Articles on Islamic Economics

Analysis of Ethical Dimension of the Great Recession (2007-2010)

Salman Ahmed Shaikh

The negative effects of ethical emptiness in Capitalism have become more prominent in contemporary economic and financial crises. Lack of an ethical base, unrestrained pursuit of self-interest in production as well as in consumption and interest based financial and monetary system are the major obstacles to an equitable distribution of income that are inherent limitations of Financial Capitalism.

Unrestrained chase of self-interest, moral relativism, incentive-led economic choices and indifference to collective responsibilities has led to engender societies where economic interests have become the solitary basis of establishing and maintaining relationships.

This inner void of identity and purpose at the individual level and social void in the form of a mechanistic society bound together only for economic interests can be better studied and dealt with incorporating religion.

Humans are much more than utility maximizing species. They are capable of using both material rationality and moral rationality to differentiate right from wrong. Humans need reinforcements to adopt virtues influenced by an inner urge other than just material interests.

This inner urge can be reawakened by looking beyond utility maximization models to re-acknowledge the principal fact that humans are moral being than just an instrument for maximum material self-advancement.

In addition to that, it is important to reconsider value judgments which lead to cornering of any thoughtful consideration of regulation and oversight as necessary means to control and avoid crisis in today’s complex economic world. Despite the unprecedented economic growth, we have unprecedented income inequality and almost a billion human beings live in poverty and are suffering from hunger and malnutrition.

To tamper the unbridled pursuit of greed, we also require some spiritual source of guidance than mere reliance on material animalistic instincts. Religion provides the ethical check and call to balance material pursuits with pointing our attention to the misery of underprivileged people.

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