfying the needs of the community as a whole by raising the level of production and increasing the national income of the country as a whole. Through the availability of the national income, the distribution of income among the members of society occurs, by means of freedom of possession and freedom of work. So it is left to the individuals to acquire what they can of the wealth. Everyone strives to get his/her share of the wealth using whatever means, skills, or tools he/she can afford. Whether the individual is or is not able to satisfy his/her needs is not of concern to the economy, as long as the production of goods continues to grow, and the wealth continues to grow. This is the major principal of the capitalist economy. It is inherently wrong, and contradicts reality and does not lead to an improvement in the level of livelihood for all individuals, and does not fulfill the basic needs of every individual. It does not resolve the issue of poverty for the individuals, despite the massive increase in the production of goods and services. The hard fact in this reality is that the needs, which require satisfaction, are individual needs. They are needs of particular people such as George, Maria, Hassan, Mohammad, and the like. The fact that the needs of George are satisfied does not make Maria any better, unless her needs are also taken care of. So these are needs of individuals and not needs for a group of human beings, a group of nations, or a group of people. Therefore, the economic problem must focus on distributing the means of satisfaction for all

the individuals of a society. In other words, the distribution of the funds and benefits must reach every member of the nation or people. It is not sufficient to increase the wealth of the group, irrespective of the plight of every individual. Consequently, the study of the factors that affect the size of national production differs from the study for satisfying all the basic needs of all individuals personally and completely. The subject of study must be the basic human needs of man, as a human being, and the study of distributing the wealth to the members of society to guarantee the satisfaction of all their basic needs. This should be the subject of study, and should be undertaken in the first place. Moreover, the treatment of the

poverty of a country does not solve the problem of poverty for individuals. Rather, the treatment of the poverty problems of the individuals, and the distribution of the wealth of the country among them, motivates all the people of the country to work towards increasing the national income. The study of the factors that affect the size of production and the increase of the national income should be discussed within the framework of economic science, rather than in the discussion of the economic system.

5. Scarcity of resources is not the problem and human needs are limited

Capitalism views the economic problem, which faces any society to be the scarcity of commodities and services. It claims that the human needs are steadily increasing, and the products continue to be too scarce to satisfy the growing needs of the people. This view is erroneous and in fact contradicts with reality. This is because the needs, which must be met, are the basic needs of the individual as a human (food, shelter, education, health and clothing), and not the luxuries, although they too are sought. The basic needs of humans are limited, and the resources and products, which they call the commodities and services, are certainly sufficient to satisfy the basic human needs. It is possible to satisfy all of the basic needs of mankind completely. The economic problem is, in reality, the distribution of these resources and services enabling every individual to satisfy all basic needs completely, and after that helping them to strive for attaining their luxuries. The basic needs of man as a human do not increase. The luxurious needs that may increase and vary, due to urbanization improvement.