Solution To Economic Crisis From The Qur'an

Following two terrible world wars, the "post-war rapid growth model" finally failed at the end of the 1960s. In other words, programs aimed at increasing productivity still further within the framework of that model collapsed.

 

After The Oil Crisis

The troubles that began in those years and erupted in the 1974 oil crisis did so when the growth rate in developed economies began to slow down and profit margins to fall. The situation was so bad that in OECD countries alone, which consist of developed nations such as Western Europe, the United States, Canada and Japan, unemployment reached tens of millions. In such an atmosphere, capital that was unable to find investment opportunities in the real sector began seeking profits all over the world and turned instead to developing countries. In this way, it was the finance sector, together with the possibilities and advantages bestowed by technology, that developed the most rapidly over the last 20 years.

Capital that turned its attention to developing nations during that process obtained great profits from those regions. The international companies that set their eyes on those countries invested only a very small part of the profits they made in real production. However, money can only increase its value when used for production, and that would have made it possible for those countries to repay debts and develop their economies. However, a large part of the loans extended were used unproductively, and yet more re-entered the international finance system because of corruption. The way that developing countries' capital was kept away from those areas that most use could be made of it brought them face to face with great difficulties when it came to debt repayment.

 

The Dilemma of Accumulated Debt and Loans

Economies unable to repay accumulated debts have sought a solution in increased borrowing, and have been trapped in a vicious circle from which there is no escape. That was then followed by further unproductive borrowing and higher interest rates. Trying to borrow to repay loans led to a process of further borrowing caused by interest repayments. As the productivity of real investments fell during this process, some investors were forced into bankruptcy, and others to seriously reduce the scope of their activities.

Money that retreated from the market caused producers to have problems selling their products and to be unable to repay their bank loans. Banks and financial organizations that are unable to get their money back from industrialists try to pay their own debts to other international lenders (international capital) by using deposits belonging to the public. In such a situation the slightest rumour (if we bear in mind that rumours have a serious effect on economies that are not performing well) leads to customers who want to withdraw their money being unable to do so. The bank will then announce that it has gone bankrupt and turn over the whole of its debt to the state.

 

Argentina and The Unbearable Weight of Interest

States suffering under such a burden again seek a solution in further borrowing, this time falling under a greater interest burden. Yet that is still no solution. The important point is that it is only possible to pay back loans by means of the use of capital in real production.

The fundamental cause of the crises in the 1980s and 1990s was the fact that such capital was not used in real production in sufficient quantities.

The latest example of a country caught in the interest trap is Argentina, whose economy collapsed under foreign debt of 130 billion dollars. Business closures, the hungry unemployed and desperate people unable to make their voices heard all give rise to social unrest. In fact, the social problems that have already started and are likely to continue are being followed with great unease.

First of all, loans must not be eaten away unproductively or unjustly, but must all be benefited from in the field of production. Industrialists must keep prices low and raise quality thanks to these investments. In that way imports from other countries must be reduced, and the country's exports raised.

 

The Solution To Economic Chaos Lies In Qur'anic Morality

In the same way that a country which sees increased cash inflow into its economy can easily repay its debts, it can also easily become a trustworthy investment destination due to the confidence that it inspires. It will then attract capital, by investing in profitable enterprises and making gains. In this way, that country's companies will gain value, its currency will become stable, unemployment levels will fall, and most important of all, the public will feel confident again and look to the future with hope.

The deep chaos caused by the interest economy has revealed itself in many countries so far, and has caused the heavy price to be paid by the public in those nations. These problems, caused by individual interests and lack of ethics, refuse to disappear from many countries, and clearly demonstrate that the solution lies in the morality of the Qur'an. In the same way that Allah has condemned as a sin the unjust consumption of others' property and the waste of existing resources, so He has also forbidden people to ignore others and plunge them into difficulties for the sake of their own gain. The solution to the problems plaguing the economy lies in all of mankind abiding by the morality of the Qur'an, which recommends a human model
that is productive, just and enterprising.

In the same way that an atmosphere of peace, security and justice can only come about when people live by the morality of the Qur'an, it is possible to resolve the problems in the economy and increase every individual's standard of living by implementing that morality in every sphere of life.