Of Outlook and Attitude
The difference in definition leads to difference in assumption. This in turn shape the attitude of the players of the system.
Credit-ism believes that everything is quantifiable and can be calculated — both profit and risk. But in Islam profit and risk is in the hand of God. We do the best we humanly can, but it is up to God to determine the outcome.
The difference in attitude is also reflected in regard to the way profit expected to come. Credit-ism demands steady profit but Shariah-based Economic System anticipates ups and downs as God do as He please.
This stark difference can be seen in the way banks demands steady loan installment payment at set interval while Mudharabah and Musharakah ventures distributes profit at the end of each venture.
Muslims believe each and every creature had their share of rizq (sustenance) allocated by Allah. Thus its futile to strive for more through work and trade alone. Western attitude is the opposite of that, believing that human effort can break all barriers.
Modern Mainstream Economic System seeks to squeeze profit from the available resources while Islamic Economic System believe in nurturing prosperity. This can be done through various ways — such as zakat (tithe) , sadaqah (donation), and waqf (perpetual trust).
We can see the difference in approach to farming. Modern farming seeks total eradication of pest but Islam enjoins that birds eating some of the crops are a form of sadaqah.
The way we assume ourselves are remarkably different as well. Modern Mainstream Economic System assumes that humans are rational and can completely manage the market on their own. While in Islam we learn that human by nature are forgetful and require divine quidance.
Humans are are also greedy, when given one valley of gold he will want another valley of gold. Islam acknowledges human nature and constructed to contain (but not completely eradicate) human greed. In contrast, modern mainstream belief put a premium on accumulating wealth.
The accumulation of wealth is also not pun in context to what is sufficient and enough. Work is for work (wealth) sake but in Islam work & wealth is to achieve higher purpose. Wealth and money are simply means to achieve the end and not the end.
More fundamentally, Modern Mainstream Economic System are secular — separated from morality. Shariah-based Economic Systems on the hand are deeply embedded in religious morality. The prophet is a trader/entrepreneur/fund manager and the acts of worships affects the economy.
Bridging the Worlds
Islam should not be diametrically opposed to the ‘West’. True, it is different but Islam is accomodating wisdom from other traditions. Dinar & Dirham comes from Denali (Roman currency) and Drahma (Greek currency) after all. Wisdom belongs to Muslims wherever and whenever they found it.
The one who enlightened me to separate Credit-ism from Capitalism is trader-turned-thinker Nassim Nicholas Taleb. Perhaps it is fitting that he hails from the Levant, one of the most chaotic place in the Muslim world these days.
I’m particularly awestruck by his chief ethical rule;
“Thou shalt not have anti-fragility at the expense of the fragility of others.”
When I see the rule, my mind quickly relate it to Islamic teachings. It fits nicely to the prohibition of usury as practiced by modern banks. You can’t have guaranteed profit at the expense of other people’s risk. Even more unjust, you can’t raise interest rate when the economy turns sour and some of your debtors default.
Nassim Nicholas Taleb also attacks the notion that risk is quantifiable;
“Fragility is quite measurable, risk not so at all”
His triad of Fragile, Robust and Anti-Fragile is instrumental for me to put Islamic Economic System in context of the modern world. Credit-ism is definitely fragile. Shariah-based Economic System is robust and quite possibly anti-fragile as well.
Stressors are information but fragile systems can’t process it well. Credit-ism as practiced by Wall Street and its followers seeks to insulate from this very stressors a.k.a risk. Thus spring forth insurance, re-insurance, credit default swap, derivatives and a lot more exotic financial instruments. Rather than protecting from risk, these instruments simply abstracts the risk. It hides and obfuscates the risk rather than facing it head on.
And facing risk head on is one of the maxims of Shariah-based Economic System — one can’t have profit without risk. Placing it side by side with Nassim Nicholas Taleb’s chief ethical rule, it doesn’t seem that much different after all.
In upcoming part, we’ll simulate the effect of using interest-bearing loan as opposed to profit sharing scheme.