The failure of the contemporary economy to alleviate the current economic turmoil that is holding the world economy down has doomed existing theories for their inherent flaws. The existing knowledge on the subject has failed miserably to solve the problems facing the world economy, especially European countries mired in huge public debt. As I argued in one of my previous blogs, Pakistan is not learning from the ongoing crises in Europe and the debt acquisition of the government led by Nawaz has reached an all-time high by breaking the bar. 2,200 billion rupees. Based on figures recently released by the State Bank of Pakistan (SBP), debt over the past three years has increased by 0.8 trillion rupees.
In the Middle East, the Kingdom of Saudi Arabia (KSA) is another victim of the brutal fallout from capitalism, as subdued demand from the global economy hit its margins hard and failed to rebound due to lack of diversity of its economy. exposed the bitter reality of not doing enough when it was good to go. He once compelled a Gulf pivot to follow the familiar route and take it. The KSA eclipsed Argentina’s $ 16.5 billion offer and raised $ 17.5 billion in the record-breaking sale of sovereign bonds. But, this is just the start and in the future Saudi Arabia is expected to borrow more and face more and more financial tests as the country’s woes worsen.
Over the years, economists have felt proud to have introduced sophisticated mathematical modeling to predict the future with certainty or at least provide insight into expected events, but academics around the world seem embarrassed and somewhat embarrassed about their inability to predict or manage economic crises. . Academics like Paul Romer and Paul Krugman, whose textbooks are regularly taught in advanced macroeconomics courses around the world and in Pakistan, have argued that it is time to say goodbye to flawed and incomplete business models that have failed. understand the reality of human behavior. Romer’s latest article, which made huge waves around the world, called macroeconomics the science that set the field back because it threatened global markets rather than facilitating them by playing with imaginary disruptions. Another world-class economist, Oliver Blanchard questioned the implications of the widely used DSGE (dynamic stochastic general equilibrium) models and also called them seriously flawed, though improvable, calling them crucial for the future of the economy. macroeconomics.
With the traditional economy and capitalism at a crossroads, this is a clear signal that despite a dramatic increase in the standard of living in the world and the progress made by humanity, the current system is fragile and subject to unbearable shocks. The current system enslaves nations through debt which threatens employment levels and production in the respective countries. As Saudi Arabia follows the same path with bond issuance and is on the verge of bankruptcy, unless drastic action is taken, and countries like Pakistan and Egypt with ever-growing public debt have to step back. awaken and relaunch their quest for the implementation of the Islamic economic system.
Islamic dogma presents a simple but the most convincing and rational way of managing the affairs of a nation. Although the Islamic system is a hybrid of both capitalism and socialism, choices and behavior are limited in guidelines and assumptions. It restricts individuals, corporations and governments to act only in a manner permitted by Sharia law. The most important aspect of Islamic economics is the prohibition of Riba and speculation in transactions (any transaction or contract that is uncertain is null and void in Islam). Since these man-made systems are devoid of any religious implication, they therefore eschew morality, ethics and embrace the human intellect.
The existing systems only favor the capitalists and have been extremely unfair to society. The political elite who come to power with the help of wealthy investors and lobbyists end up legislating for the benefit of their sponsors to the detriment of society. Muslim countries have widely embraced capitalism and preferred Islamic doctrine. Pakistani governments continue to follow traditional economic policies and have witnessed dire consequences for not alienating from an interest-based financial system as debt continues to soar, causing it to comply with the orders of the masters westerners. The common logic given for the practice is that we have to work in a universal system that follows the interest-based system, as a result, the absence of an alternative system pushes Pakistan to the brink.
The emergence of Islamic banking and its success paves the way for Muslim consumers willing to follow Islamic doctrine and this should set a precedent for the government which, given the good prognosis, abolishing the conventional interest-based system is not not mission impossible.
The traditional system alienates itself from mainstream science by using the arguments that it cannot be applied universally across the world because economic realities are distinct in different parts of the world. But, the Islamic economic system is applicable across the world because its dogma is universal and provides the same regulatory framework for all. The market mechanism in Islam approved by the Prophet (pbuh) requires voluntary and involuntary organizations that provide social security, a solidarity mechanism for the problem of waste, overuse and excessive exploitation of natural resources, justice distributive through risk sharing and equity participation, equity of interest-based and interest-free economic systems.
If Pakistan is to avoid crises, it must establish Islamic economic research centers, equip them with state-of-the-art facilities and learn to rely on its own resources and slowly alienate the existing financial system which is too fragile and toxic for it. company. The human intellect very often contradicts itself, but the revelations of Allah are forever and obligatory on human beings. Muslim countries that continue to refrain from embracing Islamic economics must realize that this is nothing more than a sign of disbelief and fraud. As the great Iqbal says,
Where is the greatness of a king
Whose riches rest on borrowed gold?
You put your faith in idols in vain
And turn your back on Mighty God
If it’s not unbelief and sin
What is disbelief and fraud?