Solving poverty under the Khilafah

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Solving poverty under the Khilafah


The call for the return of the Khilafah system grows stronger every day. The future
Khilafah state will face many problems inherited from the current corrupt and
tyrannical systems in the Islamic world. One such problem is the widespread poverty
that affects many parts of the Islamic world. In this article, Pakistan will be taken as a
model:


Currently 33% of the population is below the poverty line. Despite the extent and
continuous occurrence of poverty, various other events and problems, such as
Afghanistan, the Nuclear testing, Kashmir and the Musharraf regime have
overshadowed this as an issue.


Reasons for dire economic situation in Pakistan

There are many reasons for the dire economic situation in Pakistan and the Muslim
world in general. These include:
a) Corruption and theft
Last years World Bank Report deems sustained mismanagement of resources, bad
governance, both of which could include corruption landed Pakistan in the present
economic mess. The previous governments of Bhutto and Sharrif are accused of
stealing $2 Billion and that is just part of the $30Bn lost or smuggled out during
Pakistan’s democratic period [The Atlantic Monthly, Sep 2000]). The World Bank
has reported the failure of the principle of reduction in poverty with increase in per
capita income. Poverty in Pakistan increased from 22 % to 32% per cent in the last
decade although the per capita income of the country increased from $410m in 1990
to $495m now.

b) Massive cost of debt servicing

Despite the present and previous governments focus on the economy and the much
assistance from foreign agencies, the outlook is bleak; Pakistan’s economy is still in
dire straits continues to rely on international creditors for hard currency inflows. The
current Pakistani government faces $32 billion in external debt and has nearly
completed rescheduling with Paris Club members and other bilateral creditors.
Furthermore foreign loans and grants provide approximately 25% of government
revenue, but debt service obligations total nearly 50% of government expenditure
(approx Rs180Billion/$3Billion). Meanwhile, the IMF has remained silent on future
disbursements from its $1.56 billion bailout package initiated in 1999, and other
international financial institutions are gauging the current administration's resolve to
implement necessary fiscal reforms.

c) Excessive military spending

Furthermore the government’s economic tilt away from essential services such as
health and education and towards an unproductive and unused military, that will
rarely fight and even more rarely fight a genuine conflict, does nothing to help the
economic problem. In 2000 the Musharraf government increased military spending
after promising to cut it. This type of economic management is nothing new. In 1994
military spending was 240 % as high as spending on health and education combined.
Spending on education remains among the worlds lowest.

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d) Strangled agricultural and industrial productivity

Productivity is being stifled by taxes and schemes such as loan repayment cash-crops,
some of these crops that are grown are ill suited to the recent drought like conditions.
Also, last years General-Sales-Tax includes basic agricultural inputs such as fertilizer
which in-turn raises the cost of basic foods. Another factor in the list of the many
obstacles to prosperity would be the feudal land system and general corrupt practises.
e) Wasting funds on grandiose and useless projects
There exist many examples of projects including the building of new government
offices that now lie empty. The resources used could have been put to better use.
The reality of the poverty in Pakistan as well as the rest of the Muslim world is well
known. The following is a brief outline of how the Khilafah State would solve the
problem of poverty:

Production vs Distribution

Islam views the economic problem in a radically different way than Capitalism. The
current elite and economists within Pakistan and the Muslim world see the economic
problem in the same way as the Western nations. They believe in ‘trickle down
economics’, which means that the economic problem is that of unlimited wants and
limited resources and in order to bridge the gap between these an economy should
focus on increasing production. Production is the key for the West and this is why
they pay so much attention to national income statistics like GDP and GNP.
Islam views the economic problem as the distribution of wealth. There are enough
resources in the world to provide the basic needs for over 60 billion people according
to some statistics. The problem of poverty won’t be solved by producing more and
more for the rich to consume rather it will be solved by ensuring that basic needs of
every individual are satisfied completely and to enable him to satisfy his luxuries as
much as he can.

This unique view of the economic problem will be the cornerstone of the Khilafah’s
economic policies. There are many ways that the Islamic economic system
encourages the distribution of wealth such as;
Provision of basic needs and public/private enterprise
The Ahkam Shari'ah (divine law) has stipulated the satisfaction of all of the basic
needs (food, clothing and housing) completely, for every citizen of the Islamic State.
This is achieved by obliging each capable person to work, so as to achieve the basic
needs for himself and his dependants.

Allah (SWT) the Supreme said: "So walk in the paths of the earth and eat of His
sustenance which He provides." [TMQ Al-Mulk 67:15].
Many Ahadith came to encourage earning. In one narration, the Prophet
Muhammad(SAW) shook the hand of Sa’ad ibn Muadh (ra) and found his hands to be
rough. When the Prophet (SAW) asked about it, Sa’ad said: “I dig with the shovel to
maintain my family.” The Prophet (SAW) kissed Sa’ad’s hands and said: “(They are)
two hands which The Supreme loves.” The Prophet (SAW) said: “Nobody would ever
eat food that is better than to eat of his own hand’s work.”<br>
Islam obliges the children or the heirs to support the parents if they are not able to
work, or obliges the State Treasury (Bait al-Mal) to do so if there is nobody to support
them. In Pakistan today most of the help that the poor receive is not through the
government but through relatives as Islam proposed. The SDPC (social policy and
development centre) in Pakistan last year estimated that through informal household
or community based schemes over Rs60 billion was transferred to the poor.
When the Islamic values are inculcated into the Islamic society the rules of aiding and
supporting your family will become more apparent to the people and adherence to
them will increase. If the family are not well off enough to aid the individual and if
the individual has not been able to earn through employment or other ways then the
state will aid him to satisfy his needs. This can accomplished in a number of ways:
If the person is unable to earn due to a disability whether physical or mental, the state
will give he or she the necessary funds from the Bait ul Mal(State Treasury). The
Islamic economic policy treats each individual as a specific individual.

If the person is able to work but has been unable to find work then the state could
employ him after reviewing his reality through an interview process at one of the
Public-private enterprise offices in Karachi, Lahore or wherever the individual
resides. The interview will be conducted by an administrative official of the Khilafah,
its objective would be to determine the skills, experience and competence of the
citizen in question. After the citizen has been assessed the official will have the
responsibility of deciding between 2 possible courses of action: A) To employ the
individual within one of the state industries and public sector like the Gas, Oil,
transportation, administrative sectors, etc. This would provide a workforce for the
public sector and allow individuals to earn enough to satisfy their needs. B) Go into
partnership with the individual such as in a Mudharabah company structure. This is
where the state invests capital and the individual carries out the work and the profits
are shared. For example, if the State invested capital to buy farming equipment for an
individual who had some expertise in the area and owned some land. The State and
the individual would both share the profits.

Alternatively, if the individual had I.T.
skills the State could aid him to start a business of being an independent contractor, or
having a computer shop, software support etc. The State may want to encourage
businesses in particular sectors and therefore could invest in these, e.g. it can invest in
companies to break international patent and copyright laws and sell drugs at cheap
prices on the international market. India has recently been in the news for this as it
wants to sell to South Africa. In return some pharmaceutical Multinationals want to
take the South African government to court. Many people from Britain and Europe go
the Third World to get these drugs due to their cheap prices. In the UK a drug may
cost up to £9000 whereas in India the same drug can be as little as £600 in India for a
years supply.

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Through this the State would achieve dual objectives; firstly it would solve the
problem of the lack of the satisfaction of individuals’ basic needs and secondly the
shared profits would be a source of revenue for the State which would increase its
funds in the Bait al Mal.
Whilst a person is out of work and not earning and thus does not have his basic needs
satisfied the State would provide the necessary funds from the Bait ul Mal. It will not
give a flat rate amount to each individual in need like the DSS (Unemployment
Office) scheme in Britain. Rather an official of the State would need to study the
reality of each individual with a legitimate claim and would give the person the
amount required to suit his or her needs. So it will give different amounts to those
who have large families to maintain than to single bachelors.


The State should not just rely on giving money to those in need for its aim should not
only be to temporarily fulfil one’s needs, but also to provide the means which would
assist the individual in his quest to fulfil his own needs over the long term. In Pakistan
giving simple goods to individuals would enable them to earn a livelihood.


The Khilafah is not a businessmen, it is a guardian and must act as such:


This means that the State must engage in projects to speedily solve major problems
occurring as a result of poverty. Cities such as Karachi have up to 25% of their
populace residing in squatter housing, whilst there are up to 200,00 empty flats with a
high proportion recently built. The government should launch a scheme to encourage
landlords to rent out such places to the poor whilst the government pays the rent in
part or in full depending on people’s circumstances.

Priority should be given to those
in squatter housing and slums especially in the major cities.

2) Investment

Due to the fact that Riba (usury) is haram (prohibited) in Islam and that hoarding of
wealth is also prohibited there will be no motivation for the people with wealth to
save. Within Pakistan there is massive hoarding of wealth, within a Capitalistic
banking system people put money into banks in order to earn interest and therefore
this acts to produce a huge loss in economic activity and prevents circulation of
wealth. Many of the wealthy within Pakistan even save there money within Western
banks in Europe or America which means that the wealth doesn’t even stay within
Pakistan.

Within the Khilafah there will be no motivation to save other than saving up to buy a
good or acquire a service. This means that people will either spend their money on
goods or services or they invest their money. The Islamic rules allow investment and
companies of which there are five types in Islam. These are Al-'Inan (equal), Al-
Abdan (bodies), Al-Mudharaba (two or more), Al-Wujooh (faces) and Al-Mufawadha
(negotiation). From this we can see that an increase in economic activity will be
natural under the Khilafah.

The Ahkam Shariah relating to land that is unused also motivates landowners to use
their land productively. If any land remains unused for over three years then the State
has the right to take it and use it productively or distribute it to others. In Pakistan
there are large amounts of land that remain idle. Under the Khilafah this land will be
used and therefore will increase the yield in farming and other industries like housing
and building. A lot of the land in Pakistan is fertile such as in northern areas and that
surrounding the Grand Trunk Road.
Revenues of the Bait al-Mal
In order for the State to provide the basic needs for people also and allow them to
acquire the luxurious needs, it needs to have capital from which it can invest and
spend.

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a) Taxation

One of the most important issues for a practical way to regenerate Pakistan would be
the comprehensive implementation of the Islamic taxation system through which
much funds would be raised. A conservative estimate of the Zakat collected in
Pakistan today would be just over $2 billion dollars, that’s over Rs1trillion. Other
taxes such as the Kharaj on agriculture would raise up to $1Billion alone. Unlike
taxes within the Capitalist system, Islam taxes individuals on their wealth rather than
income.
Zakat

Zakat properties are kept in a special place in the Bait al-Mal and they are not spent
except for the eight categories mentioned in the Qur’an. None of the Zakat monies
may be spent on the State’s affairs. The Khalifah is allowed to spend them according
to his opinion and ijtihad, for whom he sees fit of the eight categories. He has the
right to give them to one or more of these categories, or to all of them.
Allah (swt) mentioned the eight categories in the Quran,
"Alms are for the poor and the needy and those employed to administer the funds;
for those whose hearts have been reconciled, for those in bondage and in debt, in
the way of Allah and for the wayfarer …" [TMQ 9:60]
Jizya
The jizya is a right that Allah (SWT) enabled the Muslims to take from the Kuffar as
a submission from their part to the rule of Islam. It is a general money that can be
spent on the welfare of the subjects as a whole. It becomes due every year and cannot
be collected beforehand. No fixed amount is estimated for the jizya, rather it is left to
the opinion of the Imam and his own Ijtihad, provided that the amount set by the

Khalifah is no higher than the payer could bear.

The Land Tax (kharaj)
The kharaj is a right that Allah (SWT) enabled the Muslims to take from the Kuffar. It
is a right imposed on the neck of the land that has been conquered from the Kuffar by
way of war or by way of peaceful agreement. Provided that the peace agreement
stipulates that the lands is ours (i.e. belonging to the Muslims) and that they will
continue to farm the land in exchange of a kharaj that they should pay to the State.
The kharaj in the Arabic language means the rental and the harvest or the crop. Each
land conquered from the Kuffar after declaring war against them is considered kharaji
land, and even if they embraced Islam after the conquest the land remains kharaji. The
whole of Pakistan and the Indian sub-continent is Kharaji land.

As for the amount of the kharaj imposed on the land, this is estimated according to the
potential of the land. When Umar (ra) imposed the kharaj he took into consideration
the potential of the land, unfairness to the owner and without any prejudice against the
farmer. The Imam reserves the right to estimate the kharaj while taking into
consideration the most appropriate way with regard to these three aspects, either on
the surface of the land, or the surface of the planted part, or by way of estimating the
produce.

b) Annexation of lands

It is natural that the Khilafah will annex the Muslim lands which will increase the
revenue of the Bait al Mal. If the Khilafah was re-established in Pakistan annexing
Afghanistan, Uzbekistan, Kyrgyztan, Tajikistan, Kazakhstan, etc would add to the
resources and income of the state. As these States are abundant in oil, gas and
minerals.

c) Fines

For the Ta’zir (right of the community) and Mukhallafat (right of the state) the state
can adopt fines as punishment. Initially because the Islamic values may not be so
strongly embedded into the people, the revenue from this may be substantial, however
this would naturally decrease over time.
d) Revenue from Public properties and State properties
The public properties are managed by the State as it is the Khalifah who is the
caretaker of the ummah and its resources. Huge revenues will be generated by the sale
of oil, gas, phosphates, coal and other resources to other nations. The more land the
State annexes the greater the reclaimed resources will be. The eventual annexation of
the Middle East will boost the revenue considerably due its vast oil resources.

d) Recover stolen monies and property

Another form of revenue for the Khilafah State is ghulul money; that is money taken
from the rulers, the State’s officials and civil servants, as well as money confiscated
from illicit earnings such as gambling, bribery and usury. With swift action in terms
of investigation and confiscation, it may be possible to track down and recover some
of these funds stolen from the State and still kept within Pakistan, though this may not
be substantial.

e) Emergency tax

In the case of dire need the Shariah has allowed the Khilafah to impose an emergency
tax upon the very wealthy, this is in order to overcome a problem like an earthquake
or flood. It has been calculated that if a 2% emergency tax was put on the wealth of
the top elite of Pakistan it would generate more revenue than that has been generated
from the imposition of the GST by Musharraf.

d) Other sources

The spoils of war
Maks tax imposed on Dhimmi’s and Harbi traders if trading goods across our
frontiers
Al-Rikaz – a fifth of all hidden buried treasures and minerals.
The property of the apostate
The property that has no inheritors
Selling off or renting out unnecessary state properties such as government officials
and other unneeded govt owned buildings.
4) Public expenditure
As well as directly providing the basic needs and creating opportunities for
individuals, the State will need to focus on building the basic internal infrastructure.
Third world countries like Pakistan lack basic infrastructure, the roads are only fixed
when there is a presidential visit like when Clinton went to Pakistan or when
Musharraf goes to a particular place.
The public expenditure under the Khilafah will be higher now than as was the case in
the past, at the time of the Messenger (SAW) the Khulafaa after him, the days of the
'Umayyads and Abbasids and even in the days of the Uthmanis. This is due to the
huge development in the means of life and its civic forms, particularly weapons of
war have reached a high level which calls for increase in expenditure. This is like the
expenditures of the offices and departments of the State, the compensation of the
rulers, the provision of the army, salaries of the civil servants, the expenditures to
supply water, open roads, establish schools, universities, mosques and hospitals which
are necessary for the ummah and she cannot do without and would suffer in case of
absence. Similarly the Khilafah will need to spend upon jihad, preparation of a strong
army and supplying all the requirements of the heavy industry to produce modern
developed weapons, both nuclear and otherwise as well as missiles, planes, tanks,
artillery, warships.

In conclusion, the Khilafah State will face a steep challenge when attempting to
overhaul poverty and the economy. However, a thorough analysis of the situation
reveals many paths the State can take to resolve this issue. Furthermore many sincere
Muslims throughout the world hold practical ideas to solve this issue. It would indeed
be prudent for the State to incorporate these people and their ideas regarding the styles
to alleviate poverty. Currently the secular State views the problem from the West’s
perspective (a perspective that always incorporates benefit to the West in the
equation) and this is why she is unlikely to resolve anything. Likewise, blind faith in
western systems with the hope that with growth in production poverty will disappear
has already failed Pakistan and will continue to do so. Therefore, only with a sincere
implementation of the Islamic system can problems like poverty be removed
permanently.