An Islamic Monetary System
Making possible a more truly Islamic society?
[I beg forgiveness for any misstatements about Islam due to ignorance.]
I don’t know much about Islam. I had learned somewhere along the way that in it the existence of poverty is considered to be an injustice. I had developed a monetary paradigm that would eliminate poverty, so I have been curious whether or to what extent that paradigm would be compatible with Islam. It turns out, that paradigm is not only compatible with Islam, but as the determinative component of an economic system it seems to be a way of realizing as fully as possible in this world today an Islamic economic system, and beyond that an Islamic society. As far as I can tell, nothing about it would contradict any part of that religion.
Ideally, as I understand it, Islamic societies would have no government per se, only individuals living in accordance with Islam in a society with an economic system consistent with the tenets of Islam (not that the existence of a government contradicts Islam). This paradigm would allow the economy to exist entirely separately from the offices of government; it would not depend in any way on the government for its functioning.
I have learned that there is no complaint against being wealthy in Islam, but being wealthy in the presence of poverty does present an issue. There is a requirement to give privately for charity through mosques, but there is no requirement to diminish one’s own financial state in the process. Taxation is required to be minimized, so using taxes to alleviate poverty is also problematical.
Besides poverty, there are other economic matters directly addressed in Islam. Though lending is acceptable, all interest is considered usury. Also, Islam does promote a market-based economy, not one in which the government or religious authorities dictate what will be produced, in what amounts (though, as in the U.S., there are religion-based bans on some products and services). There is in Islamic nations today, however, state ownership of large enterprises, including banking, (an issue apparently not directly addressed by the Prophet) even in nations that are not monarchical.
In general, it seems fair to say that the economies of all Islamic nations are caught between the strictures of Islam and the demands of a global economy. In particular, the International Monetary Fund and, to a lesser extent, the World Bank can compromise the sovereignty of less economically powerful nations to ensure their compliance with the rules of the global economy as established by the ‘first world’ nations, particularly related to finance: even nations with large reserves of oil cannot withstand that power.
As a result, there is no such thing as a truly Islamic economic system in any nation. The paradigm I developed could go a long ways towards the implementation of such an economy by eliminating poverty without taxation or public debt (which in turn requires some form of taxation). In general, government’s role of acting as a facilitator between Islam and an Islamic society would be vastly reduced, if not altogether eliminated. (In more traditional Islamic societies the royalty would be the owners of the land and natural resources, with particular relationships between them and the rest of society attaching to that circumstance.) At the same time, the economy would be freed from the global financial structure: a nation with this monetary system in place could be utterly monetarily independent. (Islamic nations could use this paradigm to establish a common monetary system with a common currency — without compromising sovereignty among them.)
This paradigm would allow money to be provided for the economy without involving debt of any kind. That lays to rest the problem of interest in creating currency at present in Islamic nations, in which the creation of currency entails the creation of instruments of debt between the central bank and the central government (in somewhat convoluted ways to try avoid ‘interest’).
That money created would go directly to eligible individuals in the form of an income. Any Islamic adult could become eligible for it. In the standard form of this paradigm, it would be paid to all people of retirement age and adults unable to work as well as being the pay for all people employed in minimum-pay positions. It could also be paid to a parent (or legal guardian) in a household with at least one child living there. The amount of that income, which would be the same for everyone being paid it, would be sufficient to eliminate poverty.
Assuming government would still have to exist, money would also be created to fund all government. It would be funded from this point forward at the current per capita rate of total government spending. (Islam does allow public debt/taxation if more money were needed for emergencies and defense; also, non-Muslims living in Islamic nations and businesses not owned by Muslims could still be taxed.)
Money does have to be returned to its point of origin (either the central bank or a newly established Monetary Agency), so there would be a limit on hoarding money. Still, no money would be collected from any person or business before it could be used for purchases/investment.
That is as far as my limited knowledge of Islam can take this notion. Anyone more knowledgeable about Islam who might be curious about taking it further can learn more about this paradigm in the following articles (all here in Medium). As I am a non-Muslim who is a “U.S. American,” as someone once put it, they are written from within that perspective.
(for, primarily, economists) “Paradigm Shift”