General

Is Jeremy Corbyn’s economic policy Islamic?

 

The print and social media have been in meltdown over the past month or so over one hirsute, beige-wearing, honest-talking, sexagenarian. Yes, I’m talking about none other than Jeremy Corbyn.

Now, for those of you who follow my social media feeds you’ll know I’m a Jeremy Corbyn fan for a number of reasons, but what I thought I’d do this week is to approach Corbyn’s policy proposals in a completely different way and subject them to a lens they have not yet been subject to: the lens of Islamic economics.

This’ll be interesting for Muslims of course, but also for all ethical-finance aficionados.

I’ll shed some light on what exactly Jeremy has proposed and then what the Islamic economic perspective is on it – and a verdict. There are some surprising results!

Proposal 1: A large public sector with nationalised railways and other industries

This is an age-old debate in economics. The Left says “there are certain things we all use every day and they should be owned by us all or it’ll be unfair. These include things like the transport system – roads, railways, and airports.” The Right says “Ah, but these things can be regulated by the state but they are much better and effectively run by the private sector.”

There are good economics arguments either way and the ones I am particularly convinced by right now are those put forward by Professor of Economics Mariana Mazzucato in her publications such as this one. She argues that in fact state-owned industry can be a source of growth and innovation in an economy and can be very profitable and efficient. In other words, nationalising strategically is a good thing.

Islamic economics is pretty agnostic on this. It is true that in traditional pre-modern-finance Islamic economies the state sector was relatively small, like most states at the time in fact. However we can’t just extrapolate from that and argue that we should have a small state as the explosion that is globalisation has completely changed the way we do governance and comparing a 10th Century state to a 21st Century state is like comparing Manchester United with Middlesbrough FC (yep, I went there). Furthermore, every Islamic state had a Bayt-al-Mal which would collect and distribute the 2.5% Zakat on every individual’s savings across the country. This was used in a number of pursuits that would now come under an expanded public sector. So there does seem some Islamic basis for an active and largish public sector.

Verdict: NEUTRAL but veering towards YES

Proposal 2: A People’s QE & A National Investment Bank

We have all heard of QE talked a lot by important looking men in suits, but what does it actually mean? Really simply put, the Bank of England popped some money into existence and pumped it into the financial sector in the hope that this would shore up banks, increase spending, and basically kick off our economy again. Sadly that’s not quite what happened. We ended up with artificially hiked up London housing prices and not too much lending still.

“Hang on a second – so you’re allowed to just pop money into existence?” you might say. In short, yes. See www.positivemoney.org for more details. Islamically, the jury is still out on this, but more on that in a later blog.

What Corbyn is proposing is, if we have another financial crisis, rather than pumping £4oo billion into the coffers of the very sector who is to blame for the mess in the first place, a similar effect could be created by investing £400 billion into industries and technologies that are growing rapidly and we need as a country. This would be done by creating a National Investment Bank. Either way, £400 Billion ends up in the economy, but this way is fairer and more useful for the UK long term.

Now Islamically this is interesting. We know that 97% of our money supply is created by banks and is linked to debt. The one bank that can create money without linking it to debt is the Bank of England, and this is exactly what they did for QE as normal banks weren’t lending and, well, someone had to create the money. What an Islamic economy calls for is for a reduction of the money creation ability of normal banks and for this to be transferred back to a central bank such as the BoE, and for a ban on interest-based banking. This would be phase one.

If I lost you there, let me put it another way: let a public bank decide who to invest in and where – rather than a bunch of private unelected bankers, and switch banks back to the old partnership-based/equity-based system that they used to be run on just 50-100 years ago, so that they are risking their own money along with others’.

Phase two would involve a very close and careful look at what exactly is “money” and exploring whether or not we should shift back to a gold standard, digital and cryptocurrencies, or just stick with our current paper money. I don’t think the Islamic debate on this has really matured to the point where we can make a decision on this second phase, and I will contribute my thoughts in a later blog, but in any case, the more important fundamental shift is phase one.

So something like Corbyn’s National Investment Bank, which gives money creation ability back to the public sector, is a good step for Islamic finance, however it is nowhere near the finished product as it does not force banks to give up their power to create money nor does it ban interest-based banking.

Verdict: A Qualified YES

Proposal 3: Shifting budget cuts away from poorest to corporations and richest

This is probably the easiest one of the lot, and really it is the biggest change Corbyn is calling for. Islamic economics always teaches that money should be provided to those who are most needy by those who are most well off – rather than the other way around as it seems to be happening under the Conservative Government. Corporation tax is down as is income tax for those who earn over £150,000, and inheritance tax for those who have assets more than £650,000, and this is at the expense of the welfare budget, the education budget, and healthcare that affects the poorest in society. It’s a no-brainer.

Verdict: YES

Proposal 4: Borrowing for investment

Economically this proposal is sound, as with interest rates so low and the economy in need of some major investment for the future in green energy and digital technologies, now is the time to borrow.

Of course Islamically borrowing is a no-no. There are alternatives available to the government however. It can use sukuk, public-private partnerships, and other equity-based solutions to fund projects.

Verdict: No, but there are alternative ways of raising cash – and they should be used.

Proposal 5: balancing the budget

Corbyn proposes to make sure that the government’s day-to-day income and expenditure match up and so it doesn’t have to go into debt. This is largely sensible however unlike our personal finances an economy is much better compared to a business’s finances, and many businesses remain in debt permanently on purpose as it helps with their growth. So debt is not bad per se, especially if it can be funded using Islamic financial solutions such as sukuk, but yes, it is best avoided especially when talking about the government’s budget.

Verdict: YES

Overall: Islamic economics and an Islamic economy are such a paradigm shift to the way we currently run our economies and do our finance that the steps needed to get there are radical and ground-breaking. Corbyn’s solutions were never going to be that radical, and indeed he has no theological reason to adopt an Islamic economic approach, however his policies are definitely a step in the right direction and refreshingly different from the conventional perspectives shared by other politicians and the media.

What do you think? Let me know in the comments section below!

3 Comments
,

Keep Reading

3 Comments. Leave new

  • سلام.
    A few inconsistencies in this post.

    Firstly, the pretext upon which you have entered this discussion is slightly naive (if you don’t mind me saying). Indeed, the title itself stems from an infection within contemporary Islamic discourse, where people hasten to tie two opposing ideologies together.

    You will find in his policy that there are certain canons which contradict your Aqeedah, what then will you say to this? You will find that he adopts legislation related to the Islamic system (separate to the science) according to his whims and desires as opposed to taking them from the sharia, what then will you say to this?

    Just because Corbyn wishes to implement a few policies that are similar to those within the Islamic Ideology does not make it Islamic. They may share features but are founded on radically different ideas. So we would do well to realise that Islam’s ability to solve problems is not akin to supporting Corbyn, rather it is an alternative to Corbynomics and certainly a better one at that.

    Aside from that, your position on Islamic economics seem very weak and most of your concepts seem to come from positive money (whom I am well aware of). Like for example your comments on money and the manner in which in operates, or in respect to weakness in your hesitation over what currency to use when the gold standard has clearly been mandated in Qata’i texts. Or when you discuss expanding the supply of money as if it is possible under the financial mechanisms of an Islamic ideology which replaces the fiduciary with the intrinsic.

    I do agree (albeit whilst isolating them from the framework of this entire post) with certain proposals and it is true that the economic is clear (even effective) in certain matters. I also agree with your conclusion, which is strange as it has nothing to doesn’t really answer the question of your title. But this is besides the point.

    Just some observations and hope you take them well (you aren’t offended). You can read about my position on Corbyn’s policy here and ‘Corbynomics’:

    https://intellectualissuance.wordpress.com/2015/08/09/corbynomics/

    To be brutally honest, whilst some of his proposals sound attractive, they are not all, economically speaking; peachy. You can also read my book on Amazon, which delves into comparative economics, between Islam and Capitalism: http://www.amazon.co.uk/dp/1517338956/

    Hopefully this constructs a better framework through which Muslims are able to look and I hope you accept the comment onto this post!

    Ma Salaama.

    Reply
    • Jzk khayr for your post – I really appreciate people who disagree with whatever I have written as this leads to a healthy debate and a development of both individuals’ arguments.

      Let me summarise your points as I understood them, and then I’ll comment on each in turn in bold:
      1.Jeremy Corbyn is a secular non-Muslim whose policies reflect this. Some of these go against Islamic teachings. Therefore, rather than talking about Corbyn’s policies and critiquing them from an Islamic perspective we should be providing independent authentic solutions wholly based in Islamic scripture.
      In the UK today there is a mechanism by which systemic change can be brought about and that is through politics and legislation. As I’m sure you’re aware, there is absolutely no way and Islamic economic model will be adopted by the UK or any government (Muslim or not) due to two key reasons. Firstly, the concept is largely untried in a post-global-capitalism world and the railtracks of the financial system are set up for an interest-based system. Secondly, one country independently shifting from the global financial system to its own Islamic economic system will be harmful for that country as it will be one tiny nay-sayer in a sea of conventional finance.
      What I am suggesting is a step-by-step approach, calling for those changes which are most palatable and mainstream economics can get behind, testing the system out, and then calling for bolder changes. It would be the height of hubris and very disingenuous of me to claim that I have a complete picture of how a complex islamic financial system would look like in a 21st Century world, and the only way to move our way towards it effectively and safely is step by step and through political channels.
      Given that, Labour under Corbyn with its innovative economic policy and its collegiate system of policymaking where Islamic ideas can actually be heard, is definitely our best bet politically. The choice we have is either stand on the fringes and shout in vain, or be part of economic society and lead the debate where we want to.

      2. My understanding of money supply is broadly along the same lines as those behind positivemoney.org (as well as, may I add, all respected macroeconomists and Central Bankers).

      Yes, and I’m not sure if that is just a criticism or an observation?! To clarify – I broadly buy into positivemoney’s depiction of the economy though I disagree with them on some aspects (such as on the question of whether banks have any restrictions to their lending – they argue no – I argue that capital adequacy ratios do in practice restrict). On their solutions to the problem I again buy into some of their solutions but of course, as I said in my blog too, I think we need to go much further. Given that we operate in a fiat currency system and this plays in favour of the current banking system there is no way that the gold standard can be brought back any time soon. So their approach for shifting power away from banks to the public sector is a necessary first step whatever we decide to do with the currency in the end.

      3. I am currently undecided on the gold standard, fiat currency debate.

      Yes. You must remember that I am writing for a lay audience – as I make abundantly clear on a number of blogs and with my chatty style! The truth is I have not looked into this as closely as I want to to come to a solid position. I am aware that there is a large school of Islamic economics that does call for the gold standard, however I want to re-explore the economic or Shari’ argument on this. I feel that we may be fetishising gold and silver somewhat as ultimately what gives gold and silver its value is the way society views it. I may be wrong on this and I’ll let you and everyone else on this blog know what I find out!

      4. I argue that expanding money supply is possible under an Islamic economy.

      Yes, as a step towards an economy where money supply and money creation is taken back into public hands. Once that is the case then we can decide what we want to do with it!

      Reply
      • May Allah reward the one who takes criticism’s well, I have a lot of respect for such a person as he is wise and mature.

        1. Well summarised. On your response: Using politics and legislation to make internal change is akin to one destroying a house whilst he is inside of it. As you will find and what has already transpired, Corbyn will quickly realise that politics and legislation are curbed by an ideological interest that is against his socialist/left wing position (we are already seeing this occur and have seen ‘la meme chose’ with many others, ex: trident). As I state in the article on my blog, change must be exogenous and systemic (in that sense radical – re, the term from its original meaning in political science) as opposed to endogenous and superficial. I agree with you, the UK would not adopt it due to an ideological clash. I disagree with a ‘step-by-step’ approach to internal change so as to initiate a bigger one in the future, revolutionaries understand this position well. Muhammad ﷺ did not recommend economic policy to the Quraish in line with his vision for this very reason, he persevered and struggled for an autonomous entity, different to that of the status quo, so as to implement Islam in its totality as opposed to a few policies. I think with the right principles and the ability to assess the reality so as to make/derive a judgment on the matter is sufficient to demonstrate how Islamic finance would work under the Islamic ideology. Indeed, the choice is not to stand as a fringe (whilst shouting in vain) but to lead the debate in economics on the pretext of Islam as opposed to labours leftist vision.

        2. It is merely an observation, their analysis on money is somewhat accurate. I agree we must go further. The gold standard can be returned provided the right conditions – created under the construct of an Islamic authority and effect monetary management. You are right, one would be naive to implement the gold standard in the UK (now at least) as it would be incompatible with the current financial system (Bretton woods happened for a very good reason, political economists will tell you). All I am saying is that as Muslims we need to step away from this gradualist mentality and realise that an ideological shift is not an infeasible prospect, especially within the Muslim world.

        3. Writing for a lay audience does not affirm support for the fiat, these matters are independent. My point here is that the shar; has mandated gold, so our view should be inline with this, whilst I agree it is unsustainable in liberal capitalism it would flourish under Islam. Some of the main arguments against it (which is no longer principle but more to do with policy) consists of deflationary cycles, limited money supply, monetary policy becoming inefficacious and currency costs, all of which I deal with in my book.

        4. The end destination of money is irrelevant here (wether that be public or in other pockets), rather the main issue I was raising is that the IES implements a gold standard and so QE isn’t an option with full gold reserves.

        I can see the point at which I and my brother diverge. Whilst I am looking entirely through an Islamic lens and of a system that is contracted purely on an Islamic Aqeedah – ergo as an alternative to capitalism and corbyn’s vision, it seems you observe Corbyn as an agent that could potentially agree (in the sense of his policy) with Islamic economics albeit whilst maintain the capitalist ideology.

        I hope this comment finds you well and that you take it in the same manner.
        Ma Salaama

        Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Is my job haram?
ACN: What is the Islamic position?
Every British Muslim needs a will. IFG Wills is an affordable quality option entirely online.

Follow IFG

YouTube
Get exclusive tips, resources and courses delivered straight to your inbox from IFG.
  • This field is for validation purposes and should be left unchanged.
Menu