A Sharia state and economics

[aamirsaab]

1. The economy is doing well, plenty of investment , firms are happy, and gov't is doing its thing (providing social services) and a high lvl of employment.
2. Although the economy has reached its potential, ppls faith in the economy is overly strong so investment starts to be based on speculation as opposed to real assests.
3. People realize they are being stupid and start pulling out their investment from the firms. Because people (and esp. business folk) are panicy and oft stupid, as more and more people pull out, theyll panic creating a cycle. This will cause a downturn in the economy as less investment means firms have to fire ppl to make ends meat thus making everything seem all the more grim.
4. Investors will stay away from investing until the economy picksup once again, but there is the paradox that unless they begin investing, then it remain in recession

Isn't that what happend with the wallstreet crash? In any case, that would only occur if the country did not export, since outsiders are just as valuable stakeholders as insiders.

You also need to take into account gov't spending. Gov't spending would be the cause of inflation by injecting money into the economy via social programs as it increasing consumer confidence and makes them more risky which may lead to an economic bubble which can be very nasty, esp. if you have to breaks (interest rates):sunny:

Ok dokily. Let's say in the previous example, inflation did occur. This would lead to a price increase, the value of the money has risen AND people have in general more money. Prices rise = leads to less disposable income. However, more demand, thus more jobs, thus more wages etc etc. Cycle continues.

Now we move onto importing and exporting - if you know of a country that has a reasonably strong economy, you're going to want a piece of that pie. Mighty Nice Pie. If you didn't, it would lead to another wallstreet crash, which the West, in general, hasn't experienced for some time mainly because they HAVE been exporting/importing .

So other countries start investing via import/export - the value of the initial country's currency is going to shoot through the roof, since more people are using - economy is now pretty good on a global scale.

The main drawback of using sharia, in terms of business, is that the overall salary figures are going to vary little i.e. instead of average salary boundries 5 - 50 thousand annual salary, it is more likely to be around 15-30 K, simply because companies won't be making Super-sized profits so technically there is less to 'give away'. That being said though, the job prospects and the fact that there is more disposable income allows the lower end salary barrier to be much higher. Essentially, you'd no longer be keeping the rich richer and the poor poorer. It'd be around the middle for the large majority of people.

However, I do readily accept that since the nature of society nowadays is now dominated by greed and consumerism, they'd most likely not take sharia business principles and instead use the existing method. I guess since the exisiting system is so well established, on a global scale, changing it would constantly be met with challenge simply because humans are not after what is equal. Heck, If they were, we'd probably be under communism...

PS. Good to see yaa again. Was afraid you had gotten bored and given a wave of a hand and a "meh" to this topic :giggling:

Hahaha. It's been some time since I've had an intelligent/academic discussion on the internet (apart from the previous one with you on the psychology thread), so I try and take the oppurtunities as they come - the internet, in general, is populated by the uneducated (just look at the comments on youtube!) - I get lonely and bored from time to time :'( .

 

[Isambard]

Isn't that what happend with the wallstreet crash? In any case, that would only occur if the country did not export, since outsiders are just as valuable stakeholders as insiders.

That it is....kinda..haha. Bit of a complex subject but yes, it was a cause. Its called a bubble when you are producing beyond what you should be.

Keynes identified the problem and wrote solution to it called Fiscal and monetary policies which the former involves interest rates.

You could get away by having outsiders, but it would very risky to leave complete stability of your economy in the hands of what may happen in foreign markets as you ahve no control. Just one foreign war, or one famine in a wrong place and you're economy plunges into a toilet. Interest rates are much safer

Ok dokily. Let's say in the previous example, inflation did occur. This would lead to a price increase, the value of the money has risen AND people have in general more money. Prices rise = leads to less disposable income. However, more demand, thus more jobs, thus more wages etc etc. Cycle continues.

Thats only if you have economic progress with inflation and if the progress is greater than inevitable inflation. Simple gov't spending w/o method of control will lead to a greater output in inflation in the longrun and inflation itself simply means depretiates the value of money hence why you need more of it to purchase something. Your "real money" is lessened for every upward movement in inflation/money ration.

The cycle is downward :-\

Now we move onto importing and exporting - if you know of a country that has a reasonably strong economy, you're going to want a piece of that pie. Mighty Nice Pie. If you didn't, it would lead to another wallstreet crash, which the West, in general, hasn't experienced for some time mainly because they HAVE been exporting/importing .

So other countries start investing via import/export - the value of the initial country's currency is going to shoot through the roof, since more people are using - economy is now pretty good on a global scale.

This is true, but I would argue that the diversity of the "ideal shariah state" would ensure that if any did form, it would be hardly consentual and only because on group has the most power meaning rivals would make the political arena within the country unstable thus financially unappealing for foreign investment. But that falls into politics so best to avoid here as we are dealing with ideals (everyone agreeing) hehe.

The main drawback of using sharia, in terms of business, is that the overall salary figures are going to vary little i.e. instead of average salary boundries 5 - 50 thousand annual salary, it is more likely to be around 15-30 K, simply because companies won't be making Super-sized profits so technically there is less to 'give away'. That being said though, the job prospects and the fact that there is more disposable income allows the lower end salary barrier to be much higher. Essentially, you'd no longer be keeping the rich richer and the poor poorer. It'd be around the middle for the large majority of people.

However, I do readily accept that since the nature of society nowadays is now dominated by greed and consumerism, they'd most likely not take sharia business principles and instead use the existing method. I guess since the exisiting system is so well established, on a global scale, changing it would constantly be met with challenge simply because humans are not after what is equal. Heck, If they were, we'd probably be under communism...

Well the system that you mention with lesser inequality has been implemented to varying degrees in some European business models (ie Germany) and Japan had a strong tradition of it as well.

You are correct that greed is a main reason for the switch to the American model of business but there is also the strange change in status quo on the background economic noise, that is, prior to the 70s, an event such as Stagflation was seen as a logical impossibility (as raising inflation with raising unemployment makes no sense on the surface) in which case the Keynesian state would be ideal, and was until the 'impossibile' not only became possibile, but it became the norm!

I personally cant tell you why, but something that was a freak of economics is now standard in countries that practise re-distribution of wealth and increases with the more re-distribution leading many politcians and economists to turn toward the uglier, more unfair neo-liberal approach which is greed-centered.

Hahaha. It's been some time since I've had an intelligent/academic discussion on the internet (apart from the previous one with you on the psychology thread), so I try and take the oppurtunities as they come - the internet, in general, is populated by the uneducated (just look at the comments on youtube!) - I get lonely and bored from time to time :'( .

Hehe Youtube? Cmon now! Getting irritated that you cant find any intellegent convos youtube comments is like going to a dingy alley downtown and being surprised the bums smell

haha