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interests and their role in the economy

INTERESTS AND THEIR ROLE IN THE ECONOMY AND THE LIFE

By Jamaal al-Din Zarabozo

Translation: Néstor Pedraza

The The following is an excerpt (fragments) of the translation of the original article.

The full article is available, including its footnotes, in http://www.islamreligion.com/es/articles/538/viewall/

The original English can be read in full in http://www.islamreligion.com/articles/538/viewall/

[...] The interest is something you know anyone live in a capitalist country. It has become so thoroughly institutionalized and accepted in modern economies, it is virtually impossible to conceive that anyone would oppose it by full and refuse any transaction involving interests. However, there are devout Muslims who refuse to deal with interest.

The real reason why these Muslims do not deal with interest is that the interest has been prohibited in Islam, as will be discussed shortly. At the same time, however, Muslims believe that God's guidance is based on His knowledge, wisdom and justice. In other words, God does not forbid something humans without a reason. Therefore, there is definitely a strong case, some of which we can clearly recognize, of why God has forbidden this practice. [...]

God's guidance for humanity

[...] many Muslims believe that there is no strong or convincing evidence that some of their religion is out of touch with reality or not feasible at the present time. In Islam, for example, has never been a conflict between religion and science that had led to a breakdown of trust in the church and a widespread revolt against the authority of religion, as in the West. Many people, including some Muslims, have called for many changes in Islam but in reality, the arguments presented for this have been flawed and weak, to say the least. The case of interest, the subject of this article may be taken as an excellent example of this kind. [...]

Religions, Philosophy and Interests

When you read Islamic texts concerning the interest, is immediately struck by the severity of the warnings against any participation in them. [...] This was Sayyid Qutb to write: "No other issue has been so strongly condemned and denounced in the Koran as usury." [...]

Just as a person insane unrestricted ordinary reason, resorts to all sorts of unconscionable acts, so does who takes interest. Pursues his craze for money as if he were insane. It ignores the fact that the interest cut the roots of human love, brotherhood and empathy, and undermines the welfare and happiness of human society, which is enriched at the expense of the welfare of many other human beings. [...]

Secondly, [...] there is a difference between legitimate business transactions and interest. [...] Thirdly, these verses clearly state that God "destroys interests and increases charities." This is one of the "laws" of God that humanity does not necessarily view itself. The devastating negative effects on the individual interests, community and the world in this life and in the latter are only known by God. However, a look at some of these negative effects demonstrates the truth of this verse, which will be given out later in this article. In fact, perhaps underlining the significance of this verse, the Prophet (peace and blessings of Allah be upon him) also said: "The interests-even if a lot-will ultimately result in a small amount." Interest is definitely [...] harmful, and that is why they are prohibited. [...]

The Prophet (peace and blessings of Allah be upon him) said: "A penny of interest that is worn by a person knowing is worse in the eyes of God that 36 illegal sexual acts ". ( al-Hakim and al-Tabarani ) [...]

This is a basic principle in Islam. If something is forbidden and wrong, a Muslim should not participate or support it in any way. Therefore, since interest is forbidden, is also forbidden to witness in such contracts, records, etc. The Prophet's words also explain no difference between the payer and the recipient interests. This is because both are involved in a despicable practice and, therefore, are equally guilty. [...]

Islam, of course, is not the only religion that has forbidden interest and considered a despicable practice. The prohibition of interest-at least to some extent, is a well known law in both the Old and New Testament of the Bible. In many Old Testament passages referring to "usury" or "interest." (Again, usury and interest used to be equivalent, but only over time usury came to mean an exorbitant amount of interest or illegal ...) [...]

Easton's Bible Dictionary has summarized the Mosaic law on interest in the following passage: "The Mosaic Law requires that when an Israelite needed to borrow money, which will be provided free to ask and no interest will be charged, although interest may be charged to an alien (Exodus 22:25, Deuteronomy 23:19,20, Leviticus 25:35-38) . After seven years all debts are forgiven .[...]

Unfortunately, as often happens in politics, the New Testament is vague on the subject interest. according to the Encyclopedia of Religion and Ethics , "there is no direct provisions [on the interests] to guide the Christian conscience." However, the teachings attributed to Jesus in the New Testament, there are some passages that appear to be clearly against the practice of interest. In one passage states that Jesus said

"You, however, love your enemies, let them give them good and lend, expecting nothing in return. So have a great reward and be sons of God, for He is kind to the ungrateful and wicked. " (Lucas 6:35) [...]

The Geneva Study Bible says: "[...] The usury or lending money at interest is strictly prohibited by the Bible (Exodus 22:25-27 , Deuteronomy 23:19,20). Even a rate as low as one per cent interest was rejected (Nehemiah 5:11). [...]"

Based on Old and New Testament, early Church Councils did not allow interest. Eventually, all Christians were prohibited from resorting to the interests, not just the clergy. Fathers of the Church, as St. Thomas Aquinas referred interests in some detail. "The Decree of Gratian, and after the Third Lateran Council (1179), a charge ordered 'manifest usurers shall not be admitted to communion, nor, if they die in their sin, receive Christian burial'." The Fourth Lateran Council of 1215 condemned the practice but allowed the Jews. Catholics stood firm against the interest until the nineteenth century. Martin Luther, the sixteenth century Protestant leader, also condemned usury, but allowed claims that in a moment of human weakness. Calvin, more than any other, was the pioneer vision softer than the interests among Christian leaders. Gradually the civil law of Canon Law was released and the interest began to be institutionalized over time.

was not only the Judeo-Christian thinkers who condemned the interest. In fact, Greek philosophers also had a negative view of the interest. Aristotle and other Greek scholars leaders condemned the interest. The famous Austrian economist Eugen von Böhm von Bawerk (also known as Boehm-Bawerk), wrote in his important work Capital and Interest "hostile expressions of the ancient world, not just numbers consist partly of a number of legislative acts prohibiting the taking of interest, and in part on statements by philosophers as Plato, Aristotle, both of Cato, Cicero, Seneca and Pantuso, etc. Greek philosophers considered the money as nothing more than a medium of exchange and, therefore, denied the productivity of borrowing money. A piece of money can not beget another piece, was the doctrine of Aristotle. The obvious conclusion was that the interest is unfair.

Initially, the Roman Empire banned the charging of interest. With the emergence of merchant classes, the ban was reduced a little, but still maintained tight restrictions on loans with interest, and laws to protect debtors.

Shakespeare's character, Shylock in The Merchant of Venice (written shortly before the year 1600) shows how lenders were despised dealing with interest. The obvious question that arises is how the interest went from being a despised and forbidden act to be socially acceptable and institutionalized practice in the West.

Over time, it was considered that the prohibition of interest was nothing more than a religious dogma to be eliminated. No could afford more than religion handle the economy. [...] At the same time, however, it seems that the attitude change that occurred was not based on purely economic grounds. Dennis Lawrence said:

"Aristotle, the Roman Catholic canon, the Jewish Torah ... all interest loans banned or denounced as usury interest. The interest loans raised in the Middle Ages, largely as a matter of serving the princes who needed and could not raise enough money for war and other public purposes. Contrary to current thinking, the loans were not originally developed as a form of commercial financing. The Venetians, Dutch, Hanseatic, British and other traders, until the seventeenth century to finance their operations with capital contributions from partners. "

Dennis further states:" The Canonical Catholics do not disapproved the benefits of commercial, rent for the land use or sale of the fruits of the land or other capital. They disapproved of the payment of interest on borrowed money. During the Reform Period, the interest became rationalized mainly by the Protestant canonical way to avoid objections. The Catholic Church never abandoned its attitude to usury, but consented to or allowed for loans based on certain assumptions. This consent Catholic Church's moral and positive feedback from traders Calvinist, became incorporated into the laws and thoughts and behavior patterns of modern societies. "

Rationalizations referred to Dennis can be seen in a series of commentaries on the Bible. Although the Old Testament texts are very clear in their condemnation of interest, this did not prevent the later scholars ignore or distort visibly ban. [... ]

[...] Even a famous economist was willing to provide commentaries. Paul Samuelson wrote in his classic text on economics: "The biblical expressions against interest and usury clearly refer to loans for consumption and not for investment purposes" [5].

Economic Theories and Interests

With the removal of objections "scholastic", became the role of the emerging science of economics to justify the payment of interest. This, apparently, is much more difficult than it seems. Haberler was certainly right when he said: "The theory of interest has long been a weak point in the science of economics, and the explanation and the determination of interest rates continues to result in more disagreement among economists that any other branch of general economic theory. "

In fact, among economists, "there is no single adequate and generally accepted theory of interest that may give a rational explanation for the origin and cause of interest."

The very plethora of opinions that attempt to explain the existence interests and justify their pay-accompanied by credible critics of all those notorious and respected economists, should be a signal to everyone that something is wrong. [...]

In a couple of places, Afzal-ur-Rahman has provided excellent conclusions about different theories of interest. He says:

A critical study of the history of the development of the phenomenon of interest has been shown that the interest is paid to an independent factor of production, which can be call waiting, delay, withdrawal, use, etc. . But all these theories have been unable to answer or prove why interest is paid or to be paid to this factor. Some point to the need to wait, others will need to abstain or delay, but none of these explanations answer the question. Neither the mere need to wait or postpone or abstain, or the mere use or productivity of capital are sufficient to prove that interest is a necessary payment for the use of capital in production. In addition, these theories have failed to explain how a variable factor in any way you can determine a fixed factor and the rate of interest. How could a theory be valid or sustainable? [...] Monetary theories, like theories of productivity marginal, have made no attempt to answer the question: why should they pay interest? Or, why do you pay interest? They simply ignore the question and take refuge in the theory of value. [...] According to Boehm-Bawerk, the study of all these theories "reveals the development of essentially three basic concepts of the problem of divergent interests" One group, the representatives of the productivity theory, addresses the problem of interests as a production problem. The exponents socialist theories of the operation address the problem of interest as merely a problem of distribution, while the third group, those who support monetary theories, looking at the interest theory of value problems. There is no doubt that all these theorists, having been confused by the magnanimity and the ubiquity of the phenomenon of interest, have avoided the main issue of why interest is paid. In fact, they have invested all their energies on solving the problem of waiting or abstinence or productivity or value of work "or" determination of value ", and have not said anything about the origin or justification for the institution of interest .

Evils of interests

Economists can try to reach many justifications for the payment of interest, but the real test lies in the study of the effects of interest. It is important to note that when something is forbidden by God, this does not mean that anything is beneficial in the case or practice prohibited. In fact, one may be able to find something good even in the forbidden things. [...] Therefore, the essential point is not whether there is any benefit in something but whether it is more harmful than beneficial. So the economists may be able to find a hint of justification for the payment of interest, but this definitely is not greater than the damage that it can be shown to cause interest, as discussed in this section.

Even if the interest is considered some kind of payment by a factor of production, have some characteristics that distinguish them from the payment by any other factor of production. Due to its unique nature, lead to some very troubling.

First, interest lead to an inequitable distribution of income. This can be seen easily by taking an example of three people. Suppose there are three people who consume all their income in a given year, and one of them starts with $ 1,000 in savings, the second with $ 100 and the third with zero. At 10%, at year's end the first person to have $ 1,100, second $ 110 and the third zero on their accounts. If it stays the same situation next year, the first person to have $ 1,210, second $ 121 and the third will be zero. We can see how the distribution between them grows every year, even between those who have some savings in your account. This scenario is compounded if the richest person is also able to increase their savings. Suppose that the richest adds thousands to the end of each year will be $ 1,100 at the end of the first year, add $ 1,000 to continue its 10% interest and to be $ 2,310 at the end of the second year, and so on. Now this is one thing if this money was actually paid on account to a positive factor of production, but in reality one can not argue such a thing in this case. The money people are making through interest may have been wasted, lost or even stolen by people who borrowed it, but even so one must pay the interest. It may have been invested in a project that shows only losses and therefore does not produce anything. But none of that matters, must be paid regardless of whether that "factor of production" produces anything or not. This is just one particular aspect of money and cash payments. No one can argue that this is unfair and therefore their results are an inequitable distribution of money.

Moreover, income distribution becomes more and more unequal over time. One can imagine some people driving millions while others handle hundreds or thousands. The disparity in interest income is indeed large and growing each year. In other words, as we hear often, this leads to a situation in which the rich become richer and the poor are relatively poorer. Consider that the debtors, who pay interest growing every year, have been added to the equation. Where appropriate, to the extent that interest continues to grow, your total income is increasingly consumed by the interests, further exacerbating the unequal distribution of income.

One might ask whether an unequal distribution of income should be considered a major problem. In addition to the psychological effects on the poor, especially when you consider the media to highlight the good life and the need to eat, there are very significant impact on the market as a whole. In a market economy, production is geared towards those who have money to pay for what is produced, regardless necessary as they can be other assets to society. If the rich want, demand and are willing to pay big bucks for big SUVs and gas-guzzling vehicles, they will be produced (regardless of how much the environmentalists to complain). As the distribution becomes more and more unequal, more and more resources will be allocated to meet the demands of the wealthier classes. Since resources are somewhat "fixed", meaning that fewer and fewer will be dedicated to meeting the needs of the poorer classes. On the other hand, the least amount of resources devoted to goods consumed by the poor, lowers and raises your bid prices of such goods, which further undermines the overall economic situation of the poor. For example, one can find numerous medical clinics catering to the rich (those who can afford such treatments), but are far from necessary, as many areas of cosmetic surgery and the like. At the same time, one can find very difficult to find clinics that serve the poor and meeting their basic needs. If they could pay more for these essential services in a market-driven economy, you definitely find more clinics like this, more resources devoted to these needs and prices lower in the long run for what they need. (In addition, this uneven distribution also has strong implications for the health of democracy, however, that discussion is beyond the scope of this article.)

addition, the interest burden on the poor who fall into debt puts them in a situation where they can not advance socially or economically, increasing the gap between rich and poor. The debt itself is a difficult situation for anyone. However, interest payments are those that convert the debt into a moving target, often one that the person simply can not continue. Again, it is a false factor of production but it works to let the rich get richer while posing a great burden on those who fall into debt. Perhaps all readers are familiar with the company highly indebted U.S., the richest country in the world has done. This has affected not only the lower classes but many of the middle classes. Some people afflicted do not realize that if they make only minimum payments on the accounts of their credit cards, for example, never clear your balance. But, of course, are the poorest the hardest hit. In fact, the system is wroth against them, because the poor is the person with the worst credit rating and will be forced to pay higher interest rates. Shahjahan Mirza's book Income, Debt and the Quest for the American Rica: The Economic History of the Medium and Small Cities U.S. is a study of how the debt and associated interest burden has affected much of the "class average "American." The plight of small farmers forced to borrow due to falling prices of its production has been well documented. Many of them have committed their precious goods or lost their farms, which had been in their families for generations, simply due to interest payments which could not keep pace. Shahjahan found that some of the poor pay more than 15% of their annual income on interest payments alone (with most of the poor paying between 8% and 12%)-not to mention the load of calls and threats from creditors that poor people often receive. The conclusions of Shahjahan, he says:

Both monetary and the real burden of debts have kept many debtors in a struggle all their lives to service debt. The average size of the debt of indebted households in 1990-1993 was U.S. $ 32,493, equivalent to almost 100% of income of those households. Our estimate of per capita debt households for 1990-1993 is U.S. $ 12,571. A debt of this magnitude, combined with a temporary work and low income, can be depressing and overwhelming psychological conditions produce ...

Interest payments for some households, exceeding its income by 15% This interest cost high has been a source of significant erosion of household income.

Most home-million of them-in medium cities, struggle daily to meet their basic living needs. Thousands of them fail to provide a decent life for their family or provide higher education for their children. They live in debt and die in debt. This situation makes them feel they do not lead a full life ...

These households are trapped in a situation of economic servitude in which the most obvious escape routes are blocked by institutional forces. The acquisition of skills or higher education could be the key to open real opportunities for them, but higher education is expensive and is beyond the reach of most households in these cities. Such homes do not have opportunities to excel and find that they have been passed over for positions they crave. This is the nature of the plight of working class families in small towns and medium-sized U.S..

Internationally, the situation is much more devastating and dangerous. There is no doubt that when viewed from an international perspective, the interests kill people. Debt bondage to the least developed countries today is so great that they are forced to sacrifice basic needs in health and nutrition. It is galling to think that an untold number of children die daily in developing countries due to the "tool" of modern capitalism: interests. Some African governments are forced to spend more on paying debt than they spend on health or education.

In this context, UNDP (1998) predicted that if the external debt of 20 poorest countries in the world to be condoned, it would save the lives of 20 million people by 2000. In other words, this means that the debt is not forgiven was responsible for the deaths of 130,000 children every week until 2000 .

Ken Livingston, Mayor of London, said that global capitalism kills more people annually than those who were killed by Adolf Hitler. He blamed the IMF and the World Bank for the deaths of millions of people due to its refusal to ease the burden of debt. Susan George said that every year since 1981, between 15 and 20 million people die unnecessarily because of debt burden, "because Third World governments have had to reduce potable water and health programs to meet their payments. "

debt, with its associated increasing amount of interest, it is dangerous for any nation because it means loss of sovereignty and control. This aspect, of course, is no accident. The least developed countries-especially their rulers and upper classes corrupt, not free of guilt in relation to the issue of the debt they have accumulated. At the same time, if not ask for and get the debt, will definitely be pressured to do so. Caufield said:

It has been with the World Bank, refund transactions have been increasing their total loans. The result has been an accumulation of debt by the Bank owed, and a consequent gradual loss of sovereignty. No creditor is willing to extend time and again the time for payment of debt without ensuring some control over how the debtor manages its business. In the early days the great powers did not hesitate to use military force to subdue recalcitrant debtors to his will. In his classic essay "Public Debts," published in 1887, the American economist Henry Carter Adams wrote that "the granting of foreign credits is the first step towards the establishment of an aggressive foreign policy, and under certain conditions, will inevitably lead to the conquest and occupation. "

The Bank's approach to debtors is not as raw. Instead of sending the Marines, offers advice on how countries should manage their finances, make laws, provide services to their people and manage themselves in the international market. His powers of persuasion are great because of the universal belief that if the Bank decides to ostracize a borrower, all other major national and international powers will follow the same line. Therefore, due to excessive loans, born to an underlying inconsistency in its mission, the Bank has added its own power, while it has depleted its borrowers.

The now famous book John Perkins Confessions of an Economic Hitman details the contemporary economic intrigue. In describing its evaluation of projects, wrote:

The unspoken aspect of each of these projects was that they intended to create huge profits for contractors, and very happy to do a handful of wealthy and influential families in host countries, while ensuring the long-term financial dependence and therefore the political loyalty of governments around the world. The higher off the loan, the better. The fact that the debt burden placed on a country would deprive its poorest citizens of health, education and other social services for decades, was not taken into account.

Perkins's work has been followed by A game as old as the Empire: The Secret World of Economic Hitmen and Red Global Corruption, edited by Steven Hiatt. [8] Hiatt writes:

keeps debt of Third world under control. Dependent on grants, loans refinancing, renewals and debt to survive, regardless of their real development-have been forced to restructure their economies and rewrite its laws to meet the conditions of structural adjustment programs of IMF and World Bank conditions.

The current debt situation, with the leading role that the interests are playing in it is potentially very devastating to the world. 2015 Global Trends In , the Central Intelligence Agency (CIA) acknowledged:

The rising tide of the global economy will create many economic winners, but not yet lifted all boats. Generate local and foreign conflicts, ensuring a gap between regional winners and losers widening that exists today. The evolution of globalization will be unstable, marked by chronic financial volatility and growing economic gaps. Regions, countries and groups have been feeling left behind will face deepening economic stagnation, political instability and cultural alienation. It will promote political extremism, ethnic, ideological and religious, along with the violence that often accompanies it.

Noreena Hertz has an excellent chapter in his book The Debt Threat: How debt is destroying the developing world ... and threatens us all, which outlines many of the dangers of debt mass-and again, it would not be so massive without the ever-growing aspect of interest, represents today's world. She details the dangers of extremism, terrorism, depletion of global natural resources, and more. To cite just one aspect, she writes:

The ugly progeny of the debt-poverty, inequality and injustice, they are called to justify, and even to legitimize acts of extreme violence. Just weeks ago, was attacked the World Trade Center. The major African commentator Michael Fortin wrote: "We must recognize that this deplorable act of aggression might have been, at least in part, an act of revenge by people desperate and humiliated, crushed by the weight of economic oppression practiced by the peoples of the West. "The language of Fortin -" crushed, "" oppression, "" desperate, "" humiliated "- is deliberately evocative. And it is manifestly clear that there is an audience to which those words will resonate powerfully. [...]

Islamic Solution

The Islamic solution to the issue of interest is based on two basic principles:

(1) If a person wants to lend money to another to help her, this act must be based on "principles fraternal "and is absolutely unacceptable to charge any interest in this case. It does not help another person office with a debt cycle in which it must pay more than you borrowed. [...]

(2) If a person wants to use their money to make more money, then you must be willing to put their money at risk. In other words, can not by itself guarantee a fixed return (the amount increases with time) that is independent of investment performance in which their money is used. If the person puts their money at risk, deserves to share in the profits. However, this also means that you agree to lose if there are losses. This is a system that is based on justice. It also has many benefits. Who cares reverses the results of your investment and can not demand his "piece of cake" regardless of what may happen with the debtor.

Islamic

This solution works for both individuals and society as a whole. [...]

Conclusions

the most part, the "modern civilization" has decided to give back to the Divine Guidance (mostly due to the experience in the West with Cristiano ) and have tried to build their own economic and political systems, international law and others. In doing so, however, had to admit that they're trying something that is beyond their capabilities. The social sciences are very different from the physical sciences. There are no laboratories in which humans can be entered to determine what may be the best results under different scenarios (and even have to assume that humans will always react the same way low the same circumstances.)

In the field of economics, the first thing that comes to mind is the collapse of the theories of socialism and communism. One must, however, also take a closer look at capitalism and how far is the reality of what is supposed to be. The early capitalist theorists envisioned a theory that would lead to "best of all possible worlds." However, his theories were based on assumptions that never were and never will be fulfilled. They assumed perfect competition, perfect knowledge, free trade and so on. Once these assumptions are violated, as they inevitably did not lead to the best of all possible worlds. " Instead, easily lead to a world of exploitation, in which the rich get richer the poor get poorer. One of the forces underlying this system is the institutionalization of interest.

God has blessed human beings with the guidance of the Qur'an-a book that has been carefully preserved since its revelation. This book contains the guidance that humanity needs to live a successful life in this world and beyond. Therefore, it is not surprising that this book absolutely prohibit and condemn interests in the most radical.

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