Unlearning Economics

ZOOM lecture organized by the Revival Studios on Sunday 15th Jan 2023 entitled “Foundations of Islamic Economics”. This is part 1 “Unlearning Economics”, which is required as a first step to building Islamic Economics.

DISINFORMATION: The greatest obstacle to creating an Islamic Economy is “disinformation” – false ideas about the economy we have been trained to believe. Why is there so much disinformation? Because it serves the interest of the powerful.

Justifying Capitalism: Laborers are heavily exploited in a capitalist economy. But economic theory teaches the opposite: Both laborers and capitalists receive fair payments for their inputs into the production process. Economic theory makes a moral argument, BUT it is concealed with mathematics and technicalities, and an assertion that this is a value neutral, objective, and uncontestable statement about the real world. The argument can be attacked on technical grounds and also using moral philosophy. The post “Understanding Macro: The Great Depression ” explains how economists have held on to the theory despite huge amounts of empirical evidence against it. The reason for this stubborn persistence of false theory is that this Economic Theory justifies earnings of capitalists and laborers, and defends capitalism from the accusation of exploiting labor.

Monetary Illusions: Similarly, the theory of money, as taught in economics textbooks, is full of falsehoods. Central questions like the role of money in an economy, how money is created, who benefits from the creation of money, what is the role of banks and the central bank, how does fiat money work, how it is different from the gold standard – and a whole host of others – are never asked, or else, are given false and misleading answers. For some of the details, see “The Battle for the Control of Money “. Again, the reason for these myths and confusions is that they serve the interests of the wealthy financiers, as explained in greater detail below.

Role of Banks: Banks are able to create money at will, and this gives them enormous amounts of power. However, this power depends on government (and hence public) support. Concealing this power makes it much easier to get this support, disguised as a means of creating a stable financial system. Abuse of this power, excessive creation of money, led to the Great Depression of 1929. In response, a whole set of laws (including Glass-Steagall act) was passed to strictly regulate banks, which prevented banking crises for 50 years. This regulation brought prosperity to the masses, but reduced the wealth share of the financiers. The financiers counter-attacked by creating a false, ideology-based, free market theory, and implementing it via the Reagan-Thatcher revolution. This theory continues to be taught around the world, even though it is strongly in conflict with empirical realities, because it serves the interests of power.

Unlearning: To recapitulate, an Islamic Economy functions on simple, intuitive, easy to understand principles. HOWEVER, because we have absorbed a huge amount of disinformation via an education which protects the interests of the powerful, we have difficulty understanding these simple ideas. So, the first step towards an Islamic Economy involves UNLEARNING a large number of myths we have accepted as truths. We focus on a few of the central myths below.

Social Science as Religion: The central myth is that of Social “Science”. This consists of lessons derived from European historical experience about how to structure society. The use of the word “science” makes the false claim that these lessons are universal – they apply to all societies. Also, the term science borrows the prestige of the Physical Sciences. The amazing achievements of the physical sciences impact our daily lives, and cannot be denied. But what are the achievements of “social science”? Families are the greatest source of happiness, and these have broken down in the West. Majority of children do not experience the love, comfort, and security of a two-parent family. This results in enormous numbers of social problems; as an illustration, a Minister of Loneliness was appointed in the UK recently. The planet is on verge of a climate catastrophe due to unrestrained pursuit of profits taught by social sciences.

Toxic Moral Foundations: Instead of “science”, it is better to think of Social Science as the religion which replaced Christianity in Europe. This religion rejects God, Afterlife, Judgement, and focuses exclusively on maximization of pleasure, power, and profits in this world. Since there is no God, man is just an animal in a jungle of cut-throat competition, with survival of the fittest as the only moral principle. Obviously, these moral foundations are directly opposed to Islamic ideals.

Failure of Economics: Just 4 years before the Global Financial Crisis (GFC),?Robert Lucas confidently proclaimed ?that economists have solved the problem of preventing depressions. Milton Friedman had argued that the Great Depression was cause by an under-supply of money. Ben Bernanke, at the head Federal Reserve, increased money supply astronomically (via Quantitative Easing). This could not prevent the Great Recession which followed the GFC. Economists remain clueless about the causes of financial crises. Worse, the models in use before the crisis continue to be used to make policy today. Why do economists stick so stubbornly to failed theories?

Deeper Causes for Failed Economic Theories: Application of Keynesian Economics achieved full employment and prosperity for the masses. But, this reduced Wealth share of top 1% for 50 Years. A Counter-Revolution was plotted, and?executed implemented in the Reagan-Thatcher era. Keynesian economics was rejected, and Chicago School free market economics was created, which continues to dominate the profession. For details, see the book?Naomi Klein: Shock Doctrine ?or the blog post:?Keynesian Revolution and Monetarist Counter-Revolution . The lesson here is that Economic Theory is a concealed moral argument, designed to justify and glorify capitalism. Economic theory teaches students to maximize pleasure in this world, and to sell themselves on the labor market for money. The real puzzle is why Muslim teachers teach these moral philosophies, clearly contrary to Islam, to Muslim students?

Colonization is Conquest of Minds : Colonization requires consent of the colonized. A handful of Englishmen cannot rule over millions of Indians without their consent. Consent is created by Education: Macaulay’s minute on Education explicitly sets out the goals of Education to create a class which will respect and admire West, and have contempt for their culture, religion, and history. This education created the subordinate ruling classes – bureaucrats and army – loyal to the English. This education continues today and has the SAME PURPOSE! The English are long gone, but the coconut class which rules in their place continues to speak English, and denies access to wealth and power to the natives who do not. For a deeper discussion of how colonial mindsets continue to block progress in Pakistan, see?Impact of Colonial Heritage on Pakistan

A Uniting Narrative: The vision and ideals of elite ruling class, the language they use, and their lifestyles – are RADICALLY different from that of the masses. just like the colonial period. It is necessary to have a UNITING narrative, to allow us collectively work for common goals, to progress. China was united by Mao’s vision, which called the nation to their ancient and glorious heritage. Malaysia’s ethnic groups conflicts were resolved by Mahathir to create progress. But, the effects of Divide-And-Rule continue to divide Muslims, and prevent progress.

End of Part 1:

Summary and Recap: Steps for Islamization of Economy are natural and intuitive. Modern Economic Theory is the religion of capitalist societies – it was the replacement for Christianity in Europe. It actively prevents understanding the real issues facing the economy, and thereby prevents solutions. UNLEARNING economics is necessary, BEFORE we can learn how to Islamize the economy.

Links to Related Materials:

Full Video of Talk (unedited): Foundations of Islamic Economics