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 Upon any slight jolt in the market, this wealth is withdrawn causing real financial crises.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.