Presentation by Mr. Jamal Harwood (Economic Analyst & Lecturer at University of Wales) at Sharia Economics Conference 2013, with the topic: "The Growth Imperative of Capitalism & The Islamic Alternative". Paper can be accessed at: http://jistecs.org/content/economic-growth-imperative-within-capitalism-and-islamic-viewpoint

1. First Plenary Session
Sharia Economics Conference 2013
Hannover, Germany – February 9, 2013
Jamal D. Harwood
Economic Analyst / Lecturer, University of Wales
Sarfraz A. Wali
Economics commentator / Community Speaker
THE GROWTH IMPERATIVE OF CAPITALISM
& THE ISLAMIC ALTERNATIVE

2. Current Context
Property booms 80’s, 90’s and 2000’s
Consumer booms 80’s, 90’s and 2000’s
Stock Market booms including dot.com bubble early 2000’s
Bond Market bubble to date
Unprecedented money creation, cheap credit
Unprecedented growth of derivatives
Unprecedented budget deficits in the developed world
Policy of Central Banks to reduce interest rates to close to zero
“Non-conventional” funding policies of Central Banks (QE, Operation twist)
Non-conventional and widespread changes to metrics (inflation, employment)
Negative real rates of interest
Growing inflation problem
Banking crisis
Sovereign debt crisis
Growth crisis – crisis of confidence – lack of trust in Politicians
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3. Capitalist Failures =
Growth Imperative
• Role of Interest based monetary system
Debt service = Money Supply growth
Growth in output needed to avoid hyperinflation
• Inability to survive deflationary environment
Penalization of debtors
Monetary policy becomes ineffective
Delaying Consumption in deflationary environment
• Negative Effects of the Growth Imperative
Growth of debt industry due to Consumerism
Consumerism = Planned and perceived Obsolescence
Resource depletion and unsustainability
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4. Recovery in Growth?
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5. Can you trust the
numbers?
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6. Adjusted for real
inflation rate
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7. Money Supply Growth
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8. Growth in Money Supply
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9. Debt Created and Taken
by the Federal Reserve
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10. What happened in 1917
and 1971?
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11. US Debt is not
Sustainable
RED – Public Debt (US)
Black – Public Debt plus Federal Debt (US)
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12. World Debt Crisis
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13. The Casino Market
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14. Islam’s Vision re Growth
"In case it (wealth) circulates solely among the wealthy from
amongst you."
[Translation of the meaning the Quran surah Al-Hashr, 59:7]
Notion of wealth circulation to ensure a robust economy that meets the
needs of the people
Growth is not a core objective of the economy but a pleasant outcome
Environment which encourages spending and investment
Gold/Silver currency the most stable currency and non-inflationary system
Wealth oriented taxation – shunning income and consumption taxes
Non interest coupled with anti-hoarding provisions
Direct Investment and involvement within company/partnerships
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15. Despite money printing
money velocity is poor
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16. Strategic Growth
Advantages of Shariah 1
Gold Silver based Currency
o Currency stability over millenia and a level playing field between Nations
o Only mild instances of deflation and inflation
o No counterparty risk, with manageable growth in currency
o Universally accepted, promotes sound and low cost trade policies
Non Interest Economy
o Low cost risk based investment model without banking intermediaries
o Debt based creation of money out of control and grossly destabilising
o Advantages of G/S currency can only function with non-interest system
o Perversely Central Banks effectively moving to zero interest rate policies
Non-Hoarding of Wealth Provisions
o Key to circulation of wealth – connected with explicit textual evidences
o Compare with the banking system which withdraws capital during downturns
o Investment, charitable giving, consumer spending – positive outcomes
o Business cycle downturns work against investment and spending
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17. Strategic Growth
Advantages of Shariah 2
Wealth based taxation policy
o Zakat (2.5% on non-utilised wealth) Kharaj/Ushr on capacity of land, Jizyah
o No Income, Consumption, Business, Rates, Council, Transport taxes
o Wealth taxes are proportionate to wealth – fair on all (natural redistribution)
o Strong incentive for investment and spending and full employment
Equity/Partnership financing
o Direct investment with responsibility – no stock market
o No start-up barriers (bureaucratic) and small business employment driver
o Corporate scandals engendered where Directors are not owners (body)
o Maximum corporate transparency
Absence of Limited Liability
o Risk profile reflects what business owners can adopt
o Leveraged risk taking difficult due to non interest and full liability
o Encourages trade with clear counterparty responsibility for all transactions
o No government bailouts of companies
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18. Strategic Growth
Advantages of Shariah 3
Prohibition of Gambling
o All gambling including most derivative contracts forbidden
o Derivatives increasing volatility in markets at higher risk levels
o Gambling in all forms take wealth out of circulation/trade
o Unacceptable losses to society via moral hazard
Intellectual Property Rights
o Knowledge purchased along with the good or service where obtainable
o Faster product development and innovation
Flexible Labour Markets
o Wages can go up and down based upon the value of the work/service
o Equal pay for the same value of work for male/female and age of employees
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19. Strategic Growth
Advantages of Shariah 4
Land Reform
o Use it or lose it (3 years)
o Revival of dead, unused lands promotes widest ownership among masses
o No leasing of agricultural land
o Land tax encouraging full utilisation
o Laws against price fixing
Ethical Trade Rights
o Clear annulment and set-aside provisions where trade is not fair
o Full trade descriptions required
o Protections for young and vulnerable (orphans, disabled)
Regulatory Framework
o No monopoly, strong anti-fraud provisions
o Stable regulatory environment – laws consistent over 1400 years
o Lobbying unlawful
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20. Contact
Recent publication (freely downloadable):
thegoldreport.co.uk
Twitter: jamal_harwood
Daily Blog: 2nights3days.info
www.breakthrougheconomics.blogspot.com
www.newcivilisation.com
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