Global economic crisis and economics of faith (Part 1)

In the last two columns I have been discussing the merits of institutional economics and the crisis of contemporary economic systems. Although many of the current problems are observed in the realm of economic life, they go beyond its narrow frontiers and include problems pertaining to the structure of family, demography, environment, alienation of human beings as a result of excessive individualism, and so forth.

Modernity necessarily brought about excessive specialization and division of labor, and therefore with the passage of time we have become a part of a gigantic machine that is shaping our everyday life and organizations. This means that we lost our chance of putting a human foot print and humane touch on our own product. Moreover, in the organization of daily life, ethical, religious, spiritual values were left aside as they are not directly observed and cannot be easily quantified within abstract and simple neoclassical economic models. However, as mentioned above, the negative repercussions of ignoring them within economics goes beyond mainstream thinking.

The deepest reason for the exclusion of these values is that such values are found to be a constraint in the quest for profit. Therefore, by eliminating such constraints on hedonistic desires that trigger conspicuous consumption, the path for profit maximization has been opened. As viewed from this perspective, the capitalist mode of accumulation is activated by delinking formal as well as informal institutional constraints on economic activities.

Within this framework, we deal with the institution of religion as a type of incentive for society. This is because religion as an institution is comprised of the beliefs that individuals, groups and societies hold, it is something which does not come about in the span of an individual's life or in a generation, but is passed on inter-generationally. We also reached the conclusion that economic performance reflects the nature and the quality of the institutional framework that economic agents operate in. This suggests that our aim is not to ignore social institutions, but, on the contrary, how to effectively construct and activate institutional values -- in this case, the teachings of our religion -- throughout our life.

The deepening economic crisis suggests that we have to reconstruct our daily life including economics, family and society although not necessarily by reverse engineering methods, but by fertilizing and co-habituating our modern experiences with that of traditional or ancient values. In our quest towards re-synthesizing the material dimension of economics with that of the traditional institution of religion, we can derive valuable lessons from the religious practices of fasting (savm) and legal alms (zakat).

Neither fasting, nor zakat is unique to Islam. They play a central role in most monotheistic religions that come from the tradition of Abraham, the prophet. However, experts on comparative religious study note that these practices of faith are firstly and deeply defined and encapsulated in Islam. Zakat is only payable on assets continuously owned over one lunar year that are in excess of the resources one needs to survive (nisab). The nisab is calculated after adding the cash value of assets (gold, silver, cash, stocks, merchandise for business, livestock etc.) that are subject to zakat. Personal assets such as clothing, household furniture, one residence etc. are excluded from zakat obligation.