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
- Improve food products, this will include developing the latest machinery and agrarian techniques.
- 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.
- 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 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.
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