The term ‘crisis’ (in Arabic) means ‘hardship’, linguistically speaking. It means in this subject the hardship which is difficult to solve except through exhausting the effort. The term ‘economy’ means saving, which is opposite of extravagance. The word ‘economy’ is originally derived from an old Greek term, which means looking after affairs of the home, where its capable members associate in producing food and performing the services, while all of its members associate in utilizing what they earn. However, people developed the meaning of ‘home’ here to mean the community that is governed by the state.
Therefore, the meaning of the word, economy here is not its linguistic one; it is rather its traditional one, which is running affairs of the funds, whether by increasing them and securing their creation, where this is discussed in economic science; Or by the manner of its distribution, which is dealt with in the economic system.
Thus the economic crisis means severe turbulence in the management of financial affairs of the state, which requires spending of the utmost in the effort to remove that turbulence and bring situation back to normality and balance. Economic crisis does not mean a mild imbalance in the financial affairs, which can be treated by the ordinary means. For this imbalance is usually expected in all of life’s affairs, and can be treated and tolerated within accepted limits.
For an ideological state that follows a proper view-point of life, it is not possible to ignore a mild imbalance that develops into a crisis. Therefore, the ideological state treats it from its start, so that the solution is easy and feasible.
Since we all know that an economic crisis is the severe turbulence in the management of the financial affairs of the state, it is incumbent upon us to know the first instance the manner which the state manages its financial affairs. Then, we have to explain the chances of occurrences of crisis in these matters, and then explain their treatment. To understand this, it is necessary to study few factors that have a great effect on the economic situation of any state.
Treatment of Economic Crisis
Having explained the reality of the economic crisis, we begin to explain the correct solution of this crisis.
Firstly: Addressing the crisis caused by the current monetary system.
We have stated previously that the monetary crisis could occur in the Gold-exchange system as well as the system of compulsory paper money. In order to eliminate the crises we have mentioned, reference has to be made gold directly, or by bank notes representing gold that are convertible into gold unconditionally. Many economists have realised this. Had not the relevant states, especially America opposed the return to gold standard, fearing for their loss of political and economic hegemony, the world would have returned to it. That is because this is the system that preserves stability and leads to prosperity in economic activity without the domination of one state over another. In this system, currency is defined by a standard unit recognised and respected by the whole. In this system the State also cannot increase the money supply unconditionally, because they are bound by the requirement of gold reserves. This is in contrast to the mandatory paper banknotes where the state could, when needed, issue the quantity they want to serve their own interests, a matter that leads directly to monetary inflation and weakness in the confidence in the monetary units. However, following conditions have to be observed in this system:
- Freedom of export and import of gold by all countries without restriction or condition.
- Absolute freedom in exchanging the paper money that represents gold into gold at any time, by their full value written on them.
- Freedom of smelting and coinage of the yellow metal (gold). So, whoever possesses gold money, he could melt them and coin them into gold bullion without restriction. Likewise, whoever had gold alloys could go to the Department of minting money and mint golden money (after paying the expenses of the minting process, in order to prevent any possible disruption between the official and commercial price of gold.
- This is from the angle of abstract economic research. But from the view-point of Islam, it is invalid to have money other than gold and silver, due to relevant shar’i evidences.
Economic crisis means severe turmoil in the management of the financial matters of state, which requires effort to remove it.
The crisis resulting from currency occurs in the gold-exchange system due to the political and economic domination of the state that owns the reserve currency over that other state. It also occurs in the mandatory paper (fiat) money because they are subject to price fluctuations and speculations among nations, and to financial conspiracies that led to political and economic unrest and economic collapse in financial markets. The treatment is to over revert to the system of the gold standard, which preserves exchange rate stability and economic prosperity.
The crisis resulting from the balance of payments due to deficits leads to indebtedness. Economy is not self-stimulated and the loans are misused, particularly as the loans are fought with danger of extending influence; and also because of usury which is prohibited in Islam. Resources to the IMF complicates the problem because it treats it as an abstract mathematical equation, and demands increase to taxes devaluation of currency, freezing or reducing wages and salaries, and removal of subsidies, besides increasing prices. It’s said to develop projects, which instead of developing the wealth of the state makes it unable to dissociate itself from aid and loans. Thus, the country would enter into the indebtness trap, from which it cannot escape. The maximum that a country that follows the IMP programme can achieve is the rescheduling of its debts rather than abolishing them. Besides it facilitates the taking up of new loans, thus accumulating debts, such that it cannot find a way out of them as is happening with all the countries currently dealing with these programmes.
Regarding the resolution of the crises of unemployment and poverty resulting from the ill-distribution of wealth or from its insufficiency, this is achieved by the State, as well as the imposition of financial maintenance for the incapacitated males and to the females due upon their mahram (close relatives). If such maintenance is not available, the state is responsible for such people by giving them what is adequate to meet their basic needs, from the bait-ul-maal (House of wealth). Otherwise, it is given from the taxes levied upon wealthy Muslims, and taken from the surplus of their funds.
The state services the basic needs of the whole nations as it services this for each and every individual. The basic needs of the individual are defined as; food, clothing, and accommodation; all according to prevailing standards. The basic needs of the whole nation are: education, health care, and security. These needs, in both cases, are fulfilled from the funds of the Bait-ul-maal if available, otherwise from additional taxes.
The constant revenues of the Bait-ul-maal, besides their supplements are: War booties, spoils, land zakat, head tax, all of the public properties and state properties of the lands, building, utilities, customs taxes, illicit funds of the rulers, and State officials, illegally earned funds, fines, a fifth of the buried treasure, minerals, property of those who have no heir, funds of apostates, charity funds – Zakat, and then the taxes (where essential). The revenues are usually sufficient for the state’s needs, particularly through running the economic activities properly.
The Khilafa state, that will soon be established, by the Will of God, own the proper solution to all the problems , whether economic or otherwise, because it is a state in which sovereignty belongs to God and authority belongs to the Ummah (community). It has one Khaleefah who adopts the Shar’i rules and is given pledge of allegiance on the Book of God and the Sunnah (way) of His messenger. Thus, he and the ummah are fearful of God in all of his actions. So, life will be organised according to the orders of God, and will prosper in all of its affairs.