Global poverty has become a curse of the 21st century, 1.3 billion people live on less than one dollar a day and another 3 billion live on fewer than two dollars a day. From amongst them 1.3 billion have no access to clean water; 3 billion have no access to sanitation and 2 billion have no access to electricity. Although there is no universally agreed definition of poverty, it is generally considered a condition in which a person or communities are deprived of the essentials for a minimum standard of living. These essentials are material resources such as food, drinking water and shelter, or they may be social resources such as access to information, education, health care and social status.
The Muslim world has also not been spared from such poverty and unfortunately many of the nations with predominantly Muslim populations are also some of the poorest in the world. The Muslim world does not even have the necessary infrastructure to fulfil the basic needs of the people. Wealth in the Muslim world suffers from huge misdistribution; the Middle East may have some of the largest oil reserves in the world however very little oil revenue actually trickles down to the population. In the Arab world one in five Arabs still live on less than $2 a day. And, over the past 20 years, growth in income per head, at an annual rate of 0.5%, was lower than anywhere else in the world except sub-Saharan Africa.[1] In Pakistan 40% of land is in the hands of 23 families.[2] Government investment in infrastructure and public services is minimal considering the large population of the Muslim world. Its autocratic rulers, whether presidents or kings, give up their authority only when they die; its elections are at a best a farce; half of the Muslim world is treated as lesser legal and economic beings, and more than half the young, burdened by joblessness and stifled by the use of Islam by the few want to get out of their country as soon as they can.
What this article will highlight is why with such an abundance of wealth, resources and minerals is the life of most Muslims in abject poverty and how will the khilafah eradicate poverty.
Why is much of the Muslim world in poverty?
Numerous organisations have researched into the general causes of poverty which range from the lack of resources to the nature of the local climate to the lack of democracy. There is generally no consensus on the causes by sociologists and think tanks however a dominant idea that exists is that only the diffusion of capitalism with its free markets is the cure. However a cursory glance at not just the Muslim world but the third world in general shows a handful of factors have played a large part in the poverty in the world today.
The role IMF and World Bank and their notorious structural adjustment policies in countries such as Pakistan, Turkey, Indonesia, Bangladesh and Egypt have directly aided some of the underlying economic problems. The general solution provided by such institutions is the engaging of trade to climb out of poverty. In reality there are a number of obstacles placed by the developed nations that ensure developing nations will never reach a level where they can compete. What this actually means is that Western goods should be imported rather than allow imports from poorer countries. The theory is that only via trade will nations pull themselves out of poverty. The development of a market economy with a greater role for the private sector was therefore seen as the key to stimulating economic growth and removing poverty.
As an example Pakistan actually required essential investments in health, education and infrastructure before they could compete internationally. The World Bank and IMF instead required Pakistan to reduce state support to these sectors and concentrate on exports. They insisted on pushing Pakistan into markets where they were unable to compete with the might of the international private sector. Such policies inevitably undermined the economic development of Pakistan.
Africa is being asked to repay it's a legacy of the colonial era. Africa's debt is partly the result of the unjust transfer to them of the debts of the colonizing states, in billions of dollars, at very high interest rates. It also originates from ‘odious debt', whereby debt was incurred as rich countries loaned funds to dictators and corrupt leaders when it was known that the money would be wasted. South Africa, for example inherited "apartheid-caused debt" at £28 billion (which is now $46 billion).[3] Post Apartheid Africa was forced to repay debts incurred by the apartheid regime so, in effect, South Africans are paying for their own oppression. In 1998 ACTSA (Action for Southern Africa) estimated that the £11 billion (now $18 billion) that South Africa borrowed to maintain apartheid, and the £17 billion (now $28 billion) that the neighbouring states borrowed because of apartheid destabilisation and aggression now represents 74% of African debt owed.
Much of the situation in the Muslim world stems from the colonial era and is summed up best by David Fromkin, Professor and expert on Economic History at the University of Chicago "Massive amounts of the wealth of the old Ottoman Empire were now claimed by the victors. But one must remember that the Islamic empire had tried for centuries to conquer Christian Europe and the power brokers deciding the fate of those defeated people were naturally determined that these countries should never be able to organize and threaten Western interests again. With centuries of mercantilist experience, Britain and France created small, unstable states whose rulers needed their support to stay in power. The development and trade of these states were controlled and they were meant never again to be a threat to the West. These external powers then made contracts with their puppets to buy Arab resources cheaply, making the feudal elite enormously wealthy while leaving most citizens in poverty".[4]
Fundamentally the problem boils down to one issue and that is the many policies applied by the Muslim rulers are time specific and are usually motivated by the political climate at the time. Most of the Muslim world do not have a sound agricultural policy and the unfortunate result of this is that a whole host of contradictory policies are applied which create a situation where there is no organised way of distributing resources and only a handful of people such as the elites or the ruling families benefit.
How will the Khilafah would eradicate poverty?
Islam views poverty through a different lens relative to that being presented by the developed world and at the same time has a number of rules which would eradicate poverty. Islam defines poverty as the inability to satisfy one's basic needs. Islam defined these basic needs as three things: food, clothing and shelter. Islam here differs with capitalism because it views poverty as a consistent and fixed principal. It's not like the definition in the developed world were poverty is viewed from a relative perspective. It views poverty as a relative measurement between GDP and the peoples needs, this means that not fulfilling luxuries in the UK would be considered poverty whilst in Sudan it would not. With this definition one's reality as someone in poverty could change due to a change in the nations wealth even thought nothing has actually changed for him. The crucial point being is it would be impossible to develop government policies on such a basis as those who are in poverty would constantly change.
Islam recognises other needs such as security and education and this becomes one of the priorities of the state as its job is to ensure the basic needs however numerous they are.
As a policy the Khilafah would make all essential utilities public property. Islam lays out three types of property; state, public and private. It designated any utility regarded as indispensable for the community, such that its absence would require people to search far and wide for it, as public property. It would then be publicly owned and the revenue generated would be administered for the benefit of all citizens. This is derived from the hadith of the Prophet (SAW) "Muslims are partners in three things: in water, pastures and fire". Although the hadith mentioned just three things we can utilise qiyas (analogy) and extend the evidence to cover all instances of indispensable community utilities. Thus water sources, forests of firewood, oil fields, electricity plants, motorways, rivers, seas, lakes, public canals, gulfs, straits, dams etc cannot be owned by individuals. Of course Islam would allow ownership if it were not indispensable for the community. This solution will have a unique effect, as it will ensure all will receive the basic requirements to live and not be at the will of monopolies or high prices. If the state had the revenue available to meet the needs for the foreseeable future there would then be no need to tax people. Zakat, a pillar of Islam is constant but is not a tax, more of a social insurance measure for certain categories of people. This would mean Muslims could say it was no longer possible to say there were two inevitable things in life; death and taxes.
The issue of poverty is not one of production necessarily, but rather the distribution of the agricultural products around the economy. Although market forces would ensure this happens the khilafah will need to aid the distribution of the agricultural products. This can be achieved by a variety of policies. For example, it is well known that any piece of derelict land cultivated by a person, he would become owner of that land. This came in a ahadith of Muhammad (saw), "Whoever cultivated a land that is not owned by anybody, then he deserves it more."
This rule could potentially change the agricultural landscape of the Muslim world fundamentally. In much of the Arab world there is an abundance of water and a very fertile land, yet this land has been left unused due to people residing in the main towns leaving the vast majority of the country uninhabited. One of the rules of Islam is that the one who cannot financially support himself and also cannot be supported by his family then he comes under the financial care of the Khilafah. However, rather than issue remuneration in the form of benefits to sustain people, Islam favours providing people with the means to generate their own wealth. Hence, much of this agricultural land will be given to people who cannot support themselves so that they can help provide the state's agricultural needs.
The Agricultural Policy
The Khilafah's agricultural policy should revolve around achieving the following
1. Improve food products, this will include developing the latest machinery and agrarian techniques.
2. Increasing productivity in clothing materials such as cotton, wool and silk, for these are basic necessities that should be made available without having to resort to imports
3. Improving the production of goods which would have a market abroad, whether they were textiles or food products like citrus fruits, dates, etc.
The Khilafah will need to encourage its farmers, particularly those with proven expertise, to bring this expertise, particularly in farming methods to parts of the Muslim would that do not have these skills. Turkish farmers are some of the most skilled in the world whilst Pakistani farmers are some of the most technologically advanced. Encouragement may come in the form of issuing of large areas of farming land as well as possible direct financial inducements.
The Khilafah should enter into the markets as the supplier of the inputs and buyer of the agricultural products in order to regulate agricultural production and to protect the agricultural producers from market fluctuations and the perverse effects of the natural and climate conditions.
The khilafah should impose controls on cultivated-area for quality reasons, and to address problems of excess capacity in less important agricultural sectors.
The Khilafah must as a matter of priority invest much needed money in the general agricultural policy for two fundamental reasons. Firstly it is of the utmost urgencies particularly in the early stages of the Khilafah. Only the development of the defence industry and the sustenance of oil and gas industry should be higher on the agenda. Secondly, the Agriculture will also become, inshallah one of the biggest sources of employment hence creating jobs and circulating more wealth around the economy.
With this is mind the Khilafah should invest in the latest machinery and agricultural techniques. It is noteworthy to mention that North Korea has had a sound agricultural policy in the past that it developed after WW2 in three stages along communist lines. However, North Korea finds that when it wishes to export its machinery the US and European markets are closed to them due to protectionist measures. The Khilafah should create favourable trade terms such that we are able to purchase North Koran agricultural machinery whilst benefiting from their agricultural techniques.
Wealth Distribution
The underlying reason to why poverty exists in the Muslim world is due to the implementation of a whole host of capitalist ideas which severely restrict the distribution of wealth. The khilafah will immediately up-root all reminisce of the capitalist system and apply Islam in its entirety. If one was to examine the effects of such rules it is very clear poverty would disappear.
Islam does not have a concept of income tax, nor value added tax, nor excise duties, nor national insurance contributions and so forth. Rather Islam puts the emphasis of taxation on wealth rather than income.
The effect of this on the economy is significant. Take the average salary in the UK of £24,000. At this rate the tax burden alongside the national insurance contributions falls at 33%. This alongside indirect taxation (that is taxation on spending rather than income) as well as council tax, road tax etc means that the real tax burden falls at closer to the 40-50% mark. This means that the average person in the UK is losing between £10,000-12,000 to tax.
In the Khilafah, although simplified, the wealth tax falls at 2.5%. This means that the within one year, the average can save at least £10,000. Therefore two or three people could easily enter into a business contract such as mudharabah to supply some of the demand in the economy for consumer or manufactured goods thereby creating more employment in the economy.
Consider also the abolition of interest rates.
In the western economies every economic model is based on the rate on interest, from investment decisions, consumption decisions, savings decisions to financing loans, purchasing housing and so forth.
The effect of this is that spending and investment are unnaturally skewed. For example, the average person who buys a house is then stuck in the mortgage trap paying back extortionate amounts of interest for 25-30 years. This coupled with loan payments for cars and other luxuries severely erode people's disposable income. However, even after the costs of taxation, and the costs of interest payments, people are left with some disposable income. The problem is then one of investment; simply put people will not invest if the rate of return of a business venture measured against the risk of the venture is offset by the interest that can be gained from leaving the money in a bank account to accrue interest. In other words, the interest rate restricts investment and hence is an impediment to the distribution on wealth.
Besides the public properties Islam laid down a number of rules to ensure wealth continually circulates and penalized and in some cases taxed those who hoard their wealth. This is important because hoarding money and leaving wealth in an account to accumulate interest would in fact take money out of circulation. Islam has a whole host of rules which restrict the hoarding of wealth and promotes spending ensuring wealth distribution. Islam has land taxation where Khara,j which is a tax estimated on the quality of the land, and Ushri, which is a tax on the produce from the land. Islam allows the confiscation of land if it's unused for 3 years. This rule would effectively end the monopoly some families have in the third world who inherited huge lands from the departing colonialists, unless it's used productively which would aid wealth distribution.
In Islam incentives not to spend are non existent, interest is forbidden and hoarding is taxed. Having no interest means there is no incentive to leave money in a bank account as it will not accumulate interest, but instead be taxed if it's held for a year. By not having taxation on income or spending a larger proportion of disposable income is free to be invested in physical goods, assets and items, which in turn will create jobs and fulfil any demand in the economy. Paper such as shares, bonds and debt as a form of commodity are non existent in Islam, the only types of investment are in real goods which ensures the economy continually generates wealth.
These are a set of general polices the khilafah should follow to pull the Muslim world out of poverty. This system should then be presented to other African and Latin American countries who for decades have been immersed in poverty due to the US and IMF and Word Bank conditions. This system would also then be part of the global agenda when conferences and anniversaries aswell as millennium goals are discussed. It must be noted that many of the polices being presented to the poverty stricken world are from the same basis from which the problems emanated from.
The Muslim world has been blessed with fertile land, water and minerals which if dealt with correctly can easily solve the poverty in the Muslim world. What must also be clear that the mere production of agricultural goods is not the solution to poverty its distribution is where the problem lies and Turkey is a good example of this, 20% of its 70 million population live in poverty even though it is a world leader in agricultural production, as of March 2007, Turkey is the world's largest producer of hazelnut, fig, apricot, cherry, quince and pomegranate; the second largest producer of watermelon, cucumber and chickpea; the third largest producer of tomato, eggplant, green pepper and lentil; the fourth largest producer of onion and olive; the fifth largest producer of sugar beet; the sixth largest producer of tobacco, tea and apple; the seventh largest producer of cotton and barley; the eighth largest producer of almond; the ninth largest producer of wheat, rye and grapefruit, and the tenth largest producer of lemon.[5
Poverty in the Muslim world (Those living below the poverty line (which is the minimum needed for sustenance) as percentage of total population.
Bangladesh 50%
Iran 40%
Pakistan 33%
Jordan 30%
Indonesia 27%
Turkey 20%
Egypt 20%
Syria 12%
[1] The Economist (2002), Self doomed to failure, Arab Development, Special report, July 4th 2002, print edition, accessed 26th July 2006, http://www.economist.com/displaystory.cfm?story_id=1213392
[2] James A, Too much for one man to do, The Economist, July 6th 2006
[3] ‘Paying twice for apartheid' Action for Southern Africa, May 1998, Date accessed 23rd July 2006, http://www.actsa.org/Debt/paying_twice.htm#_Toc418416370
[4]Fromkin D, A Peace to End All Peace, p 45, New York: Avon Books, 1989
[5] MSNBC, Turkish agricultural production, 2006 http://ntvmsnbc.com/news/403824.asp
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