Friday, August 24, 2007

Islam and Economics, Interest, Capitalism

Category: STRONG

How does bringing up random economic terms have anything to do with his question? I'm sure economics is interesting as hell, but the principles behind interest don't involve all of it.

As for what would stop people from leveraging everything through borrowing? THE LENDERS. What incentive do lenders have to lend? What do you care? Are you a bank? (See following)

To that guy, a n00b answer from a n00b at economics (though his post was from last year):

First of all, http://en.wikipedia.org/wiki/Islamic_Banking. There's no reason to be asking people on this site about anything relating to econmics or Islam. It's a rating site.

But here's how I interpret the Islamic view on interest using common sense.

It's a common misconception (or tactic) to assume that since Islam outlaws interest, that Islam argues that interest is not technically feasible. Wrong, interest can probably be made to work very well and in any manner of ways which could alter wealth distribution for whatever ends you want. It's just that in a free market atmosphere, it almost always winds up being how it is now.

Instead of interest, the Islamic interpretation of economics centers around profit-sharing. In a society with capitalist principles, if a person goes to the bank to get a loan for whatever venture, the bank charges interest and is guaranteed profit regardless of whether the venture results in profit or loss. The lender is guaranteed profit. Now if the venture's successful, and he makes a certain % profit, he'll pay interest on that to the bank. If he had 50% profit, lets say he winds up keeping 35% and 15% goes to the bank. Except... that profit was gained on public money. And 35% of it went into that guy's pocket, and of the 15% that went to the bank, lets say they keep 5% so only 10% goes back to the people whose money this was all done with. People might be satisfied with the 10% return on their deposits but they're not realizing how much was really made with their money. Back on the other end, the guy who kept 35% of the profit will probably add to the cost of his product to compensate for giving 15% to the bank. So that 10% return the people get doesn't count for much since the prices of everything in the economy get ratcheted up for profit. Any serious risk of loss is compensated for by insurance companies who are also using the money of their policy holders. So the lender is guaranteed profit and the business is essentially guaranteed profit. The common people have no say in this. It's not like eBay where you can choose not to give $45 for a $30 blowdryer or something, or you can choose how much over $30 you're willing to go.

Then it's spread around so that in a healthy economy, everybody is doing this to everyone else to kind of mask the trend of wealth movement. But if you want to know where all the wealth has gone, just look around (since we're in a global economy). A very tiny % of the world's population has a very large % of the world's wealth. And mostly in a certain area (where modern Western capitalism arose). And again, a person on the street in papua new guinea has no say over being involved in the economy of the united states. Not that globalization or economics itself is bad, because a lot of this are just natural laws that play out this way when manipulated at the root by a certain civilization's principles.

Islam mostly keeps the principles of capitalism, free markets and all that intact. Except it allows the Islamic government to wield greater power if necessary. The Islamic system of economics is different from a purely capitalist also in that the economy is not the #1 concern of an Islamic society. It's not even considered a primary concern. Basic human needs are.

Anyway, capitalism guided on Islamic principles would be as follows in the above scenario: The lender and the business decide to split the 50% profit equally for instance (up to the two, however they split it), so 25% goes to the business, 25% to the bank... which then gives the 25% to the public. How does the bank make profit? Through all the other fees. Who cares anyhow (since most people would argue 'OMG WHAT ABOUT TEH BANKZZ!1!!'), you're not a banker. You'd most likely either be the business or the public depositor. I know shit all about banking/economics, so I have no idea how banks make money as is so I can't really answer that, ask someone who owns a bank and they could probably come up with a few ideas. See that wiki article on Islamic banking for all else it says.

And like I said, you could even rig an interest system to follow this same path of wealth distribution, so Islam isn't saying interest is technically unfeasible or not profitable or whatever. It's just saying not to use it (because clearly it doesn't mix well with a free capitalist foundation for an economy).

In today's world, an Islamic economy would be encapsulated within the Islamic state, which would then have to interact with the rest of the world on their basis (because it would likely be inheriting tons of debt, due in no small part to interest, and consolidating all the interest-related debt of its constituents). It can then come to whatever agreement necessary to get rid of that debt eventually, and then can halt all future transactions based on interest and pursue an appropriate trade policy to reflect those principles. I don't see this as a huge deal because if this were to ever happen, if things were to ever get to the point where a government existed that could and would have to do this, it'd probably already be in the middle of World War 3.

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In today's world, an Islamic economy would be encapsulated within the Islamic state, which would then have to interact with the rest of the world on their basis (because it would likely be inheriting tons of debt, due in no small part to interest, and consolidating all the interest-related debt of its constituents). It can then come to whatever agreement necessary to get rid of that debt eventually, and then can halt all future transactions based on interest and pursue an appropriate trade policy to reflect those principles. I don't see this as a huge deal because if this were to ever happen, if things were to ever get to the point where a government existed that could and would have to do this, it'd probably already be in the middle of World War 3.

Personally, I'm not too sure where I stand on Western-style capitalism. It will, after all, come back to bite the US in the ass. Human nature doesn't serve any one people over another based upon where they live or who they are. It could wind up being teh winnar for those tricksy Chinese for all we know. (Seriously, if a COMMUNIST country can kick ass at dealing with a capitalist world, why are people doubting an Islamic economy would have any problems following the same path? Communism DOESN'T WORK. But people can MAKE it work. Islamic economies in the past have never collapsed due to being Islamic.)

The symptoms are there... (being abandoned by its own 'monster') pointless wars and projection of power and idiotic, panicked foreign policy. They aren't directly focused on China, but they don't have to be. Existing resources and involvement in other places has grown more important necessitating all this. The country's under threat from essentially the rest of the world.

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^^ Re: 'coming back to bite the US in the ass': http://news.bbc.co.uk/2/hi/business/6960961.stm

oh snap. and that triggered the recent global economic panic.

Also, I notice in the second part of that where I quote myself, I'm kind of arguing for Chavez-style socialism.

Wednesday, August 22, 2007

Quotes re: America

Category: SOUND

"I believe that banking institutions are more dangerous to our liberties than standing armies... if the American people ever allow private banks to control the issue of currency... the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered."
-Thomas Jefferson, 3rd President of the United States

"A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom.

We have restricted credit, we have restricted opportunity, we have controlled development, and we have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world--no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men."
-Woodrow Wilson, 28th President of the United States