The View of Islamic Economics
Maurice Allais, an expert on world economy and a Nobel Prize winner in economics, said, “Theworld economic system is based on some concepts and rules that will be the very cause of itsdestruction unless treated and rectified quickly.”Islam strictly prohibits the use of Interest in all kind of financial transactions. It considersinterest as an evil to the mankind and as a self destructive tool.In May 2000, Saudi Islamic banker Dr. Nayef bin Fawaaz ibn Sha'alan warned that the USeconomic system was on the verge of collapse because of its cumulative debts, ever-increasing deficit and the interest on that debt. "When the debts and deficits come due, they just issuenew Treasury bonds to cover the old bonds due, with their interest and the new deficit too." Thecycle cannot be stopped or the debt cancelled because the US would no longer be able toborrow. The consequence of relieving this cycle would be a total collapse of their economicsystem as opposed to the crash of 2008.Actually, some economists believe that no real development or wise employment of the meansof production could be achieved unless the interest rate is zero. This view was held by AdamSmith, the Father of modern economics. Furthermore, economists think that the alternative isbased on participating in profit and loss, because it brings about stability and security. Inaddition, interest-based system results in the accumulation of wealth in the hands of few peoplewho will thus be in control of the world’s fortunes.In addition, the world financial system rests on the basis of the financial derivatives system thatdepends mainly on nominal transactions, with no real exchanges of goods or services. What iseven worse is that most of these transactions are based on credits taken from banks in theform of loans, and when things develop unfavorably all that collapses triggering the financialcrisis.Islamic economy promotes participation in profit, loss, and actual exchanges of money andassets. In fact, there should be real interaction between the wealthy, employers, the employees,and financial experts. There is no party who is a constant winner or a constant loser; yet profitand loss is mutually shared.The Islamic economic and financial system is based on a set of values, ideals, and morals, suchas honesty, credibility, transparency, clear evidence, facilitation, co-operation, complementarity,and solidarity.These morals and ideals are fundamental because they ensure stability, security and safety forall those involved in financial transactions. Furthermore, the Islamic Shari`ah prohibits theeconomic and financial transactions that involve lying, gambling, cheating, monopoly,exploitation, greed, unfairness, and taking people’s money unjustly.Shari`ah allows for a system of funding and investment based on participation in both profitand loss and interaction between capital and labor. Shari`ah calls on the parties involved in transactions to behave in a truthful, honest, clear and transparent way by prohibiting cheating,gambling, lying, rumors, exploitation and taking people’s money unjustly."Islamic banking", said Dr. Al-Sha'alan, "always protects the individuals' wealth while putting acap on selfishness and greed. It has the best of capitalism - filtering out its negatives - and thebest of socialism - filtering out its negatives too." Both systems inevitably had to fail.