“The health of the economy is correctly measured by assessing how well the wealth is distributed. Human beings have always been driven to create and acquire more wealth and hence people's private fortunes have always grown and will continue to do so - so there's no need to worry about economic growth. Instead, we need to ensure that the wealth is circulating throughout the society and isn't just collecting in the hands of the few.”
This is the third post in a multi-post series. The previous two posts examined how production is disconnected from the well-being of the society and the issue of job creation. In this post, we explore the Capitalist mindset that led to focusing on production instead of distribution.
Part 3: How the Capitalists got it wrong
So why does the Capitalist system focus on production instead of distribution?
We addressed part of this by refuting the idea that society needs incentives to produce more. However, there are a number of other incorrect assumptions that the Capitalist thinkers made that resulted in this approach to the economy.
Before getting into the details, my main goal of writing this point is to show how these policies are not natural – as in they didn’t come out of the ground. These policies are designed by the Capitalist thinkers who were applying the concepts of freedom to the economic sphere of life.
Since they had deemed religion as a personal matter, they had to use their limited minds to judge the reality of human beings – as if they were gods of some kind. But indeed they were not.
Consequently, we should see these ideas for what they are: just products of flawed men who thought too much of themselves.
Myth #1. Humans have unlimited needs and wants.
As we learn in “Econ 101”, the key problem for the Capitalist economic system to solve is one of scarcity. Specifically:
“The economic problem—sometimes called the basic or central economic problem-asserts that an economy's finite resources are insufficient to satisfy all human wants and needs. It assumes that human wants are unlimited, but the means to satisfy human wants are scarce.”
The error with this model is that it treats needs and wants as if they are the same. This absolutely contradicts the reality. Needs are not the same as wants and therefore must be treated differently.
The reality is that as limited human beings we actually have two sets of needs – basic needs and luxurious wants. Basic needs are things that human beings can’t live without, such as food, shelter and clothing. Luxurious needs are anything above that. Prophet Muhammad (saw) identified the basic needs as follows:
"The Son of Adam has no better right than that he would have a house wherein he may live, a piece of clothing whereby he may hide his nakedness and a piece of bread and some water." [Tirmidhi]
Obviously, we won’t die if we don’t get to read the latest magazine.
But we will die if we don’t have access to food or clean drinking water.
According to the World Water Council, “1.1 billion people lack access to safe drinking water. 2.6 billion people lack adequate sanitation. 1.8 million people die every year from diarrhoeal diseases, including 90% of children under 5.”
At the same time that this is happening, massive amounts of water are being used to produce glossy paper.
According to Statistics Canada, the paper industry used 2.6 billion cubic meters of fresh water. About 9.5% of this is used for coated paper, which goes to the magazine industry (based on statistics from Pulp and Paper). This equals 335 billion liters of water, roughly a billion a liters of water per day. According to the World Health Organization, people need about 50 liters of water a day (to reduce the health concerns to low).
So if we do the math, this water – just used for coated paper – would enable 20 million people to have access to the water they need to live.
This illustrates the problem in a nutshell; by treating the wants and needs of people as if they are equal results in water being allocated to produce reading materials for the rich instead of quenching the mouths parched with thirst.
Before moving on, it should be clear that Islam does not condemn the acquisition of luxuries:
"Who has forbidden the adornment of Allah which He has produced for His servants and the good [lawful] things of provision?" [TMQ 7:32]
But at the same time the rights of our fellow human beings take precedence over our private property. In the following saying of Prophet Muhammad (pbuh), it explains that if someone steals to meet their hunger then the people whose property was taken will not have a claim against the person with the Creator. The reason is that the community should have seen to it that all their members had their basic needs met.
“Whenever the people of an area wake up with a hungry person amongst them, then they have removed the covenant with Allah” [Ahmed]
Myth #2: There are not enough resources to meet our needs.
One of the core tenets of Capitalist economics is that there just aren’t enough resources to go around. This speaks to Malthus’s contention that human growth is exponential while the growth in food is arithmetic: meaning that humans may outgrow the food supply. This theory speaks to one of the endemic problems with liberal thinking: we as human beings are influenced by our environment so our theories are limited by our experience and can never understand the true nature of humanity or the environment.
To illustrate the point: if we assume that the only way to generate heat is to burn wood (or other plants) then we will assume that once the wood runs out there will be no way to warm the colder regions of the planet and consequently we would all have to migrate to a warmer climate.
Did people have to move south when the wood got used up?
No they didn’t because humans can mine fossil fuels (coal, oil, etc.) to generate energy to not only heat our houses but also power machines, modes of transport and other things.
So even at face value such an idea doesn't have merit.
Furthermore, it is a fact that there is more than enough to go around to meet everyone's basic needs. As noted in the February 2011 edition of the Economist:
“Indeed, the world produces more than just enough to go round. Allowing for all the food that could be eaten but is turned into biofuels, and the staggering amounts wasted on the way, farmers are already producing much more than is required—more than twice the minimum nutritional needs by some measures. If there is a food problem, it does not look like a technical or biological one.” [Emphasis Added]
Even the issue of water, 71% of the earth’s surface is covered with water. Although it is salty, the reality is a matter of desalinating it or using other technologies to make it potable. For example, Vancouver’s Saltworks Technologies (featured in this article) has a number of solutions to address the problem. The point is that there is no shortage of resources: it’s a finite a planet for a finite people. The issue is there a lack of adequate distribution to get the resources to the people that need it most.
MYTH#3: Capitalism is a Pre-requisite for Economic Production.
Capitalism holds that production is achieved through the implementation of Capitalist economic policies. That is, without their economic policies people won’t produce.
This contradicts the reality of production.
Good production depends on good science or business strategy (e.g. total quality management).
Islam embraces this reality and leaves human beings to investigate the physical world and manufacturing processes. Prophet Muhammad (saw):
“I am but human like you. Hence, if I ordered you something related to your Deen’s affairs [e.g. spirituality, economics, politics, etc], do take it, and if I ordered you something related to your worldly affairs, then I am only human.” [Muslim]
Consequently, there is no such thing as “Islamic science”, “Capitalist science”, or “Communist science”. Science depends on creative human beings using their mental faculty, to investigate the world. Although the ideology (Islam, Capitalism, etc.) which will direct how the science is used, it does not change the fact that it emanates from the creative aspect of being human. Therefore, production does not need liberal economic policies: economic production existed before the Capitalist system and will exist outside of it.
So it is based on these myths– humanity’s infinite needs/wants, scarcity and need for capitalist policies instead of science – which has led the mainstream economists to focus on production instead of distribution. This incorrect approach leads to the situation where water is used to print glossy paper instead of providing it to those who are dying of thirst - a clear illustration of how deeply flawed this approach is.
In the next couple of posts, we will in sha Allah refute trickle-down theory and take a brief look at how wealth concentration has led to the elite takeover of society.