Labour Crisis in Capitalism

"That is because they say trade is like usury, but Allah has permitted trade but forbidden usury" [: 2:275]

The above ayah is very well known amongst the Ummah. The discussion often centres about the impact of the ayah on the individual level. Consequently, the legitimacy of mortgages is a source of much controversy. The concept of trade is also discussed in an individual context. The narrations of the Prophet (saw) praising the one who works with his own hands to earn his provision and condemning the one who cheats are often mentioned in the course of this subject.

However it is a sign of dominance of secularism in Islamic Lands, that the above ayah and other ayaat like it are not a point of discussion amongst Muslims when it comes to seeking societal solutions. Indeed the secular onslaught is so strong that when these ayaat are read, they are approached from an individualistic context. The correct approach would reveal that these Islamic texts discuss trade in a general way and therefore encompasses many issues that need consideration, some of which are listed below: 1) The limits on the types of items allowed for trade 2) The impact of the market on trade 3) The impact of monopolies on trade 4) The impact of currency fluctuations on trade 5) The impact of tariffs and custom duties on trade 6) The impact of price controls on trade 7) The impact of financing on trade Indeed there are hundreds of other issues affecting trade that need to be considered as a result of the ayah. Allah (swt) has not just mentioned trade without mentioning the detailed answers to the hundreds of issues affecting it. These are readily found in the Quran and the books of the Sunnah.

To convince the detractors of Islam who still claim that it is not possible for a 1400 year old religion to solve modern day problems this article will demonstrate the manner in which Islam solves the problems of labour crisis

Strikes, pay disputes, are all signs of the continuous labour crisis that exists within Capitalism. This inherent injustice comes from the freedoms that form the basis of this ideology, and most importantly the freedom of work. To rectify the injustices caused by this freedom external patches were added. The fire fighters strikes in Britain highlights the labour crisis that exists in Capitalism, based on this the following points are made:

Firstly: There is no crisis of labour in Islam, as in Capitalism. This is because in Capitalism wages are set in accordance to the lowest standard of living. As a result the workers are oppressed by their employers, while they toil and sweat to achieve a very basic level of living.

Socialism came to rectify the ill effects of the Capitalist system by setting the hours of work, the minimum wage etc. This forced the Capitalists to rectify the problems created by the freedom of ownership and work which are both the basis of the Capitalist system.

To rectify the problem they introduced certain measures that would supposedly protect the worker giving him certain rights, such as the right of assembly, the creation of trade unions, and the right to strike. Added to this workers were given pensions upon retirement and the unemployed were given social security. The labour crisis in reality emanated from the basis of Capitalism that gives freedom of both ownership and work, and then basis the level of wages in accordance to the lowest standard of living. To attempt to correct these problems they introduced measures to silence the workers and to prevent the collapse of Capitalism.

To claim that these measures corrected the faults of a system is not nothing but a lie, in reality these measures are only an attempt to hide the true face of Capitalism and its inherent injustice and to silence the workers.

On the other hand this does not occur in Islam. This is because Islam does not have a freedom of ownership or work but has made work and ownership permissible. Upon this there is a big difference between the permissibility of work and ownership and the freedom of ownership and work. Islam makes the work or ownership in itself permissible but restricted it within confines that specifies how one works and what he owns. So the Muslim for example has the right to own but what he owns must be in accordance to the Islamic Shari’ah. Similar to this it is permissible for the believer to work, but what work he chooses must be in accordance to the Shari’ah which Allah (swt) has revealed. The permissibility only falls upon the very basis of work and ownership. However freedom of ownership and work means one can work and own whatever he wishes.

In Islam we will not have a labour crisis as is the case in Capitalism. As ownership is restricted and any further building of wealth is all constrained by the rulings of the Shari’ah. As stated before work is permissible, but the details of what work is allowed, and the relationship between the employer and employee and so on are all clarified and the Muslim must conform to these restrictions. In other words work and ownership are restricted with rulings that remove disputes that normally occur in the Capitalist system. As this is the case, Islam does not require the external patches to protect the employer or employee as it does not have the freedom of work, and these protections and measures came to attempt to correct the injustices that were created by leaving man to work as he wishes and how he wishes.

Secondly: Workers wages are estimated according to the value of this benefit in the society in which they live, and not the basic level of living as is the case in Capitalism. Based on this the employee will not be exploited by his employer, as his wages would be in accordance to the value or benefit of his efforts and how this benefit is measured in the market. If the employer and the employee differ on the estimation of the wage then the wage is decided by an external body of experts, and the word of the experts is binding. However it is not permissible that the ruler set or fix wages, based on the analogy of the prohibition of fixing the price of goods in the market.

Thirdly: The Capitalist system to rectify the exploitation that is inherently caused by the foundations of its system introduced rights to the workers. From amongst them:

Right of assembly: It is permissible as the Shari’ah has made it permissible for the citizens of the Islamic state to assemble and discharge whether they are workers or not.

Forming trade unions: It is forbidden to form trade unions, because taking care of the affairs of the citizens is the right of the caliph alone, and the trade unions is a body that takes care of the affairs of the workers it represents.

The right to strike: Strikes are forbidden in the Shari’ah of Islam. This is because the contract of employment is a necessary contract that gives no right for either side to break a contract that was agreed upon. So the employer must perform what he was hired for and if he does not he doe not deserve his wages.

Pensions and social security: Pensions for the retired and social security for the unemployed are all external patches to correct the inherent injustice of Capitalism. In the Islamic economic system, the one who is not able to work deserves to take what suffices him from the state (nafaqah), as this is the case there is no need for either social security or pensions. These duties are fulfilled by he state alone and is not from the responsibilities of the employer. For example health care, that is provided by many employers to their employees and families, is the duty of the state alone. Based on this these services have nothing to do with the relationship between the employee and employed.

To conclude: The labour crisis that exists in Capitalism does not exist in the Islamic economic system. This is because the basis by which wages are set differs in the Islamic economic system. Furthermore Islam makes the responsibility of taking care of the affairs of the people in general and specifically the poor, disabled, and unemployed of the state alone. This differs in the Capitalist Democratic system, as the state structure differs between the Islamic and democratic Capitalist state. The Islamic state is one entity and not made up of many entities that exists in the Democratic system namely what they call “civil society”.

Detailed Analysis

The relationship between wages and price have long figured in capitalist theories of economic growth, because if prices rise then it reduces the amount of goods and services which can be bought on wage structures at that particular point in time. Thus it is inevitable that workers will seek wage increases in order to meet the rising prices of commodities and services and to meet the cost of basic needs such as housing; as evidenced in the fire-fighters’ strike. However an increase in wages could also create inflation not only because it would increase the costs of production, which in turn means an increase in the price of commodities and services but it also means that there is too much money chasing too few goods. Hence western governments seek to control inflation by controlling wages i.e. to manage the amount of money in circulation by controlling what workers are paid. In the public sector western governments have substantial control since it pays the wages of public sector workers directly and indirectly. Hence the attempts of the Fire Brigade Union to even see a 16% pay-rise have been sabotaged. Also the recent pay rises for teachers and other public sector workers were calculated according to this criterion. However in the private sector western governments have less control and therefore issue warnings concerning excessive wage rises in business and industry, warning that pay awards would simply increase inflation and result in higher interest rates. This has meant a growing disparity between the rich and the poor because of the difference of wage structures in the public and private sector.

The estimation of price and wage structures are two separate matters, which the capitalists confuse and use to exploit the workers. This is because they estimate wages based upon the price of goods and services, which inevitably leads to exploitation because employers can control the worker’s wages based upon the pretext of the decline and increase in prices. Indeed this is the basis upon which the current negotiations with the fire-fighters have been conducted. Consequently they have been offered only an 11 percent increase over two years, which in real terms still doesn’t bring their salary in line with inflation, but is just enough to satisfy the most basic standard of living. The truth of the matter is that the estimation of wages should not be built upon price, rather wages should be paid in relation to the employer’s benefit from the effort of the employee and not according to a commodity they produced. The proof of this is evident in the nascent tourism industry, which produces services and thereby increases the wealth of the country. However a doctor or fire-fighter doesn’t produce commodities that directly increase the wealth of the country, rather they provide a service to society. Hence, wage estimation is based upon the benefit a worker brings to society and not upon the price of commodities. Thus it contradicts reality to estimate wages based upon commodity prices because wages are paid irrespective of whether people produced a commodity or not, whether it was a pharmaceutical, computer or any other type of tangible commodity i.e. not all labour produces tangible commodities as is the case with fire-fighters hence it is irrational to estimate wages upon price and therefore it is an impractical method since this principle of wage estimation cannot be applied for every vocation.

This erroneous method that is used in estimating employees’ wages is given further impetus because of inflation, which is an unnecessary evil that could be avoided if nations adopted the gold standard. Instead, the western economies have since 1971 implemented the Fiat standard, which is also known as the paper money standard. The Fiat standard creates problems in the economy because a tangible asset such as gold or silver doesn’t support the paper money’s value. This is the opposite situation to that of the gold standard. Rather the value of the paper money standard principally relies upon the confidence of people in the general management of the economy and as a result western governments can print more money than they actually have, so long as they control inflation. However if a nation is to truly avoid inflation then it should avoid printing too much money. Under the gold standard this would be a natural by product because governments would fear that if they issued too many banknotes, then they may not be able to meet the demand for gold, hence nations would maintain a sane ratio between what they issue in terms of banknotes and what they have in their gold reserves. Today however the British government issues more banknotes than it actually has in gold reserves and this creates inflation. In turn this creates unnecessary suffering for the people because prices are subject to inflation and wages are calculated according to the market and inflationary forces.

Indeed the fire-fighters strike reveals just how pernicious the capitalist system actually is because we find a disparity in how wages are calculated throughout British society. In the case of fire-fighters and other public sector workers their wages are calculated according to prices in the market as well as the minimum cost to stay alive, and work. Whereas the salaries of politicians, and the leaders of business and industry are calculated according to the benefit they bring to society. If the capitalists apply this principle to the fire-fighters’ wage demands then they would agree to a pay rise in line with or above the rate inflation. If the criteria being applied to fire-fighters was a true economic principle then the capitalists’ salaries would be just enough for them to survive upon. However, we find a disparity and hypocrisy in how they estimate wages, between the people who have the ability to exploit and those who are vulnerable to market forces i.e. the general populace. Therefore the capitalists seek to control inflation and their own wealth by subjugating the public sector workers to wages that are barely enough to survive upon. This is absolutely clear as the capitalists intimidate the fire-fighters into accepting the recommendations of the Bain report by threatening legal action. This is despite the fact that independent studies by people who are qualified in calculating wage structures have recommended that the fire-fighters’ demands for a pay-increase are reasonable. This comes as no surprise because industrial relations in the capitalist nations have always been characterised by oppression and exploitation, which is why the trade union movements have risen to fight the injustice of the capitalist economic system.

The Islamic economic philosophy ensures the rights of workers and prohibits their exploitation. The Messenger of Allah (saw) said;


“If any one of you employed a worker then he has to inform him of his wage.”

He (saw) said;


“There are three persons of whom I am their opponent on the Day of Judgement; a man who gave (a word) in my name then he deceived, a man who sold a free person and devoured his price, and a man who hired a worker where he received (the work) from him in full and did not give him his wage.”

These ahadith establish the obligation of the employer to pay the employee and further prohibit the exploitation of the worker. Wages are therefore calculated according to the benefit the worker brings to the employer and society; hence the worker’s wage is not linked to the price of commodities or what is basically required to survive and work. Rather it is estimated according to the benefit obtained by the employer and society, so the wage of a manual worker and a professional worker would differ because a professional worker brings greater benefit to the employer and society. In the case of the fire-fighters dispute this means that a fire-fighter should be paid more than a manual worker due to the professionalism of their vocation and the benefit they bring to the community. This calculation would be left to those who are qualified to make such judgements. Thus it is prohibited to estimate a worker’s wage based upon the minimum standard of living because this is exploitation. It contradicts both the Shariah and the reality of life to estimate wages based upon prices in the market at any point in time, irrespective of whether prices rise or fall because they are separate matters. This deceptive link is further obliterated because the Islamic economic system is based upon the gold standard and therefore eliminates inflation altogether thereby ensuring economic stability and steady growth.

Indeed income distribution and the economic problem is viewed in the context of the gold standard because Allah (swt) said;


“Those who hoard gold and silver and do not spend in the way of Allah give them tidings of a painful punishment.” [At-Tauba: 34]

Thus Islam permanently linked the Shariah economic rules with gold and silver, and prohibited hoarding since this leads to economic decline. Without doubt a restriction in the amount of money circulated in the economy would inevitably precipitate a fall in wages and create unemployment, as employers wouldn’t have the financial resources to pay their employees. However the capitalists fail to address the skewed distribution of wealth in society, instead they institutionalise income disparity by hoarding wealth and subjecting workers to wages that are pitiful on the pretext of controlling inflation even though there is sufficient money for everyone in society to enjoy a high standard of living. The proof of this is evident in research conducted by the Institute for Public Policy Research who found that 10 percent of the population owned over half of personal wealth in this country, and that the top 2.4 million households owned assets worth £1,300 billion while the bottom 12 million households only owned assets of up to £150 million. Furthermore, the capitalist economic system can never ensure fair income distribution because it incorrectly views the economic problem as being related to supply and demand, rather than ensuring the distribution of wealth amongst the people. The Islamic economic system prevents this type of gross income disparity by prohibiting the hoarding of wealth and ensuring wealth circulation, which would ensure high income and employment. Allah (swt) said;


“Lest it circulates solely among the wealthy amongst you.” [Al-Hashr: 7]

As a result the Khilafah experienced unprecedented economic prosperity such that during the time of Khaleefah ‘Umar ibn Abdul Aziz in the 7th Century CE, the state could not find one poor person in need of Zakat. This standard of living could only have been realised through the comprehensive implementation of Islam. The Khulafaa would ensure that the needs of the workers were fulfilled before their own needs had even been met.

Oh Muslims! The fire-fighters’ strike demonstrates how the capitalist system exploits and enslaves the people because kufr is characterised by injustice, leading to a miserable existence for the vast majority of people. It is incumbent upon you to put out the fires of capitalism by presenting the Islamic ideology to western society so they come to know of its truth and justice.
 

Further Reading

Wealth Creation or Wealth Circulation

Meaning of Taqwa

Taqwa and Politics