At the outset, let me disclose my approach. I have no specific model but only observations. This is because the nature of the subject of this paper requires “personal statements” more than documented academic conclusions. Being inter disciplinary and “futuristic”, the present exposition doesn’t attempt to give instant solutions, simply because there is none. As is always the case in such inquiries, we are faced with difficult choices that involve risky decisions. I am arguing that the Muslim Ummah, in the 21^st century will enjoy a unique position in the world. Muslims will remain technologically second (or may be third) class. But by then technology will be so disseminated in the world that it will not be as crucial as it is the past and present century.

Our main concern here is the economic aspects of this argument. Can we design policies that express the above argument in the realm of economy? will be the main concern of this paper. At times we will be “thinking the unthinkable” and questioning the very “unquestionable”.

Muslim Ummah at the close of the 20th Century:

The Muslim Ummah is entering the 21^st century with distinct qualities and unparalleled characteristics.

Lets just name a few:

a) A strong sense of Identity:-

No other group of people with our numbers feel so attached to and so concerned about the welfare of each other. This is one of the miracles of Islam that so many hundreds of millions of people, with diverse languages, different colors, outstretched geographical locations, yet they all consider the fact they are Muslims their most important identity.

b) Geographical stretch and proliferation:

Take a look at the planet Earth from above and you see the world of Islam. No Continent, no Country, no spot on the land with no presence of Islam. Where ever there is day and night, there is Islam. The number of Muslim every where is growing very fast. This happens at a time when a major portion of the world (the west) declines in number (negative or zero population growth). Our growth is not only through birth rate, but also by way of new comers to Islam.

c) One History and one culture: 

Muslims societies in different parts of the world may have their own local customs, habits and traditions. They may be endorsed of rich heritage and great history. Nevertheless, they remain part of a broader history and a more multifaceted culture. Otherwise, how can a Muslim in the heart of Africa have so much in common with his brother in central Asia or the pacific archipelago.

d) “A state of Siege”

Muslims feel, in the last decade of the 20^th century that they are in a state of siege. As communism falls to pieces, the west cannot maintain its unity (and civilizational integrity) without facing to one common enemy. They are forcing Muslim Ummah to play this role and as a result they are using all the means at their disposal to put Muslims in a state of siege. By this they are actually extending a great service to all Muslims because history shows great nations rise only when they feel incarcerated.

e) Faith, The not so obsolete power:

In the age of moral relativism, where the concept of freedom is reduced to the “pursuance of happiness,” Muslims stand alone as the only group of people with higher moral code. Western individualism, which is now unhinged from any sense of personal accountability is becoming very destructive. Even personal accountability which is owed to a fallible state will not produce moral people. It is only when such accountability is owed to the ultimate authority, to the creator Himself. Here is where Muslims are superior to the rest of humanity.

The meaning and message of our times:

Europeans dominated the world since the Industrial revelation in the 19^th century. Certainly they used armies to colonize the rest of the world during the 19^th and early 20th century. But the last 50 years or so showed that their power and domination was quite vigorous with little “bloodshed”. This is because they had something the rest if the world lacked, but needed very badly, technology. Muslim Ummah is poised, in the 21^st century, to have the same position, and to hold similar vigor. We can offer the world something that it now lacks but needs very badly: not technology but moral standards appropriate for our times.

In the words of one writer: “The 17^th  century gave us the Scientific revolution. The 19^th century the Industrial revolution. So perhaps the 21^st century will give us: Spiritual revolution to tie it all together.”⁽¹⁾

When you watch a day-time “talk-show” on American TV showing grown men and women “sharing” with the viewers their sexual experiences not with each other but with their children you know that this nation is going without direction. Certainly crime is every where, but allowing such “garbage” to be aired to the public with little or no objections from the rest of the society means that the whole society is no longer concerned about its moral fabric but about a capricious legal concept called freedom of speech. When you read that a Supreme Court (state of Hawaii) decided that same gender “marriage” is legally a marriage because the constitution did not specifically say that a marriage is man and woman affair, you know that the nation which succeeded in putting a man on the moon is no longer sensible on earth (could a relationship between a man and a tree be also marriage?).

Through technology the west was able to bring to the world the nuclear energy, genetic engineering, digital computers, and psychoactive drugs.

They were able to manipulate matter, life, mind and mood. Yet they attempt to do all this in an assumed value-free context, with little or no attention to the moral essence of these changes. A value-free social doctrine is not capable of being a source of the very thing it lacks: i.e. moral values.

In the words of one author: “Although America has all the physical and some of the political attributes for leadership, it is underminded by the empty moral content of its message”⁽²⁾. Certainly America is but a microcosm (or may be a macrocosm!) of present-day western civilization.

The West is in a fix:

It is not that there are no wise men and women in the west who can “see the writing on the wall”. The problem is that the west is now hostage to the very same idea which gave rise to its civilization. “Freedom” which produced the set of Laissez-faire philosophy in economy and society is driving these same societies to spiritual anarchy. The idea of freedom is now demoted to the unrestricted pursuance of individual lust, with no regard to any larger social good, religious or moral commitment.

The idea of freedom was quite resultant in the past as it emerged in a social setting that is moral and religious. It, therefore, had limits of ethics, habits and social norms. But in a culture based on rationality not morality, freedom becomes a mere legal proposition, spelling the end of a civilization because this culture is uniquely liberal and western. History teaches that no civilization can remain dominant unless it projects a message of world wide relevance.

Fatigued Christianity cannot be a source of any meaningful moral values:

There exists, within western societies religious movements trying to give new life to an old source of moral standards. Never the less, Christianity is now too fatigued to be source of any meaningful moral values appropriate for our times. This is not the first time Christianity failed in the challenge of tying up technological change to a binding system of moral values. During the sixteenth and seventeenth century Christianity failed to generate any significant “innovation” to keep pace with the deep-rooted changes that were taking place. This will happen once again. A religious doctrine that in the going back to its original teaching it has to be opposed to “profit” and prejudice against private property, is too antagonistic to contemporary civilization to be of any consequence.

 Are we, really, morally superior?

Our Quran is full of statements about the necessity of justice, fair play, goodness, kindness, forgiveness, guidance against moral peril. Our Prophet states very clearly that the whole message of the religion with which he was sent to all humanity is a consummation of the highest of morals. Not only that we are already morally superior, but also our capacity to be moral is remarkable. Certainly if we compare our present moral standards to those of our forefathers and to the companions of the Prophet (PBUH), we find that there is “a lot to be desired” to say the least. Nevertheless, compared to our contemporaneous nations, the difference is colossal.

In the 21^st century, Muslim Ummah will be the only populace capable of meeting the moral challenge, and these are the reasons.

a) The fall of communism created a vacuum. The west think that such vacuum will be filled by capitalism and by the “liberal answer.” They are forgetting that communism was originally a moral response to capitalism. It came to solve a capitalist defect which exist until this very                 day: Inequality. The fact that communism failed because of its internal contradictions, does not deny the fact that a moral response today, to today’s capitalism is in much need.

b) No organization in a competitive environment can survive without innovation. To be sure, innovation spells life for any institution. Religion is no exception. Here where Islam display its superiority. Not only that our religion had shown majestic capability of responding to major challenges in modern times, it has a built-in capacity to be innovative. Through Ijtihad⁽³⁾, Islam  revives  itself  promptly  responding  to  major changes. It is because of this, Islam will be, in the 21^st century, the only religion that is not disintegrating under the impact of “science and technology.”

Practical policies:

No theory can be of much use unless it leads to policy. If morality is the central theme for our plan for the next 25 years, then we have to see where such theme is manifested into workable economic policies and what line of actions that need to be taken to make the objectives of these policies a reality. How can we articulate our moral ideals into practical course of action. Certainly if we are, to transform our moral ideas into a value-based system for the world, we need more than economic policies. However, since the scope of this paper is limited to such propositions it will be most concerned with that. This is our agenda for the 21^st Century.

Embody not reject:

For close to 1000 years after the advent of Islam, our Ummah was an all-embracing, totally-open civilization. We had self confidence to the point  that we were willing to encompass competing cultures and incorporate exotic devices and inventions of other nations. In a few generations our Ummah was successful in taking-in diverse life styles, different tribes, races, clans and a couple of empires, and amalgamate them into one culture and a single unified civilization. At that very time, Europe was looking inward, completely closed and sealed off the outside world under the feudalism.

Two events took place almost simultaneously at the end of the middle ages. Europe decided to unfold and open up⁽⁴⁾ and rather than fighting the dominant civilization of the time (i.e. Islamic), Europe decided to absorb its achievements, and assimilate its economic system through complete openness. Free labor which brought the end of feudalism was an idea imported from the world of Islam. At the same epoch, Muslims, under the Othaman empire decided to close their doors and became an inward-looking nation. It reached the point where it was illegal to export goods as export was thought to be detrimental to the security of the state. It was quite permissible, however, to import.  This gave Europe the historical chance of developing its industry dependent on the open Islamic markets and protected from Muslim competition by Muslims own design. Europe sustained a few centuries of growth and the rest is just history.

We are now at the preface to another historical epoch. It is no news that the west is now inward-looking going into a phase of rejection of every thing alien to the western culture and civilization. This new direction which is clear from the messages of political parties every where in west, is now translated into protective trade policies and more restrictive immigration⁽⁵⁾   and  cultural  exchange  rules  and  occasional  calls           for isolationism. This can be felt every where in Europe and America; in the popularity of the books and ideas of Friedrich List, the intellectual opponent to the idea of free trade of Adam Smith and David Ricard. List called, in the 19th century for protectionism. It can be felt in the rise of politicians like Le Pen in France and Pat Buchanan in the U.S.A who is running for the office of the president, promising people that he will move America again into isolationism, and bar even “legal” immigration.² In calls by prominent individuals in Europe such as Sir James Goldsmith who writes in his book “The Trap” that free trade “will provoke a disaster unparalleled in the history of mankind.”⁽⁶⁾

Now it is our chance to assume a brand new philosophy and a fresh look at our relations to the rest of the world, we again need to embody not reject.

Our fore fathers knew best. The only correct policy for the Ummah that had been entrusted with the message of Islam, is to be all-embracing and most forthcoming nation in the world. Otherwise how can the message of Islam reaches every single human being. This means that we need to be more tolerant and extra broadminded to be able to embrace the whole world. Our economic policies should reflect this. There came a time when Muslims thought that the best economic policy is one that maximize their “independence” from the rest of the world. This meant that every Muslim country become an isolated economic island. The result was disastrous. Our policy for the next century should be to integrate into the world and integrate the world unto us. Our best bet is not to be independent, for this is just an illusion. It is to be indispensable to the rest of the world. Let us forget nationalism, provincialism and all narrow definitions of interests. We are too morally-strong to fear annihilation or extermination by technological superiority. On the contrary, our task in the next century is to absorb technology so that we can give it a “moral” face.

Our strength is moral not technological:

Technology in the 21^st Century will be so cheap. The capitalist of the world are ready to give it to any one who is willing to let them accumulate profit even China can get it). Our message as Muslims is not to be morally superior to every one. However, technology will never get us there. It is about time that Muslims realize that they have no hope of having any  civilizational dominance through technology. This is because we will then be trying to beat the technology giants at their own game. A skillful warrior fights at his own terms because this is the only way to win. For the 21^st  century  we need to stop trying to re-invent the technological wheel and concentrate on what we know best. To assert the above is not to deny the fact that we need technology. It is only that we should be getting it in exchange!

Morally - Intensive Economic activities:

Concepts of capital-intensive and Labor-intensive methods of production are well known to all economists.  These are, nevertheless, conventional wisdom.  While they are useful as technical notions, that help select the most appropriate means of production, we need our own concept to help shape our economic future. This concept don't necessary lead to maximization of profits (though it may) but it emphasize our comparative advantage in the world today which is basically moral.  We need, in the next century, to emphasize the morally-intensive economic activities.  By morally-intensive we mean the kind of activities that have a higher human behavior content.  In a world that aims at less human and more machine involvement in production, this idea may come as an “antithesis”.  But for a nation which has its strength in people and moral standards, it only make sense that they are underscored. These two aspects are the core of our future.

(a)     Trade and commerce:

No economic development plan worth the name will emphasize commerce as a means of economic growth.  On the contrary, economists led us to believe that exchange activities in general and commerce in particular are but a “parasite” activity. That the real added-value is in agriculture and industry.  Muslim countries development were influenced by such conventional wisdom in the last 30 to 40 years through their economic development plans and their effort of “social engineering”. They produce but let someone else sell.  But this goes against our heritage and rebuffs our basic aspect of superiority.  Muslims have always been merchants.  The great conquests at the early generations of our Ummah actually followed the trade routes for this is the only route they knew.  Even the spread of Islam in many parts of the world took place at the hands of merchants doing their normal trading activities.

Once more, trade is our map to regaining our place in the world.  This is because trade is a “morally-intensive” activity through which we can disseminate our Islamic values.  Furthermore, trade and commerce is the one activity in which we have centuries of experience to the point that Muslims in general are “born” with commercial instincts.  It is no secret that commerce is actually the core of all human activities and that the west’s control over the world economy is done not through technological edge. But via commercial behemoths that control the flow of trade.

(b)     Islamic banking:

Islamic banking came as answer to the usury based conventional banking model.  Nevertheless it demonstrated that whenever we depend on our own selves, build-on our own foundations the outcome brings out the best in our system.  Read any critical assessment of the model of Islamic banking and you will see that even the most objective commentary emphasizes the “moral” aspects of that model. To conventional bankers, moral hazard is a weakness in the model. But we know better. While not denying that in an immoral environment this model will not even function, we shall not ignore the fact that this is the source of uniqueness of our model.  Certainly, Islamic banking reason-de etre is the prohibition of riba.  However, in the 21^st century we have just-as-important a reason to go even more strongly in Islamic banking.  It is so fitting to the nation the flourished on morality not technology.  The 21st century will be the century of Islamic banking.

Equity not debt:

 The whole world is sinking in debt. In the U.S. over 50% of household savings goes to pay debt.⁽⁵⁾ In Belgium 11.2% of GDP goes to payment of interest on public debt⁽⁶⁾. Belgium and the U.S.A are but examples of the debt situation in industrialized countries. Italian government debt is equal to 105% of GNP, and 70% of government revenues goes to payment of interest⁽⁷⁾. Italian tax payers are doing little other than providing income for investors in government bonds most of whom are not poor. In the U.S.A 72% of government expenses goes to interest and retirement benefits. It is expected that such percentage will keep growing because of debt, that it may require all the government revenues to go to payment of interest, before the end of the century. In LDC’s the problem is even worse. At the end of 1991 total hard currency debt of developing countries were             $ 1,608,000 million, which jumped to $ 1,701,000 million in 1992 and expected to keep rising⁽⁸⁾. In 1980, the net transfer from Industrial countries to LDC’s was $ 35,000 million. In 1992 the net transfer reaches $ 60,000 million but in reverse, i.e. from LDC’s to the industrialized countries in the form of debt and interest payment⁽⁹⁾. Even the private sector is sinking in debt. In the U.S.A private business debt equals to 42% of GDP⁽¹⁰⁾.

Debt is immoral:

 Debt Vs equity is not only an economic issue, it is also a moral issue. This is because debt that is based on interest has the detriment of being compounded. With world wide inflation (and deterioration of the terms of trade of LDC’s) debt is an enslavement process.

Not only that debt creates instability internally and internationally, it is also so detrimental to equitable distribution of income. Certainly we despise debt because it is based on riba which is one of the greatest sins in our religion. But even wise people who are not Muslims know how destructive debt is. After reviewing the world debt crises, an official world bank document commented in 1993: “Risk sharing contingencies should be built into financial contracts to make crises less likely and less costly if they    occur”⁽⁹⁾. Certainly we know that risk sharing is form of Musharakah, the advantage of which we know very well as Muslims.

Mexico is a case in point. Most of the capital inflows on which investment was based was through bond issuance. The whole economy collapsed, because at one point investors found that U.S interest rate in real term is higher than that of Mexico so they start withdrawing their money causing the exchange rate of the currency to collapse.

If we look at the world financial system today, we find that it is nothing but a vehicle for the exchange of debt obligations. For every one dollar of real goods and services exchanged in the world today, there is $ 1000 of monetary obligations being exchanged.

 A world undertaking: Equity not debt:

 We owe it, as Muslims to ourselves to eradicate debt from our societies. We have to reestablish partnership as the main stay of our financial intermediation. And we owe it to the world to give an example of how human societies can be emancipated from the pound of debt, into the prosperity and equitable income distribution of profit and loss sharing. The means that we should emphasize:

 a) Direct foreign investment:

 We need the world just as much on the world need us. But when it comes to investment, we shall welcome the world as partners not creditors. Not only that this means we are having the benefit of the foreign capital without the disadvantage of losing our independence, but we will also show the world the greatness of our economic system which cares about fair dealing. One can always claim that direct investment means ownership. This carries a risk of losing control of our own assets. Experience show, however, that more investment means more assets to be owned not lost and indebtness is the shortest way to slavery.

 b) A capital market based on share not bonds:

 It started with direct link between savers and investors. Then for centuries, savers were separated from investors by a financial intermediary, i.e.  the bank. In the last few decades, however, a process of  reintroducing the direct connection between savers and investors took place. This is through the tremendous growth in capital markets. Reason being that! “People want to take the actual risk of business not  the risk of the bank”. How familiar such a statement is to the model of Islamic finance. Our concept is exactly that. Providers of funds should share the risks and rewards of business not the financial intermediary. This idea is more in tune to our system than to the capitalist system. Capital markets are so important to Muslim countries in the next century. Not only that they will help channel savings into most profitable investment projects, they will be the link between our economies and the rest of the world. They, however, have to be based on equity not debt. We want more shares and less bonds. Muslims need to make it a role that their capital markets are basically equity based.

 Engine of growth:

Another source of strength of the Muslim Ummah in the 21^st Century: Capital birth rate in most European countries is below replacement level. The OECD birth rate is already below 2 children per couple. In Germany and Italy below 1.5. Almost all industrialized nations are facing the same situation.

In the next century, these countries, with improvement in health care and longer life expectancy will be quite aged. this means that the majority of the population will be dependent on the few who are still productive. Most importantly, however, these countries will face a serious problem: saving rate. This is because the income generated by those who are still producing will not be enough to support the retired people, the government as well keeping a sufficient rate of  investment. In their important report about the global capital market, Mckinsey financial investment group have shown that the west’s, demographic changes are such that saving rate will not keep up with the needs of the capital markets nor with government financial needs in an age of reduced taxes in coming decade.

A glance at the Muslim countries shows the exact opposite. Youthful societies. Not only that the demographic mix is such that young productive members of society constitute the vast majority, our growth rate is the highest in the world. In the next century, the world will be looking at us to be the engine of growth.

This is because our societies now have the opportunity to be the highest savers in the world. This means that we will have a source of sustained growth. Furthermore, with few other countries (like China which incidentally have more than hundred million Muslims) will be the makers (or breakers) of world prosperity and growth in the 21^st century.

It is because of this, financial institution everywhere, are doing their best to “tap” the “Islamic money”. They try to position themselves now to be able in a decade or two to have full access to Muslim savings, for this they are willing to go into Islamic banking full gear, if this what it takes to be there.

Our plan for the next century should include building strong financial institutions that is capable of channeling Muslim savings into Muslim investment, and have the skill and ability to cultivate this unique historical opportunity.

Finally, No writing on the 21^st century is complete without “coining” a phrase about the future: The next 100 years, we believe, is not the century of the united Europe, nor America or the pacific rim. It is the century of Islam. This is no just a “hollow” statement.

 Foot notes:

 (1)  Tom Mahon: The spirit in technology, P.6 The WSJ 1-16-96.

 (2)  Z. Brezezinski, out of control.

 (3)  Which defined formally as “independent juristic reasoning for inference of detailed rules at primary sources”.

 (4) We don’t want to push the envelop too much, otherwise it is not difficult to show that his philosophy of outward looking, Europeans learned from Muslims as an out come of their contact during the crusade. Some writers think that free-labor, the very basic idea which brought the fall of the feudalism was certainly copied from Islamic Economic system to which Europeans were exposed during their 90 years stay in the near east at their crusading campaign.

 (5) WSJ March 2/93, page 6.

 (6) WSJ March 8/93, page 10.

 (7) WSJ Jan 12/93, page 7.

 (8) World debt tables 1992-93.

 (9) WSJ Jan 12/92.

 (10) WSJ Sept 12/93.

References:

(1)        Micheal Noval

            The Catholic Ethics and the sprit of Capitalism

            free press 1997.

(2)        Hausman and Mcpherson

            taking ethics seriously

            J. of E. litrature

            volume XXXI June 1993

            P. 676

(3)        Ethics in Islam (conference proceedings)

            Gustave E. van Grunebaum Center for near Eastern studies

            University of California L.A

(4)        Amartya Sen

            on Ethics and Economics

            London, Basic Blackwell 1987

(5)        Walter Lippmann

            A preface to morals

            New York, Macmillan, 1992

(6)        Zbigniw Brzezinski

            out of control

            New York, Collier books, 1993

(7)        Rudiger Dorn busch

            Policy making in the Open Economy.

            EDI series in Economic Development

            Oxford University Press, 1993

            New York.

(8)        The Global Capital

            market, supply, demand pricing and Allocation.

            Mckinsey Financial Institution group.

(9)        The Wall street Journal.

(10)      Economist.

(11)      Bankruptcy 1995

            Harry Figgie Jr. and Gerald Swanson