World economies (part 6) - Arab countries

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Arab countries - Koranic economy

Arab countries are unique due to the huge role of religion in their functioning. This applies to both economic and political aspects - Saudi Arabia has the Koran for its constitution, and Iran is a theocratic country led by a cleric Ayatollah. In many countries, there is a religious law, or sharia. The principles contained in the Quran strongly influenced the economy of Arab countries. The most significant meaning is the prohibition of the practice of usury (riba), expressed directly in the pages of the holy book of Islam. It is about interest on loans - religious law therefore significantly restricts the use of capital and undermines the sense of the existence of banks. In addition, in countries with a more restrictive approach to faith (e.g. in Saudi Arabia), all economic changes are carried out very slowly - all due to the need to meticulously check their compliance with the Koran. Despite this, the economies of rich Arab countries (including Qatar, United Arab Emirates, Kuwait) are doing well even in times of crisis - analysts point out that this is the effect of religious law prohibiting usury. There are many reasons for this - after all, the economic collapse in the (Western) capitalist countries was brought about by breakneck speculation with capital, impossible to implement without the existence of an interest-bearing credit system. And Muslim countries emerged from the crisis almost unscathed, because hard religious law prohibits the practice of precisely those practices that were the cause of trouble.

Other Principles of Islamic Economy - quoting from the work "Selected Principles of Islamic Economy and Sustainable Development of Enterprises" by Dr. Mateusz A. Boncy is:

1. Protection of property,
2. Work obligation,
3. Transparency and trust in relations between contractors,
4. Competition and risk sharing.

Expanding on individual points, the author writes:


"It is unacceptable to make a profit without taking risk. (...) Trust in Islam is considered the most important element of social capital, the basis for building relationships between people and between man and Allah. The Koran repeatedly emphasizes that the basic virtue of man is to behave in a manner in accordance with the principles set out in it and in a manner predictable to others. it presupposes the existence of competition among market participants. The Koran, however, indicates two types of competition - "good" and "bad." "Good" leads to the improvement of the well-being not only of the individual, but also of society as a whole. "

When reading studies on the Muslim economy, it is difficult not to pay attention to the presence of concepts and ideals that in our cultural circle are considered to be leftist. The ban on usury directly addresses one of the main reasons for the deepening of social inequalities, i.e. the interest rate on capital. In support of this restriction, there is a postulate to prohibit the use of a poorer person (by interest) when borrowing money. The harmfulness of usury was noticed, among others, by Clifford H. Douglas, creator of the concept of social credit, noted that the value of wages paid is usually lower than the value of the goods they produce, and therefore people cannot afford to buy all the things they have produced. The lack of funds for consumption is used by bankers who operate with interest-bearing money, thus exacerbating the impoverishment of society and filling their own purse. In addition to the prohibition of usury in Islam, there is a condemnation of the so-called gharar, or - simply put - frauds. It is about taking advantage of your own advantage when doing business with someone. It may be, for example, greater knowledge or a better economic position.

Interestingly, the second understanding of the aforementioned gharar concept relates to the prohibition of transactions relating to things that the seller / service provider does not currently have. If you think about it more deeply, this Koranic law makes, for example, contracts for the performance of a work or author's advances illegal. Faced with such difficulties, Muslims often look for ways to conform to the restrictive laws of the Koran. They are supported in their efforts by foreign banks wishing to attract clients from wealthy Islamic countries. Sharia-compliant financial institutions offer their share in a given investment instead of interest-bearing loans - it is about the rules of participation in the development of real goods and the prohibition of speculation with money. In this way, specific banking products are created that can be used freely by believers. Their special feature, apart from the lack of interest, is the even distribution of risk - the bank may also lose on the investment. The same is true for deposits that do not earn interest but represent an individual's share of the profits (or losses) of a financial institution.

It all sounds very beautiful, and in combination with the obligation to give alms (zakat), it should mean the emergence of a state straight from socialist visions. Solidarity, the prohibition of usury, high capital of social trust - all this results directly from the Koranic principles. How is the reality? As you know, the wealth differentiation of Arab states is large, so it is worth taking into account the indicators of the stratification of income and wealth rather than, for example, GDP per capita. Both of these indicators can be expressed as a percentage using the Gini method - I took the ready data from the analyzes of the World Bank and the Global Peace Index. Thus, the income dispersion index (the smaller the better) in the UAE is 31%, in Saudi Arabia 32%, in Egypt 30.8%, in Kuwait 30%, in Oman 32%, in Qatar 39%, in Pakistan 30%. For comparison: Sweden and Norway 25%, Poland 34%, USA 45%, Singapore 48%. As can be seen, the income stratification in Arab countries is not high. The situation is slightly different in terms of the Gini index for differences in wealth distribution - Saudi Arabia 73%, Egypt 69%, Yemen 61%. In the ranking, Japan ranks best - 54%. A poor position - and it is not surprising - was taken by the USA with the result of 80%.

To get a better picture of the social situation in Arab countries, let's take a look at the Human Development Index, which systematizes countries according to the standard of living of their citizens - it includes, among others, education, health and life expectancy. The highest position was taken by the Sultanate of Brunei - 30th place in the world. Qatar was 36th, UAE 41st (behind Poland!), Saudi Arabia 57th, and Egypt 112. In the HDI ranking, the United States - despite worse results in terms of income stratification and overall wealth - beats Islamic countries, ranking third in world. It is clear that greater economic equality does not necessarily mean a higher standard of living. There are various reasons for this - in the case of Egypt, it is both a poor national economy and the fact that there is social unrest. In terms of rich oil countries (Qatar, Saudi Arabia, UAE), several factors can be identified, including the ossified structure of power (sheikhs, emirs), a low level of social protection and the presence of the so-called cheap labor from poor Asian countries.

After analyzing such information, you can ask yourself an intellectually intriguing question: what would Western developed countries functioning on the basis of the principles of the Islamic economy look like? Assuming, of course, that they would be able to reach the current economic level at all, respecting the rules of the Koran. From this doubt, another question arises: is it not precisely the religious restrictions that result in the backwardness of the Arab countries? Or is it only the fault of geographical factors?

The geography of Arab countries

Muslim countries are very diverse in terms of natural resources. In fact, most of them (except Turkey and Indonesia) lie in the desert climate belt. The twentieth century saw the discovery that black gold, or precious oil, was hidden in the barren and hot sands. But not in all of them - that's why the differences in living standards and wealth between countries are so huge. Of course, the mere presence of this raw material is not enough - for a country to be rich, it must properly manage this treasure. The Persian Gulf countries coped with it perfectly, which is why they currently maintain a strong position in the economic world. Some of them - like the United Arab Emirates - are aware that oil will run out sometime, so they are investing heavily in other industries, mainly in new technologies.

The case of the United Arab Emirates

The United Arab Emirates is a truly bizarre country. Its population is over 8 million, of which only a dozen percent are indigenous citizens. The country has the highest emigration rate in the world and ranks second after Qatar in the gender imbalance statistics. The UAE society is a veritable cultural conglomerate, which gives it an international character. The exceptional movement of the population in this country is evidenced by Dubai International Port, serving almost as many travelers annually as London Heathrow.

The UAE authorities are well aware that oil resources, which have driven the country's economy for decades, are depleted. For this reason, many investments have been made in the sectors of new technologies and tourism for a long time. The UAE also focuses on infrastructure, which can be seen from the laboriously built network of highways and railroads. There are also the dark sides of the Emirates' economic boom. It is worth knowing that a large part of the immigrant population in this country are workers from poor Asian countries, often working in poor conditions.In addition, there is a ban on union membership in the UAE and workers are not allowed to strike. Interestingly, despite ultra-liberal tax laws and poor labor legislation, the largest companies in the UAE are state-owned. It is enough to mention Dubai World, a public construction company responsible for the largest infrastructure investments, and Emirates - the famous airline, sponsoring such football giants as Arsenal, AC Milan, Real Madrid and PSG. This clearly shows that the mantra repeated by the liberals about privatizing everything and pointing to Arab countries as an example is not true.

Due to the lack of taxes, many business entities from other regions of the world move their brands there, thus avoiding the need to pay levies where they operate. This is an extremely unethical action, also present in our country - see the recent scandal with a clothing company. It is difficult to understand the morality of people whose company operates in Poland, employs Poles, uses Polish roads, fire brigades, police, ambulance and education (indirectly), and does not give a penny for it. This is euphemistically called "tax optimization" ...

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