Re: North's vicious circle of Poverty

[_Waziri_]

Re: North's vicious circle of Poverty

In the 26/07/08 edition of Weekly Trust Newspaper is the cover story with the above title, which discussed the poverty phenomenon in Northern Nigeria in the light of the much attention the issue has garnered in recent times, especially when the Central Bank of Nigeria's governor,  Professor Charles Soludo drew attention to it - though reiterating what he once said a year past - at a lecture organised by the Northern Development Initiative in Kaduna,  some weeks ago, asking the federal government to declare the situation in the North, a national crisis.

Many people differ on the different causes and solutions to the problem as it affects the region and the country in general. While some of us are quick to identify with positions as that of Mallam Salihu Lukman, a development Economist interviewed in the same edition of the paper, which squarely blamed it on the leadership of Northern Nigeria, that cannot, among other things, fully account for the 17 Trillion Naira it collected from the federal coffers between 1999 to 2007, in the light of efforts at poverty alleviation. Others, as our brothers across the Niger, will rather blame the religion and culture of Northerners as the main culprit, with the justification that the Northern leaders are not any worse than the Southern leaders and yet the Southerners are better up, so the explanation must be in the values, religion and culture of Northerners, or at a stretched imagination, laziness – as seen in certain statement issued by Arewa Consultative Forum (ACF) and reported by The Punch of 31/07/08. This perception is further strengthened by the content an interview conducted by the Weekly's reporter, Ja'afar Ja'afar and published in the same edition, under a title that says it all, 'I was given N50, 000 capital, but I married with it', and described Mallam Garba, the interviewed, as  "a real-life stereotype of a Hausa man.", who cares not about, "what to eat or what to wear" and is "very indifferent, un ambitious and a man with a simplistic outlook to life."


This piece intends to scrutinise the two positions advanced, in the hope of providing insight into the nature of the processes that led the North to this sorry state economically.

Here it is important to understand the fact that there is a wide gap of difference between, culture, religion, values on one side, and in this context, from world view, which typifies the behaviour of an average Northerner like Mallam Garba. The truth of the matter is religion or culture has little to do with human taste, instinct and desire to survive on a certain standard. It only governs choices on how to achieve a standard. This is why we see a lot of Northerners who are not like Mallam Garba in style, despite them sharing same religion, culture and values with him.

A close examination will reveal that the mechanism of progress that made the Hausa the most vibrant and enterprising nation in the whole of West Africa, at a time of the past, is still here. It is also not laziness as, today; nobody comes from any region to farm for them the food they survive on daily.  It is like those seeking for an answer to why the Northern Nigeria is in its state now despite the fact of its elite holding power in the composition of the present Nigerian nation-state for over 40 years, should try some reading in classical power and relational politics and its implication on groups' socio-economic development. In this, one will see that the North is where it is today only in respect to the popular saying that one cannot eat their cake and still have it as it is with all other natural phenomena.

The seemingly correct explanation is the Northern elite, who are responsible for  expanding the paradigm and worldview of  average Northerners situating them at par with their counter parts across the world,  got power, in the composition of Nigerian nation, in the late 1950s and in order to keep to it they chose the option of eliminating the middle class among them, because the likely thing to happen is the middle class, if allowed, might grow in economy, influence and strength enough to wrench power from the upper class. This is what happened when Gowon in the early 70s and Shagari in the late 70s, allowed their own to grow strong in the military. They just did away with them in 1975 and 1984 respectively and clung to power making sure they did not make the same mistake their predecessors made. They continued the practice of axing their own economically, intellectually and otherwise.

On the other side, the other regions, with especial example of Awo of the South West, were not faced with anything of political control of Nigeria and as such they continued to strengthen their middle class as the upper class realized the need to empower their own as a comprehensive defence against the onslaught of Northern upper class elite. The middle class served as an armoury to the upper class. They continued the battle for them until the early nineties when IBB annulled the popular June 12 election.

Then came the climaxes, the June 12 was ethnicised and regionalised, the South West had a good number of media outfits and middle class individuals with the right education and economic resources to sustain the fight while in the North of early nineties, very few among the middle class could do well in countering the others in the intellectual fight at the level of resources. At the end of the day, after the demise of Abacha, the Northern elite were confronted with no option than to dash power to the South West in 1999. They have won the fight.

When Obasanjo realized his bearing and started targeting these Northern elites it still remained that they had none to defend them save the few middle class created during Abacha regime under the Buhari PTF. Many young Northerners then have merited contracts and made a couple of millions. They were the ones who established focused media houses, maintained Newspaper columns, and started getting back at Obasanjo and his policies.

And of course, the era of Obasanjo was the era of South West participating in national politics. Even though they already have a vibrant middle class, and sound economic structure that benefited from the regime's economic considerations at the centre, it is evident that they also suffered from what the North earlier on suffered from as their elite started a war of control of the region's social and cultural resources. This war recorded many casualties as even people like Bola Ige had to take exit, brutally killed.  Also the control politics did not allow their governors to work in unison with progress of the region. In fact they were rated among the worst in performance.
On his part, Obasanjo had to seek for his loyalist outside his own region because trusting and elevating his regional men in the centre may lead to excessive ambition which in turn may result in a palace coup akin to what happened to his predecessors like Gowon and Shagari and their people whom they trusted with the leadership of the military.

This is about the story of Northerners in Nigeria and what came up in their economic development. It is also the reason why there was no time when Northerners talked much about their economy more than the time of Obasanjo's leadership. Being it they left the leadership position of the country and the upper class were being attacked by Obasanjo mercilessly. Of course, it was also then that the leadership in the North achieved most, more than the many years it clung to power at the centre.

This is why some of us think the North can have meaningful economic development only if power is made to stay away from its elite for several years while others think, Northerners may have learnt their lessons and will now work assiduously to develop the region. 
The whole of this truth is particularly important to stress here given the pronouncements of the governor of Niger State, Alhaji Mu'azu Babangida Aliyu, who tried to attribute the present economic predicament of the North, as widely reported by Newspapers around the country, to an obscure international conspiracy.

If indeed there was a conspiracy it was a Northern Political Class Conspiracy which lost itself in the game of control politics over time.

As it is now the solution to the problem is not one of a short term as the generation of youths without the relevant  skills necessary for survival in formal economy now as the ones to be produced in the recent future are very much in the league of the 86% -  quoted percentage of the poor - among us. So an affirmative action, with the intent of taking care of our distant future, which appeals to laws and legislations, is the only options. The solution, though good, is not totally in the much taunted, revitalisation of the Agricultural Sector in the North, for Anambra State that is among the highest in the country's economic index is not an agricultural haven or oil reservoir. After all the Agricultural Sector, if revitalised, may end up serving the economic need of others if there is no enough skilled manpower with right national and international market strategies among the Northerners. Here it is particularly important for the government to invest hugely in human capital development as Northerners need to have more of a world class exposure in various disciplines both academic and entrepreneurial,  necesary for survival in the capitalist world.

We certainly, also, cannot continue in the pretentions of creating welfare states. No how can a government continue to afford a free education for all as the Bauchi State House of Assembly is recently heard to be saying it would put Qur'anic Schools and its Almajirai in the state's budget. This is not practicable as even the formal Western Type of schools that are government owned are not maintained adequately. In fact the example of Kano State which tried to do that as reported in the same edition of Weekly Trust is not encouraging.

So instead of us to continue sailing the dream boat, legislations must be made and enforced that will compel parents to bear more the responsibilities of the children they produce – since religiously it is their duty - as they sometimes recklessly and indiscriminately marry without regard to religious injunctions in keeping and maintaining a family. Thus they send the children out to others cities, hawking and scavenging as Almajirai, in the Qur'anic Schools they could always find in their own villages. It is these Almajirai , growing in the streets with a very bad taste of what life is, with wrong upbringing, wrong heroes, wrong worldview and wrong skills of survival in the 21st century world, that  form the bulk of the poor people in Northern Nigeria.

Also such legislations must lead to the creation of agencies, as in other Muslim African countries, like Egypt, Libya and Tunisia, which will be saddled with the responsibilities of accessing the economic and mental worth of anybody who intends to marry or add another wife as many among us are tilted toward abusing the privilege associated with polygamy by placing satisfaction that comes from their being with many wives above their responsibilities of seeing to the maintenance of the family. They plan to produce as many children as they can without planning to give them the best as the religion requires of them. As such we end up with many children that cannot be catered for adequately by their parents, growing in the streets with a terrible taste of what life is, with no abilities to think and save themselves or even those around them in the context of the challenges daily living presents.

It is my humble opinion that family is the barometer of all communities, and keeping political correctness aside, we will need to understand governance as meaning making attempts to make subjects of a defined community disciplined and responsible in all of their dealings and this starts with the channels and processes of procreation in the community. Failure to address issues at this level signals the triumph of anarchy as it is seen in the threat we are facing from the monsters of poverty in Northern Nigeria due to, largely, among other things, our neglect of legal provisions in the formation of family units in both religion and our secular living.

[HUSNAA]

Poverty in the north has not created a vicious circle thank God. If it were a vicious circle then there would be no way out literally. But there is a way out, since the poverty doesnt feed on its self. The way out is to get selfless leaders and give everyone a good education, slowly and surely the poverty will eradicate itself.

[Dan-Borno]

welldone uncle waziri, i wouldnt have make my earlier
thread on finding whose fault over the north's poverty
i had known you were busy making up this wonderful
piece.  i read it for the third time, and on each circle i
kept on stumbling on something new which i havent
thought of at all - thanks to old age and wisdom.

earlier on, in my thread on who to blame, i strongly see
our religious leaders as mastermind of the serious at
hand, though uncle waziri instead you blamed it on the
followership, whereby muslims practiced only what suits
them, as you cited examples of marrying multiple wives
and producing unnumbered children without making proper
and adequate means of taking care of their BASIC needs
such as food, education and health.  I see this in tandem
with my submission,  since these crop of followers in one
way or the other receive fatawas from these ulama's,
imagine a well reknowned ulama reciting hadith to buttress
his point and advicing his students to add another wife
each time poverty strikes his house - God save us.

the upper class are still around, the middle class are now
in power, it is left for them to lift up the lower class, because
the future challenges will be worst than the one we have
at hand.

truly husnaa, your observation is in line, the better we educate
the society the better for us.  however, the leadership is now the
problem.  public schools performance on last year's neco/waec
is nothing to write home about - a total failure which shows the
less attention our governor's and other leaders give to the
education sector.

[Dave_McEwan_Hill]

The social stratas of the North need to be examined seriously. They may be a major impediment to progress. If you have a feudal type of social structure two things are immediately apparent.
1. The lower classes are expected to show deference to those above them.
2. The upper castes have a vested interest in keeping the lower classes in their place.

Both these related conditions militate towards a careless attitude to widespread education. If you have a social structure which is wedded to a religious framework religion is very often hijacked to support the staus quo and help keep those exercising  power in their position of power.
That way the essential element of religion is debased and instead of being a agent of justice, fairness and morality it becomes a tool of the ruling classes. This is not a specifically Islamic concern. It is a very evident phenomenum in for instance some Catholic parts of the world where the church and the ruling elites have colluded to support each other in power. In medieaval Europe the churches exercised huge political powers which was only taken from them by the advent of universal democracy across Europe.
If you free religion from the grasp of the rulers religion can then point the finger at the thieves and the corrupt. 

[Jack Fulcher]

I'm sorry I haven't contributed to this board for awhile.  I've been in some silly bridge tournament in Las Vegas, getting my head handed to me by the Islandic team.  They just blew us out of the water - I'm still having nightmares.

This is an interesting subject for me, being an economist.  I really hate to say this, but Dave makes a lot of sense.  I'd better sit down.  But, of course, I'm also going to disagree somewhat with perhaps most of you.

What Mr. Waziri says is, unfortunately, predictable, since he's a member of the "religious-industrial complex."  As he's someone who makes his living off of religion, I'm not surprised that he says it's not the imam's fault but it's the fault of the people.

Here's the underlying issue, in my opinion.  For any economy, the important driver is the mix of resources that are available and how are those resources used?  What do you have available to you in northern Nigeria?  Well, not much oil - that's in the south.  Maybe some minerals, but the major resources you can use are your land; your technology, skills and education; and your people.  If you don't get much free money like the Saudis in the form of oil or abundant minerals, you have to work hard and learn to be smart.  Look at how the Japanese have done so well being stuck out on those rocks in the Pacific.  They work all day, use all their resources to the fullest, and eat anything they can drag out of the ocean.  Raw fish is pretty horrible to me, but many people seem to like Sushi.

In America we don't worry about the economy being affected by corrupt officials.  No doubt there's corruption, as politicians seem to be arrested every month or two for putting their brother on the city payroll; however, the economy is strong enough to keep running regardless who we put in power.  That's why we don't get more than about 60% participation in the elections - most people think it really doesn't matter who's in office.  I don't think that way, and I'm sure Dave agrees, but most here think it really doesn't matter.

We use markets and capitalism to run the economies all over the country, and regardless of what you think about capitalism, you've gotta admit it gets people to produce a lot of stuff.  China figured this out a couple of decades ago and look at its booming economy now.  The People's Republic of Cheap T-shirts and Lots of Stuff at Reasonable Prices.  They make maybe half of the things I buy.  It used to be the Japanese, but their economy got so strong they had to pay their workers more and now their stuff costs as much as our stuff. 

Now let me suggest something that will probably make you mad.  Ready?  I think there are some things Muslims do as part of their religion that make it difficult for economies to grow.  There, I've said it.  Under Shari'ah law, for example, interest cannot be charged at any particular rate by banks or institutions that loan money.  This is the old Mosaic law, and some orthodox Jews have the same practice (or so I understand).  However, the problem is that the interest rate is the same as the price of money, and there is nothing better than a price system to allocate resources efficiently.  This is why Marx (Karl, not Groucho) liked capitalism as described by Adam Smith - he saw capitalism as a great way to get rid of feudalism, which he saw as a great impediment to social progress.  He also thought that communism would inevitably get rid of capitalism one day, but that doesn't seem to be happening.  But forbidding the use of a price of a good as fundamental as financial capital distorts that market so much that transactions cannot be used to facilitate other capital markets the way it happens in the west.  Why doesn't Saudi or Iran have vibrant economies, building cars and producing goods they way they do in Japan?  One reason is that the financial system is impaired by this prohibition against charging interest rates.

Another problem I see is the underutilization of a very basic resource - women.  Frankly, I don't know if this is a problem in Nigeria - are women part of the workforce and work alongside men they way they do in the west and Japan (and China)?  If they're limited in a way similar to the Arab world, this is a major waste of an important resource.  Certainly the most productive worker where I work include women, and I'd hate to have to do all this work without their help.

Which reminds me - Husnaa refers to Harold Lloyd???  Even I am not that old.  Please tell me you saw one of his silent movies in a class you took, dear Husnaa. 

And I just can't believe my eyes when I read that some imams advise their followers to reject vaccines.  For religious reasons??  The problem is that if disease is not checked by some central authority, it imposes costs throughout the country and impairs the economy.  Little things like this add up. 

One more thing before I have to go.  How long do you work?  I know that I'm like a broken record on this issue, but here we seem to get up at 6, go to work at 8, and come home at 5 or 6.  I know that many think we're crazy, but that's how things get done.  There are no easy shortcuts to economic development.

On the other hand, if I don't work on my bridge game, the Islanders will own me the next time we play, like they did this time.....have a great weekend, folks.  Jack

[King]

Well Jack, while you were away playing around in Las Vegas, I was vacationing in smoky mountains Tennessee. Have you been? I was at Westgate resort in Gatlinburg, TN, and I have to tell you, I had a blast. I loved the mountains, gorges, lakes, creeks, the white water rafting, hiking, and most importantly the weather. So guess what? I bought me a piece of real estate seeing how affordable real estate is Gatlingburg, and Sevierville. You should check it out. I'll post some pics later.

Now, in reference to the above discussion, my view is this, if people can free themselves from the grasp of religious strongholds that impede them personally and collectively, then that's one major huddle in the process of achieving self determination and personal upliftment.  Please note, religion itself is not bad, but when religion is used in ways that impact people negativity and deprives people of growth and of the ability to maximize their full God given potentials, then religion in this case isn't serving a good cause.

Take for example the numerous cases of religious riots in the north where northern Muslims so easily attack their fellow non Muslim citizens for the flimsiest of reasons that we know are all religiously inspired by some misguided Cleric actually quoting and justifying such actions using religion and religious books. In many of these deranged chaos, when 'order' is eventually restored, several hundreds of people are dead, several businesses worth millions of Naira are destroyed, public buildings destroyed, small business buildings torched, the stench of death lingers in the atmosphere, and the list goes on. Now, think about it for a second, how in the World does one expect buoyant economic activity in a region like this? And it is a lot more than this as you and Dave have listed some other factors the impact the poverty level, but unchecked religious fanaticism, and the total lack of consequence for repeat violent behavior plays a big role in the north's situation as well.

Aside from all these, without competent and knowledgeable people to actually come up with some real vision for the North, and for the rest of the country as a whole, the country would continue chasing its tail in confusion. Husnna mentioned that poverty will self eradicate if the North gets selfless leaders and  if everyone is given good education. I'm afraid the solution may have gone a little beyond good education and selfless leaders. If you have good education and selfless leadership that still defers to the feudal lords, then what's the point? There has to be a total revolution of the mind, and a complete break from the old social structures that control the politics of the north and its future. One can't keep doing the same thing every year and expect a different outcome, and this goes for Nigeria as a whole.

Yesterday I saw the Olympic opening ceremony in Beijing, and it was simply breath taking and splendid. So far, it beats all other opening ceremonies to date. Some 20-30 years ago, Nigeria, China, India, Singapore, etc used to be considered developing nations. They were very much in the same boat of progression. Today, those countries are several centuries ahead of Nigeria. Question? Could we in a thousand years put up a show like the Chinese did yesterday? The Chinese made a global statement yesterday which anchors their position on the World stage.

Let me just say this and end here. If many of the Northern state have no idea what to do with money at their disposal, please contact me. I can purchase real estate here in America especially now when the market is so weak. We can buy up resort facilities and vacation cites in different states, hire Americans to run it, and we own it. All that stolen money wasting away can be put to good use so its not all a loss-loss situation.   

[_Waziri_]

What Mr. Waziri says is, unfortunately, predictable, since he's a member of the "religious-industrial complex."  As he's someone who makes his living off of religion, I'm not surprised that he says it's not the imam's fault but it's the fault of the people.

Now, Mr. Fulcher, for the sake of clarity, could you  please point to where I exonerated the Imams and blamed the people, this even impliedly?

Also why the wild accusation about myself feeding on religion?

Waziri

[Jack Fulcher]

To be precise, Mr. Waziri, I was quoting Dan-Borno's reference to something you said, apparently in another thread, thus:

"earlier on, in my thread on who to blame, i strongly see
our religious leaders as mastermind of the serious at
hand, though uncle waziri instead you blamed it on the
followership, whereby muslims practiced only what suits
them, as you cited examples of marrying multiple wives
and producing unnumbered children without making proper
and adequate means of taking care of their BASIC needs
such as food, education and health."

Does DB mischaracterize your position?  If so, just what is your position?  Are the problems of Nigeria the fault of the religious leadership or the fault of the people?  You put yourself forward on this board as an authority on not only Islam but on religions, generally.  Aren't you simply part of the religion-industrial complex, to paraphrase Eisenhower's farewell speech at the end of his presidency?  Ever since I started to post here (in 2003?) people tell me that the practice of Islam is just part of their lives, that the concept of the separation of church and state, so prevalent in the west, is unthinkable in a state governed by Shari'ah.  If so, don't the religious authorities bear much of the blame for holding the people back economically?  My wife wants to watch a movie, so must go.  However I'd like to develop this theme further....J

[_Waziri_]

To be precise, Mr. Waziri, I was quoting Dan-Borno's reference to something you said, apparently in another thread, thus:

You should have read the first post on this thread by myself to arrive at your own conclusion independently. It is then you will know if DB has misrepresented me or not.

As it is now, I am not ready to repeat what I said until you demonstrate an interest in reading me as opposed to judging me before reading me which you have proven good at doing since 2003. Why are you always prejudicial?

I am also waiting for you to present a proof of me making a living on religion. I write about religion, yes! But it is left for you to show how I live on it.

Waziri

[Dave_McEwan_Hill]

I suspect Jack doesn't know much first hand about Islam and Waziri has a habit of addressing most issues through a religious perspective so we are entering the area of a non-productive arguement. 

Just to be clear I don't believe that Islam holds back economic development in any way and I have no problem abouit religion being an essential part of anybody's living.
What I do believe however is that throughout the history of this world unscrupulous elements have hi jacked religion and used it as a political tool to exercise power - no more so then in US today where illiberal, racist,homophobic,right wing, bible-thumping so called Christian sects exercise inordinate power over the US electoral process demonising socialists, internationalists, Islam and the gay community in the process.
George Bush is to a considerble extent the product of this. His remarks on the Russian invasion of Georgia are laughable coming from a fool who just invaded Iraq on a lesser pretext.

What the North of Nigeria has to examine closely is the feudal backgound of its social make-up, the connection this has to its religion and whether attitudes towards authority and attitudes towards enterprise are negatively affected by these factors.
There is no doubt that the religious leaders of Northern Nigeria have execised huge secular power for centuries and a feudal system has developed which has a religious core. There is an uneasy relationship in the North between the traditional religious rulers and the elected governments.
Should these elements not be completely separated?

[gogannaka]

Nuruddeen has posted an article worth reading.
However,no matter what is said about soludo and his tribalistic attitude the fact remains that the north is dangerously poor.
Education is necessary as Husnaa said for the north to thrive economically.And the education sector unfortunately is not improving.
I remember we were 60 in number when i started JSS 2 but only 12 of us wrote our SSCE,and some out of the 12 still droped out of the university.And this is our kind of attitude towards education.
I have said it before and i still say it.A clear example is the case of one of Kano state's member of the house of representatives who had to forge his secondary school certificate because he couldn't complete it.This are the kind of people that represent us.


I wouldn't want to agree with Jack that the Islamic religion is the cause of the North's Poverty.
Yes it is agreed that the religious leaders we have have given the masses a brand of religion that does not help us economically.
The religious violence is encouraged by the ulamas and it seriously affects the northern economy.Imagine something happening in denmark and people are terorrised in Nigeria,the North in particular.
Till now i there are various Ulamas that legalise 'almajiranci' and some governments are introducing policies that will further worsen the situation.

Just recently i visited a friend who is a generator mechanic.He was interviewing a young hausa man that wanted to be an apperentice in his workshop so he asked him why he wants to leave his former 'oga'.The boy told him that there's just too much work at that place. Some other people who were listening now made a comment that made my heart sink.They said to the apperentice,'shebi u want to start doing what hausa boys do ba?Running away from hardwork,you want to come here to rest abi?

This poverty phenomena is real and our attitude and the religious leaders are not helping matters.We have to be hardworking like jack said otherwise we will still be where we are.

In Kano one of the largest companies (standard and bally) has been shut down by the owners,not because of light this time but because of some useless demands by the employees who majority are from gezawa local govt and Jogana.

[neozizo]

It is true that the political elite with the help of the ulamas manipulate the masses by using religious sentiments as well as lack proper understanding of religious laws and in junctions.These two classes are probably more responsible for the deplorable state NN is in today.
Without capable leadership, the masses cannot do much to improve the situation. I agree with Waziri that the middle class is key to the development of Arewa. I also agree that education and social re-orientation of peoples attitude toward the issues at stake have to change for the better.
Pls Jack id like to know how is it exactly that charging interest on loans is good for developing economies.
In nigeria for example where cost of doing business is extremely high, the number one obstacle(even in the south where we dont have Shari'ah) is funding. On the contrary poverty alliviation institutions are looking for ways of securing intrest-free loans as well as other cocessions like tax holidays and favorable govt policies to aid businesses.
In Islam, for every prohibition an alternative is provided.
The case of usury is not an exception.
But i beleive the welfarist approach of the governments in the north do more harm than good.

[HUSNAA]

As Dave says Jack doesnt know much first hand, about Islam. Infact I do believe he knows NOTHING first second or third hand about Islam save the stereotypical images of it made infamous by George Bush.

Islam doesnt approve of charging interest because it is not the way for wealth creation. The Quran is very clear about that. God Has made mercantilism (not capitalism) lawful and usury unlawful because it is a form of parasitism. Charging interest rates leads to wealth generation for  loan sharks and shylocks only. For the ones who have to pay the accruing interest, there is nothing but misery and a miserable existence from thence to eternity. Think IMF for example; wasnt its policies and and strings attached to the loans devastating to the victimized countries who were hapless enough to collect the loans? More recently, the subprime mortgage crisis that hit the US and consequently the rest of the global economy has its roots in the inability and consequent disinclination of home owners to keep up with their mortgage (and accruing interest rates) payment on their devalued properties. 
If Capitalism were really the ideal mode of production that economists like Jack make it out to be then the rich might get richer but we wont have any poor exploited souls.
and Jack... stop being facetious ... I may just be older than Harold Lloyd; you never know...... ;D

[Jack Fulcher]

Well, I have some time so I'll try to respond to some of this.  First, it seems that a lot of you shoot from the hip (just like Ronald Reagan).  For instance, Husnaa says my understanding of Islam comes from George Bush.  When has Bush ever even talked about Islam??  All I remember him saying is that "Islam is a religion of peace" (tell that to the Phillipines).  He's never talked about usury.  But I'll agree that I don't have a lot of personal experience with the religion.  So what?  I can still read.  I've read about the two major forms of mortage under Shari'ah, murabaha and ijara.  And I'm an economist, so I know how financial markets work. 

Let's start with the basic idea of interest, which is the price someone charges for the use of their money over a period of time.  When you put money in the bank in the west, you get an interest payment, or if you buy a bond, essentially loaning money to a company or government entity, you receive an interest payment which is fixed at the time of the loan.  The interest rate, like the price of any good, varies depending on market conditions and the supply and demand for the good.  When the interest rate goes up, more money is made available for loans.  People tend to spend less and save more.  The quantity of money supplied to the financial markets increases, in other words.  This is one tool used by central banks and governments to stimulate or dampen investment and economic growth.  For example, if inflation is rising the US Federal Reserve may increase the Federal Funds rate or some other instrument designed to increase interest rates in an effort to slow economic activity. 

The interest rate is a tool designed to affect investment and the amount of money in the markets, nothing more.  When Husnaa says "Islam doesnt approve of charging interest because it is not the way for wealth creation" this makes no sense.  All the Quran does is borrow from the old testament, which also prohibits the charging of interest.  In fact, most western nations prohibit "usury," but, like the Egyptians, the west defined usury as the charging of "excessive" or "unreasonable" interest.  The definition of these terms is left to the courts and the states. 

But it cannot be unreasonable to charge something for the use of your money.  Let me give a simple example.  If you have $100 (I use dollars because I'm familiar with that unit), you can spend it, put it in a coffee can and hide it, or you can use it to make more money.  If you can take the $100, buy some materials and create something from it, you might turn it into $120.  This is a 20% return on your investment (I simplify by assuming the value of your own labor is zero – your return is less if you pay yourself a wage).  However, let's say you're not interested in going into business but that your neighbor is, and is willing to pay you $10 for the use of your $100 for one year.  Let's say that your neighbor can make 20% using your money.  This is clearly better than putting the money in a coffee can.  Both you and your neighbor benefit from this transaction.  This is interest.  Let's say that market conditions improve so that he can make 30% using your money.  He'd be willing to pay you, say, $20 for the use of your money.  This means that the interest rate (the price of your money) has gone from 10% to 20% because the economy has improved.  Now you'd be willing to loan your neighbor $180 at this higher interest rate, and spend $80 less (plus your other neighbors would be willing to lend him money as well).  This is how interest works – it draws more financial resources into the market when more money is needed to build up the economy.  It is not "parasitism" as claimed by Husnaa.

Let's stop and look at Husnaa's statements a little closer.  She says "God Has made mercantilism (not capitalism) lawful and usury unlawful because it is a form of parasitism."  Oh, dear Husnaa, I can find nothing in the Quran that supports this statement.  Where is capitalism banned?  Where is mercantilism even mentioned?  This is the "shooting from the hip" I note earlier.  As I say, even western nations outlaw "usury," but they define it as "excessive" interest charged.  We do have problems, of course.  There are, for example, pay day loan stores, usually in the poorer parts of the city where I live.  What they do is loan you money at pretty high rates if you need money in the week before you get paid (usually once a month around here).  I would argue that this practice is usury, although they are limited by government regulation to certain rates no higher than about 25%.  I would agree that the poor are especially vulnerable to such practices, but our government tries to educate people about how to avoid losing money in this way. 

But the use of the interest rate as determined by the interplay of the supply and demand for money is helpful to the development of the economy.  And, I would argue, that the methods used by Shari'ah compliant banks to sell houses is not much different than the use of interest rates.  The negotiated price of the house, as well as the "rent" paid for the use of the house, both incorporate the cost of the use of the money used by the bank to buy the house.  Under this practice, the bank first buys the house and charges the prospective "buyer" rent for a period of time, usually 15 years if the Murabaha method is chosen, or 25 years if the Ijara method is used.  Once the agreed-upon term is reached, title is transferred to the buyer.  However, the "rental" payments include an amount for profit, which is really the interest rate.  Just how is this "profit" amount determined?  It turns out that these are percentages that vary with market conditions, just like the interest rate.  So to suggest that you avoid the problem of paying interest using Murabaha or Ijara is just fooling yourself.

The real problem is the prohibition of the use of interest when someone needs financing to invest in a project or business.  This is why I disagree with Dave regarding the effect of Shari'ah law on the economy – I argue that this is a systemic issue, and that it doesn't depend on bad and venal people running the economy to get bad results.  Let me continue this later, as I need to go home and take the wife to dinner.  Tempus fugit, my friends.  Jack

[HUSNAA]

Jack you are an economist and I am not and frankly speaking, I gained some knowledge of  why central banks increase or decrease interest rates. I'd always had a vague idea but never really bothered to find out. Glad to know that I was 80% correct.  That said, I still stand by my statement, God has made mercantilism (not capitalism) lawful and usury unlawful.   The definition of usury as excessive or unreasonable interest is very vague, especially as there is no standardization of just how much is excessive or unreasonable and as you have written is left to various courts and states to determine (how messy!) As far as Islam is concerned, it is the practice itself that is condemnable. Whether the amount of interest charged is excessive or not, it is still the same thing-  Unlawful in Islam. Now you said that you havent found any place in the Quran, where it supports my argument. I am not surprised that you havent found anything, cos I dont know if you have read the Quran at all. Reading about murahaba and ijara systems of islamic financing is not reading the Quran. It is reading about an aspect of the Sharia law. Now to back up my statement let me quote the chapter and verse that this prohibition was made in the Quran. The Chapter is Suratul Baqara (Chapter 2) verse 275

(275) Those who swallow usury cannot rise up save as he arises, whom the devil hath prostrated by (his) touch. That is because they say: Trade is just like usury; whereas Allah permitteth trading and forbiddeth usury. He unto whom an admonition from his Lord cometh, and (he) refraineth (in obedience thereto), he shall keep (the profits of) that which is past, and his affair (henceforth) is with Allah. As for him who returneth (to usury) - Such are rightful owners of the Fire. They will abide therein.

So there! Now you have it Jack! that is the Qur'anic injunction on usury.
The reason why usury is disallowed in Islam is because there is no risk involved in the transaction and also because like the example you gave of lending your neighbour money to start a business with an interest rate. Only yr neighbour will incur risk. U as the lender will get back yr money plus interest regardless of whether the venture was successful or not. So there is no risk what soever involved on yr side that is haram in Islam. Rather if you were to give yr neighbor the money, go into a joint agreement with him, whereby you share the profits and loss together.. that is musharakah (I have just read an excellent paper on Musharakah, which discusses this and...oh and thanks for introducing me to the Islamic banking system. I have never read a thing about it until I had to find out what you meant by Mubaraha and Ijara). The paper can be found on this website:

http://www.westga.edu/~bquest/2004/musharaka.htm#change

You said that Mubaraha and Ijara are no different than charging interest. Well there is a difference. I have never taken a mortgage loan in my life but I believe what happens is that the bank gives you a loan which you have to pay with the accruing (compound?) interest rate, after a certain number of years. It doesnt matter if your property becomes devalued  during the period of repayment, you'd still have to end up repaying what ever was the  loan (fair enough) and the interest ( unfair in the light of the devalued property) thus exposing the debtor to risk. In the Mubaraha, and ijara, you go into an agreement with the bank which buys up a property that interests you and then the bank sells it to you at an agreed mark up price in which you can either pay lump sum or instalmentally. There is no issue of rental with mubaraha (or so I have read), that comes when mortgage payment type is ijara. That is when the property is leased out to the buyer by the bank after the bank buys the property. What I am not sure of is whether one pays  separate amounts for the renting and at the same time pays for acquiring the property from the bank or not. At any rate, the creditor in these transactions (M. or I) is more liable to exposure to some kind of risk rather than the debtor. Therefore becos of the risk involved, the creditor cant be said to be charging interest for the profit he makes from the transaction and it is a kind of win-win situation for both creditor and debtor because the creditor (the bank in this instance)is more capable of withstanding any risks and remaining solvent rather than the debtor.