FAIR CAPITALISM
There is a feeling of distrust that prevails in our communities
in various countries of the world. There is a lack of confidence in capitalism,
in its leaders, institutions and the so-called free-market system. There are
inequalities in income and a sense of isolation and fragmentation between the
winners and losers in this unjust capitalist system. How will there be justice
while lawmakers are planning to blackmail the poor consumer? We read all the
time about the thefts and corruption scandals and cover-ups of companies and
financial bodies, some of which became public, in the absence of the role of
monitoring and accounting. Our societies reward those who have obtained great
wealth effortlessly much more than those who contributed to the same production
by their sweat and tedious work.
There's no
justification to compensate CEOs 350 times in comparison to their workers. Some
of our countries reward those who retain and increase their wealth, transfer it
out-of-country, employ more expatriate workforce, and opens its markets for
them to invest freely. Upon any slight jolt in the market, this wealth is
withdrawn causing real financial crises. Feudal era and resources monopoly is
back again. But they will not be able to stifle people using unrewarding jobs
because demand will collapse in the market in the long run. This is what we
have learned from history. Greed should be regulated. Is it possible after this
presentation to renew confidence and achieve social and economic results for
everyone?
The Basic
Principle of Capitalism
Before we discuss the
subject of capitalism, let's address its principles. Capitalism came from the
Greek word "caput," meaning the head. The rich person is evaluated on
how many heads of cattle he has. With time, financial economics evolved and
used the word "capital." Philosopher Adam Smith, who wrote the book
"The Wealth of Nations" in 1776, advocated free markets. He was
convinced that if everyone has performed to the best of his ability, the community
as a whole will gain. He recommended not imposing restrictions on the movement
of the trade, and funds must flow between the buyer and seller.
The money should go to
the best seller and who has the best merchandise. This seller is the one who
will develop the related business, and thus will benefit the community.
Capitalism has become an important word to the capitalists since the Industrial
Revolution in the 19th century, when Karl Marx claimed that the excesses of
capitalism lead to the accumulation of money in the hands of the few. He
further argued that this will lead to major conflicts and financial crises. He
said that capitalism will disappear when people displace governments. There
were massacres under the assumptions of Karl Marx, but capitalism did not
disappear.
Adam Smith was
probably naive with respect to national security. As far as possible, states
maintain their wealth to benefit from its profits or in the form of political,
economic, social and security gains. Money cannot be allowed to move freely
across world markets because it is a source of power for the state. Also, in
the 21st century, there are more creative wealth development methods and the
use of such outputs for the interest of the state that the theories of Adam
Smith in the 19th century did not test. Perhaps Karl Marx was naive in his judgment to capitalism and its impact on
individuals and international levels. His ideas became unrealistic in light of
the of current economic, political and social theories development.
In the concept of Adam
Smith, if capitalism principles are applied correctly, they will serve
communities well while Marxism brought non-workable economic systems except for
laborers. For the creative higher and middle management, there is no value, and
the concept hurt their motivation to develop the business. But we are convinced
that some people have excessive desire to possess wealth, goods or things of
value just for the self. They will not stop when they achieve their basic or
comfort needs.
Wealth
Accumulation
Over time, this greed
led to uncalculated commercial risks that are characterized with destruction of
moral values . Desires became endless and infinitely more dramatic than needs,
and the biggest concern was the collection of wealth and the comparison with
other similar possessions. This accumulation of wealth in the hands of a few
people deprived many from varied services enjoyed by the wealthy layer. The
more affluent can get the best education opportunity and health services, for
example, that other, lower-income people cannot get.
This means that that
any call for equal opportunities cannot be applied in a free- market society.
In a comparison of wealth, the International Monetary Foundation reported that
the richest 85 persons have wealth beyond what is owned by the poorer half of
the world's population, estimated at 3.5 billion people. Therefore, the issues
that must be addressed are income equality, justice in this capitalist system,
and resisting attempts by the rich to keep the situation in their favor.
Income
Disparity
Reliance on short-term
profits, as it is one of the goals of many of the world's richest people,
undermines investment and reduces the country's economic growth over the long-
term. Countries that do not enjoy equal or fair income rates cannot expect
their economies to flourish. Using their
own efforts, limited income individuals and the poor are the ones who will
build the economy for the state. They have power and creativity, but need
appropriate environments to ignite their energies. In the absence of such
people, production levels are affected and reflected negatively on the
economies of countries.
Inequality is evident
in the outcome of investments, financial and trade institutions. When these
institutions thrive, they do not share their profits fairly with investors.
They reward the top of the pyramid exponentially higher and share very low
dividends with bottom-investors. This does not feed hungry mouths. Many
examples are available in the stock market and with bank interests. For any
incurred losses, only the public will bear them. Other examples in the
commercial and industrial sectors include the lowering of labor wages 20 to 30 percent,
while wages increased for the CEOs to 30 percent at the same time.
With capitalist
globalization, inequality between people has increased because developed
nations have tapped poor countries resources at cheap prices. The developed
countries do not attribute it as such interpretation, but claims that the
globalization of capitalism has become more efficient and inequality has become
an inseparable part of it. Perhaps the government in one state can adjust wages
by enacting laws; but when you're dealing with international capital and
international companies, it requires detailed coordination between a government
and governments of other countries. This is not practical at present due to the
absence of many of the concepts and tools, like a global-thinking government.
So there are many obstacles and difficulties to finding economic opportunities
for millions of people.
Some studies put forward that the only solution to inequality and modifying the
economic situation in poor countries is education and the acquisition of modern
skills to compete in the global market; but the apparent contradiction is the
absence of good opportunities for education and training for large segments of
the poor. Most good training institutions are for profit and the cost of
education and training is not available for many of these poor citizens. Moreover,
many of these non-democratic countries don’t allow the poor to vote, let alone
responding to their basic needs. Even
democratic countries are affected by inequality.
The Battle
between Democracy and Capitalism
Democracy and
capitalism cooperate until a certain point, and then they fight each other.
Constitutions of democratic countries ensure freedom, equality and equal
opportunities, while capitalism ensures open markets. If we take the example of
livestock development, democratically our goal will be to maintain the
livestock for the coming generations at a rate sufficient to our needs. We use
the free market for the sale of surplus or benefit from it. But when we are on
the board of the profitable company, the main objective is the amount of profit
that we will get from these cattle, and we will not care about future
generations because they are not shareholders.
Capitalism influenced developed democratic
countries in the inequality of wages and unemployment. Owners of financial,
commercial and industrial enterprises are looking for a reduction in operating
costs to increase profits. They transferred their operations to India and China,
for example, where they utilized low-wage workers to reduce labor costs. Whenever
a machine is available, man is replaced. So, we find currently the challenge in
Europe is represented by unemployment, whereas in the United States, it is low
wages. The real problem is the suppression of the democratic voice of the
average citizen and the absence of influence in political decision-making.
Companies write their
own laws and investors and citizens trust them to carryout social and moral
responsibilities towards them. Instead, they use all of their privileges to
achieve their goals in the competition with other companies. Companies for
profit are not eligible and do not have the ability to take the role of social
responsibility. Herein lies the difference between democracy and capitalism.
Will global capitalism transform and govern nations to replace democracy?
Global capitalism
cannot govern people for several contradictions. Free markets are not free.
There are a lot of barriers to free trade - see a previous article on the protection of US technology. Migration laws between states face multiple
barriers and get more difficult annually due to terrorism and other economic factors.
Also, the level of unemployment is on the rise. It is evident from the presence
of supporters and opponents of global capitalism, the political and economic
systems will be affected by the contrasting views. Finally, the United States
has ambitiously sought to expand its banking and financial influence to open
markets around the world without regulating the financial sector.
These contradictions
have created financial crises that led to the undermining of confidence in
financial institutions and decision-makers and in free markets. The problem
today has become a matter of trust, in addition to an exclusion issue as we
pointed out in the preceding paragraphs. This confidence is also missing in
Islamic banks or those banks wearing a tinted scarf of Islam to benefit from
the invasion of capitalism.
Islamic
Banks by Name Only
Islamic banks are
Islamic by name only. They do not apply Islamic principles in their
transactions. Financial transactions are not only to prevent usury. A Muslim
seeks independence in his profit. Even when he exceeds his subsistence needs,
this is acceptable. The achievement of large commercial profits to live in
affluence is permissible provided that the application of Islamic law, such as
honesty, simplicity, integrity, faith and justice have been applied in hidden
dealings. And any excess gains should be spent on needy relatives and others through Zakat,
alms, endowments, charitable donations and other gifts: "And that in whose wealth is a recognized right. For the needy who asks and who is prevented for
some reason from asking."
AlMaarij 24-25.
You should also
suppose that this gain is from the grace of God and Muslims should not make an
unreasonable effort just for the sake of making money. Once in transactions,
there should not be any losers- every situation must be a win-win. As explained
above, it is not enough to avoid usurious projects, but to apply the full moralistic
principles system. Again we ask: How will confidence be recovered in financial
systems?
Applying a
Fair Capitalism
First:
Restore Confidence
Belgians say "confidence leaves on a horse and comes
back on foot."
Confidence is difficult to acquire, it takes time. Behavioral change needs
education and continuous supervision by independently control bodies for years.
First-wealth seekers must recognize that the ultimate goal of wealth collection
is happiness and prosperity for all, not to raise money for only self. "So he who gives in charity and fears
Allah, And in all sincerity testifies to the best, We will indeed make smooth
for him the path to Bliss. But he who is a greedy miser and thinks himself
self-sufficient, And gives the lie to the best, We will indeed make smooth for
him the path to Misery. (Al-Lail 5-10).
Then the wealthy must
become humble when the government asks them to share their wealth to increase
their workers' wages or grant donations and alms to the needy and the poor.
Restoring confidence needs patience and the gradual introduction of financial
improvements towards a more just society. There must be real results that can
be sensed by the poor and the oppressed. Dishonest pursuit towards equality
will be ultimately exposed, and then there will be a lasting loss to the
credibility of those parties. Finally, all transactions must be transparent.
Second:
The Role of Government
Government must have a
strong role in dealing with income disparity to achieve capital justice because
it is in the interest of everyone. The government will gain committed and
productive working cadres that have a loyal and cohesive society. It can carry
out the following:
1. The first-projected
solution of the government is to create an equation or a rate of income in the
public sector commensurate with the performance of the individual. It must be
fair to achieve a dignified fulfilling life for the individual. Governments
must put pressure on companies to pay wages equal to the individual capacity
and production outcome.
2. States that have
tax systems can achieve part of social equality by reducing low-income wage
taxes.
3. States should regulate
the pricing and taxes of real estate and rents.
4. States should
provide free education or a standard pricing for the needy.
5. States should offer
free health or standard pricing for the needy.
6. The Ministry of
Labor must have occupational standards and job descriptions with fair wages
based on scientific formulas.
7. States should grant
social benefits to citizens and permanent residents, for example, social
security.
8. Programs should be
in place to enable most people good incomes and participation in the economy.
9. Regulations should
be in place to ensure the integrity of the financial system and the
independence of regulators to control markets.
10. Laws protecting
the environment and maintaining its sustainability should be enforced.
11. The state should provide
donation to the victims in crisis.
12. The state should reduce
excessive increases in bank budgets because of the increased risk that weakens
competition, creates complications and causes financial crises.
Third: Companies
that do not Fail
Large companies called
the companies that are "too big to fail" have a responsibility to
improve the lives of the poor by enhancing business activities, employment
opportunities and facilitate access to financial support. They can create
wealth for those in the lower-income levels or the so-called fourth-grade, or
the 4 billion poorest on earth. They have social responsibilities to be
transparent, protect the environment, donate nationally to the poor and needy,
and to achieve equality among employees.
After the 2004 tsunami,
the Bill Clinton Foundation helped fishermen in Haiti and gave each a boat and
a basic mobile phone. This has increased their income 30 percent compared with
the period before the crises because they are now able to call, while in sea,
to pinpoint the best places to sell their fish.
A Final
Word
States have become big
companies that are shrinking to become a giant profit company. Wealth has
created inequality and violated the rights and opportunities of others, and
denied them investment in local or global economies. Globalization has a
significant effect, and powerful nations impose it on weaker countries to open
their markets and exploit its resources. Civilization cannot tolerate endless
injustice. Democracy cannot coexist with a group of people who control the fate
of humans. Capitalism, without democracy, will develop recession and this is a
fact from history. We need capitalism where our economy is just and sustainable,
and more inclusive. We need everyone to participate, each according to his or
her production and capability; otherwise, we will continue under the
catastrophic financial crises and that may possibly lead to a revolution of the
poor over the rich.
Financial stability is in the participation of all.
References:
Abbas J. Ali , (2014),"Globalization and
inequalities", International Journal of Commerce and Management, Vol. 24
Iss 2 pp. 114 - 118
Bruce Lloyd Lester Thurow, (1997),"The future
of capitalism", Leadership & Organization Development Journal, Vol. 18
Iss 2 pp. 93 – 98
Christine Lagarde. Economic Inclusion and
Financial Integrity—an Address to the Conference on Inclusive Capitalism.
International Monetary Fund: London, May 27, 2014
P.K. Keizer, (1999),"Capitalism, rivalry
and solidarity", International Journal of Social Economics, Vol. 26 Iss 6
pp. 752 – 764
Wael Halaq. The impossible state: islam,
politics and the dilemma of modernization. Translated by Amro Usman. Arac
Center for Research and Policy Studies. 2014.
