The Only Solution to Pakistan's Economic Crisis

Pakistan is a country located strategically, rich in agricultural and mineral resources whilst being blessed with a large and youthful population. Pakistan in it's current state is still one of the world's biggest wheat, milk and meat producers; Nestle opened the world's biggest milk processing plant in Punjab in 2007. Pakistan has huge untapped coal reserves, one of the largest in the world, which if used with the right investment would easily help overcome the current electricity crisis. Pakistan also has one of the world's largest copper and gold reserves, with just one mine in Reko Diq, Balochistan worth at least $96 billion at today's market prices, worth more than it's entire external debt. And of course we know that Pakistan has a large strong military that is equipped with modern fighter jets, tanks and submarines together with a proven nuclear weapons capability. How is it that a country that has so much in abundance has been reduced to being mere chattel for the West where it's soldiers are being sold out as mercenary slaves?

The answer lies in the fact that all economic decisions are in the end decisions made by politicians; hence they are all political decisions in origin. Whether it is the continuing failure of the education system, allowing multinationals virtual monopolies, permitting corporate farming, building new dams or power plants, all of these decisions are political. The fundamental reason why Pakistan's rulers are failing to solve these problems is ultimately because of the failed political system to which Pakistan's rulers' remain beholden to.

Pakistan's political system is corrupt and broken, a system which the West has exploited to its advantage. It has allowed the feudals, industrialists, bureaucrats and the generals to keep power to within themselves. It is an environment which allows the insincere to breed and flourish at the expense of good people. Military dictatorial rule is unfair in itself and has proven unworthy but democracy has also proven to be no better. It is bad enough to have people enter politics that see themselves as career politicians who look to accumulate political power and personal patronage but in Pakistan's case many of these are simply career criminals who look to loot and plunder in all instances.

If Pakistan's ruinous economic problems are to be solved a new radical alternative, a completely new way needs to be adopted that completely changes the fundamentals of the political and economic parameters that Pakistan is constrained by. The problems are immense and demand an urgent new radical approach to the situation. The question that naturally arises is such an alternative possible? What shape and form could such change take place in?

As we stand at the end of the first decade in the first century in a new millennium we are witnessing Western driven Capitalism in severe turmoil. ‘Boom and Bust' has always been an integral feature of Capitalism; but today those systemic fault lines are being brutally and perhaps fatally exposed. We are now witnessing the next phase in the global financial crisis as Western governments drastically cut spending and start raising taxes in a cruel transfer of immense wealth from the ordinary masses to the elite bankers and their supporters in political establishments across Western capitals'. Communism and Socialism lie dead and buried with even the likes of China having walked away and starting to adopt Capitalism as a means, becoming entangled within the Western controlled financial system, with its fate tied to theirs.

For those who are not believers the point has now arrived that only leaves Islamic economics as the only alternative that merits serious examination. Whilst this is true for all others, for the majority of Muslims in Pakistan this is an article of faith that is just waiting to be implemented. For indeed the years of economic failure in Pakistan are not the fault of Islam which has been brushed aside but the blame rightly deserves to be laid at the feet of secularism which has held sway, be it under democracy or military rule, for nearly 63 years.

Islamic economics offers fundamental changes in the way a state's economy would be managed, unprecedented in modern times. To begin with it would ban the giving or taking of interest, the scourge of the global financial debt crisis. This would mean that whilst the state may honour any previous legitimate debts it would refuse to give any further interest payments. Neither would it seek new interest based loans. This would be adhered to across the board whether applied to International loans and debts or domestic loans for individuals. In an Islamic system the Bait-ul-Maal would be used to provide interest free loans to the needy and poor who may wish to start new businesses or fund other personal projects.

Moreover it would introduce the Gold / Silver monetary standard. Today under the fiat currency system every time the Pakistani government want's to get itself out of a hole by ‘borrowing' from the State Bank of Pakistan it is not only creating more debt but it is also effectively printing money thus increasing inflation and eroding the value of the rupee in everyone's pocket. In Islam any paper currency issued in lieu of the monetary standard must be backed by gold or silver and be fully convertible on demand.

Another area that would see complete change is taxation. As we painfully know nearly everything and everyone in Pakistan is taxed except the rich and powerful who are either not legislated to be taxed or simply flout the law. In Islam the principle of taxation is based on the amount of wealth a person owns, not on income itself. Thus those who own wealth above a certain limit (a Nisab) would see that wealth taxed, whilst those who may earn a large income but end up with less than a Nisab after essential expenses would not be taxed. Those who surpass the Nisab threshold for taxation would have the annual Zakat tax levied at 2.5%. Non-Muslims would pay the Jizya tax at 2.5% if they can afford to whilst being exempt from the Zakat tax.

Agricultural land reforms would be an important part of the transformation. Today in Pakistan despite having such fertile land, the dietary needs of the people cannot be met because most of the land is locked up in the hands of the Zamindars. In Islam any landowner who does not cultivate the land for more than 3 years would have that land confiscated and given to the poor who would use it. This would provide both an opportunity and warning to those who own land to use it in a productive way or face losing it. Any landowner would pay the annual Kharaaj tax imposed on the owner of land based upon its productivity whilst Usher would be collected on any agriculture produce. The overall tax base would be considerably lower and is designed to encourage spending, investment and entrepreneurship.

Mineral resources and utilities such as oil, gas, gold, copper, electricity and water would be publically owned and managed for the benefit of all rather then being allowed into private ownership as this is not permitted by Islam; neither would foreign multinationals be allowed ownership although they may be paid a fee for their services in extraction and provision. The state would be bound to provide essential utilities such as water, gas, electricity and fuel for transportation at cost price by investing in the infrastructure required. Islam is not against competition neither does it seek to implement price controls in the market; in fact it sees a fair market as essential to motivate the producer. What it does seek though is to protect the vulnerable by preventing key essential resources ending up in the hands of powerful individuals as is the case today under Capitalism under the guise of freedom of ownership who use them as a license to mint money. Private individual ownership would be allowed and encouraged in all other spheres as permitted under the Shariah.

The stock market as we know it would be abolished all together along with all the other capitalist paraphernalia such as derivatives, securitisation, bonds, hedge funds and credit default swaps that go hand in hand and have lead to so much devastation on a global scale. It is mandatory in Islam to own a commodity or service before being allowed to trade with it. This is unlike Western financial markets where trading has become akin to a grand casino by allowing the same commodity to be traded many times over under various financial instruments without even leaving the original owner. Thus profit or losses are created and leveraged over and over again in bets and transferred to others; as we now know in an economic crisis huge losses conveniently hidden away will eventually become apparent. The requirement for ownership will prevent such ridiculous feverish speculation and short trading that has undermined Western economies by inflating and depreciating prices on a huge scale, triggering shocks in the global financial system.

These are simple but powerful changes to the parameters of an economy that would completely change its dynamics and bring stability. To some this may seem unworkable as Pakistan continues to borrow from and trade with the West. How would this be possible?

The answer to this question is that Islam's economic system does not come on it's own, it is embedded as part of the Khilafat state (Caliphate). The re-established Khilafat would be a powerful state on the method of Prophet Muhammad صلى الله عليه وسلم that will have an independent foreign policy essential to bringing the economic change to the people of Pakistan that is so desperately needed. Moreover it would be a state bound by the limits of the Shariah with the rich and powerful being subject to the law. So the ruler may change but the political system would remain the same where new laws could not be created to favour special interest groups. The result would be that it would cut bureaucratic red tape and eliminate the culture of corruption plaguing Pakistan today by implementing the Shariah punishments' on the rich and powerful as well as the poor. This would have the effect of greatly stimulating small and medium scale business enterprises that would form the backbone of a successful economy by bringing employment on a massive scale.

It is important to realise that Pakistan's economic failure is inherently linked with its political system that allows Western interference facilitated by corrupt rulers. Western policies of free market economics are imitated by it's failed rulers when in reality the current international order, both economic and political, is loaded against countries such as Pakistan such that these policies only bring disaster. The solution requires the re-balancing of Pakistan's international relationship with the West to ensure parity and stopping the cruel exploitation by the IMF and World Bank which are tools of hegemonic Western powers. They allow Pakistan's creditors to have an undue weight and disproportionate influence on Pakistani policy formulation. Independence of economic and foreign policy is a pre-requisite for economic growth and prosperity to develop.

This can only be achieved with a new vision where the ruler is prepared to stand up for vital interests, even if it means crossing swords with the West by implementing new policies that are geared to mass industrialisation, generating internal consumption, developing it's agricultural resources, encouraging new businesses and by seeking new export markets to sustain the viability of these ventures. This can only be achieved with a new political solution that the Khilafat state would provide. The Khilafat in time would re-unify the Muslim lands, assert its sovereignty and apply the Islamic economic system as a whole coupled with an independent foreign policy.

There is a much more detailed discussion to be had on each of these proposed solutions and changes which are beyond the scope of this article. Yet Pakistan's present course cannot be sustained any longer, it is leading to catastrophe and the time has come for an urgent debate on Islam's solution to Pakistan's crisis as well the current global crisis. The choice before Pakistan to transform itself will not be easy; above all it will require willpower, sacrifice and dedication. The reward for this change though is clear; the Muslim world was once the envy for the rest of the world for many centuries because of its leading developments in science, economics, jurisprudence and its military prowess; all of this was achieved under the Khilafat system.

Adam Smith, the father of modern Capitalism revered in the West, observed "the empire of the Caliphs seems to have been the first state under which the world enjoyed that degree of tranquillity which the cultivation of the sciences requires. It was under the protection of those generous and magnificent princes, that the ancient philosophy and astronomy of the Greeks were restored and established in the East; that tranquillity, which their mild, just and religious government diffused over their vast empire, revived the curiosity of mankind, to inquire into the connecting principles of nature."

The Muslims of Pakistan have a chance to start over and rekindle their future under Islam which helped shape one of the most powerful and dynamic states in mankind's history.

[Extracted from Article ‘A Radical Approach to Pakistan's Economic Crisis’ by Asif Salauddin, August 2010]