The recent book Capital in the Twenty-First Century by the French economist Thomas Piketty is creating a theoretical revolution in modern-day economics. Its main conclusion is that capitalism, as being practiced in the West, carries within it the seeds of its own destruction through uncontrolled wealth inequality and pervading poverty, which are driven by greed and the natural selfish desire to accumulate wealth and power. Piketty blames high interest rates and rents for the capitalism-associated wealth inequality. As a solution to these problems, Piketty suggests a global wealth tax on the rich and superrich in an attempt to both equalize wealth distribution and to provide funds for governments to spend on public projects and to help the poor. Such help would include the provision of a survival safety net, health care, adequate nutrition and public education.
Amazingly, an economic system very similar, if not identical, to the one suggested by Piketty has been tried and applied successfully over many centuries. It worked well enough to provide the economic basis for one the greatest civilizations that dominated the world and lasted for almost 1000 years. That economic system is the one introduced by Islam.
Islam's economic system has three main components: an annual tax on wealth, combined with self-imposed limits on interest and rent, and a ban on usury. The Islamic civilization, at its height, was characterized by some of the greatest achievements in the history of man including major advances in science, medicine, architecture, philosophy, astronomy, mathematics, etc. It covered the area from Northern India and Western China to Spain and Southern France. The achievements realized during that Islamic golden era enabled the emergence of European renaissance, the industrial revolution and Age of Enlightenment that made Europe and the West what they are today.
Many commentators, including many well-respected economists, agreed that the system suggested by Piketty could provide a solution to today's capitalism-associated problems. However, everyone can see that such a system would be difficult to introduce, or be approved, by present-day legislatures in the West and especially in the United States. The US congress is unlikely to approve any such scheme that, by necessity, would raise taxes on the rich and the superrich, given that the rich and superrich control the congress through their funding of public elections. In addition, many observers are afraid that the application of Piketty's system to capitalist societies could inhibit innovation and reduce the creation of new and successful businesses.
These fears are easily negated by reviewing precedent: the unparalleled success of the Islamic economic system when a system identical to Piketty's was applied. In Islam, Moslems are required to give 2% of their total net worth, not income, annually to the poor as Zakah. Not surprisingly, this is the exact same annual percentage that Piketty suggests to be taxed on wealth from the rich and superrich. The big difference between the Islamic system and that suggested by Piketty is that in Islam, the money is given willingly and without coercion. In Islam, it is a matter of pride that one should help the poor and give his share. Giving Zakah is psychologically rewarding, enjoyable and desirable. Moslems pay their Zakah because they want to get closer to God and to ensure a successful after-life. In the Islamic system, selflessness replaces selfishness; love and respect for the poor replaces hate and disrespect for their status in life. There can be no chicanery or cheating; it is a self-imposed system. In Piketty's proposal, the money will need to be paid as a government-imposed tax. As we all know from experience, people will use every trick in the book to avoid paying it -- just as they do now with their regular taxes.
When the Islamic system of Zakah was applied throughout the Islamic states during the Islamic civilization, there were no unacceptable levels of income inequality. The poor were respected and their needs addressed. The highest levels of productivity and innovation were achieved and social cohesion was at high levels while discrimination and poverty were minimal. Remnants of the Great Islamic civilization can still be seen today in Cordoba, Grenada, Sevilla and the rest of Andalusia or Islamic Spain.Islam is the latest, most modern and most developed of the three main monotheistic religions. Clearly, its economic system foresaw the problems that can result from unrestrained capitalism and provided adequate solutions to address them. Unfortunately, Islam as a religion, is today misunderstood and unappreciated even by Moslems. Economically though, it seems to provide what we had to wait 1,400 years to discover.