COVID-19, causing millions of people to be sick and hundreds of thousands to die, has affected many areas of our lives from daily relationships to macroeconomic activities. In these days, the health threat is gradually decreasing and the rate of transmission of the epidemic is slowing down. However, the effects of the epidemic, especially in the economic life, will now start to manifest themselves. These days, where the health war is ending and the economic struggle is beginning, the distortions in the current economic system are being revealed again.

IKAM, which was established with the purpose of encouraging the production of competent ideas and theories and to form the basis for the new studies for the general construction of the idea of “Islamic Economics”, draws attention to the fact that the solution  to the crises in the current system, which we have witnessed once again due to the current epidemic, lies within an alternative system that is intertwined with the principles of Islamic economics.

The COVID-19 period, which started with the global epidemic and then accelerated the economic crisis, once again showed the world that the capitalist economic order was fragile. The main reason for a health crisis to turn into a socio-economic crisis by affecting all modes of earnings and labours on earth is an unstable and non-durable economic and social order. However, similar to the previous crises, this crisis strengthened the capital and weakened the production and the labour hence, reflecting the root of the problem. This economic order, which only leads to injustice, crushed the labour class and businesses further under the exploitation from the capital in the environment of the crisis. People and businesses that have been indebted with interest have become shackled even further by legalized usury, let alone getting free of it. This situation has turned into an exploitative and debilitating concentration of power as stated in the seventh verse of Surah Hashr of the Holy Qur’an: ‘So that it will not be a perpetual distribution among the rich from among you.’

Many scholars with a realistic perspective have once again expressed their consensus that the current economic order cannot offer a solution should it proceed in this way. The only order that can correct this corrupt cogwheel that works against humanity may be a system intertwined with the economic bases of Islam. As was in the past, a socio-economic order, which acts to ensure the social welfare of the people, can be a solution to the current crisis. It is only possible with Islamic economics to raise all people to the basic level of welfare, that ensures the prohibition of interest which prevents the exploitation of labour; unrequited borrowing; zakat and other forms of aid; a human-centred business world and practices aimed at ensuring social justice.  

Financing Model Must Change

It is a great shame for humanity that the need for financing to survive is mostly met with bank loans, especially at a time when businesses and people are in a difficult situation and in an environment where social and economic policies are limited. It is the greatest evidence that the system is rotten when the aid to a person or business in need can only be made by institutions based on compound interest. The 2008 crisis and its subsequent developments proved that the coming out of a crisis was followed by a new crisis and hence the methods used were not permanent remedies.

As was in the 2008 global crisis, states have applied monetary expansion policies to support the market which has fallen into hard times due to the epidemic. Many central banks, especially institutions such as the US Central Bank (FED), the European Central Bank (ECB) and the International Monetary Fund (IMF), have put high amounts of liquidity in the market. Nevertheless, the recession in the economies has led the developing countries to a foreign currency crisis, and many countries have sought foreign currency borrowing. The existing debt stock of developing countries is increasing exponentially due to the epidemic. Countries already with a debt stock of 8.4 trillion dollars and those in the ‘developing countries’ category need to make $730 billion worth of payments just for this year. Nearly 100 countries applied to borrow money from IMF due to the currency loss caused by the crisis. The monetary system and the credit mechanism we operate in places countries under more and more debt while enriching groups with high interest income. A similar situation is observed at the level of both consumers and manufacturers. Many states have announced loan packages for individuals and firms that have lost their income and as a natural consequence of this, a process has been initiated in which individuals and institutions are in debited at higher interest rates and their futures are encumbered by their debts. In a sense, the current crisis has been transferred to future.

In order for this debt-interest-debt circle to be broken, the financial system needs to change. Instead of this system, which is independent from production and enables making money out of money alone, the interest-free financial system with strong ties with the real sector should be expanded. The remedy for getting rid of the interest-centred market is the application of Islamic economic practices such as the use of interest-free financial instruments and “unrequited borrowing”, which provides the needy with the capital when needed. The micro-finance funds to be created in this context will transform people from needy individuals into actors that contribute to production by supporting individual initiatives.

Basic Welfare Level Must be Guaranteed

Capitalism ensures the welfare of capitalists that monopolize capital with the help of interest, which is unrequited profit, earned at the cost of the labour segment of the society that lacks capital. In Islamic economics, it is aimed to free society from debt burden and increase welfare by ensuring the payment of debts of the people in distress by including the debtors among those who can benefit from zakat. To this end, states and the wealthy must act by the principles of Islamic economics to ensure the welfare of society. Neither capitalism nor socialism has been able to solve the injustice that has been going on for centuries leading to rebellious movements related to class discrimination such as “Occupy Wall Streets”. History, on the other hand, bears witness to the fact that Islamic economics ensures the well-being of the needy in society, by the hands of both its government and the wealthy, and with its institutions, principles and the feeling of compassion it evokes in hearts.

The dominant liberal paradigm suggests that the relations of production-consumption-distribution will be balanced by the market’s own rules, and interventions in this process will disrupt the general harmony of the market. However, as a natural consequence of this approach, it has been observed that the wage paid in return for the labour of workers, which constitute a large part of the society, has decreased to the level of misery. So much so that even in the United States, the minimum wage had to be dictated by the law. However, even these practices are designed for the benefit of the companies within the market mechanism. In capitalism, with the process of industrialization and mass production, the increasingly divided employee-employer relations have also developed in a largely immoral/inhumane plane. In this adventure, the distinction between the employee and the employer has deepened, and both sides have left their human point of view and started to take a purely economic stance.

While employers see the labour as a cost factor and a factor that undermines competitiveness, workers evaluate the wage as a means of benefit and class struggle. Islam does not separate life as religious and non-religious because it envisions humanity and society as a whole. In this context, it does not consider economic activities as a separate element from the legitimacy criterion in terms of morality and the foundations of religion. Wage also takes its place in the equation as a part of the same system of moral and religious values. Therefore, in Islam, wage appears as a reflection of the integrated perspective.

A new wage policy should be developed based on the distribution of produced value befitting human dignity. The “humanitarian wage” practice, which aims to mobilize a sustainable social revenue distribution and not to reduce the competitiveness of the companies, will be the first step towards a fair system. This humanitarian wage should be applied in a structure that is “in line with human dignity and related not to the productivity but to the existence of the employee, meeting the average economic and social needs of a human being, reflecting the welfare level of the society in which they live, taking into account the livelihood of a family and based on the social legitimacy and the responsibilities of the social parties”.

A Fair System Should be Established in Taxation

The fact that governments treat each citizen equally with regards to taxes and do not make a distinction between those who have wealth and those who do not, at many points is a hot topic. While the lack of justice in taxation increases the earnings and capital of the wealthy, it drags the non-wealthy to a spiral of poverty. This situation which takes place at both business and individual levels should be urgently balanced because in a society where taxes are distributed unfairly, entrepreneurship and basic welfare levels are hampered and the rate of tax evasion increases.

In the current system, while those who have a higher earning and wealth grow their wealth further, they also bring along inequality. The system works in a way that encourages capitalists to earn more and to hinder the opportunities for people who lack wealth and constitute the majority of a society. This situation reveals once again that the wealth that causes inequality must be taxed. However, this taxation should be in favour of the society and not the government. As some Western economists emphasize, the taxed wealth should not re-enter the government’s resources. On the contrary, the taxed wealth should be redistributed to the society in line with needs of the society. This principle, which Islamic economics has applied with zakat for thousands of years, constitutes a precedent for the elimination of inequality. People and businesses enriched with the resources of the society must return them to the society. Establishing a fair system in taxation will prevent the biggest factors leading to economic crises and ensure the solidarity of the society in potential crisis situations.

The Need for a Transition from the Free Market-Oriented Structure to Social Economy

The crisis in question has once again led to the question of relations between the market and the government. Although the throne of neoliberal economic thought, whose sovereignty was declared at the beginning of the twentieth century, was shaken by the Great Depression and Keynesian propositions after 1929, there was once again a shift in the free market direction with increasing tendencies towards liberalization after the 1980s. However, the 2008 global financial crisis and the current COVID-19 epidemic once again has led the pointer from the free market understanding to the idea that the government should be more involved in the economic functioning. In addition to questioning the relations between government and the market, this process also emphasized another area in which Islamic economics can be particularly distinguished; the importance of the third sector. The gap left from the free market and the government, which has been observed to be significant in some places, has revealed the need to be closed by the third sector that accommodates civil society. Islamic economic history contains some guiding examples in this regard. Providing several services from education to health through pious foundations in Islamic societies has been witnessed in both historical and contemporary practices. In this context, Islamic economics gives us the opportunity to solve the problems of society with their own means and strengthen solidarity.

Businesses Should Be Humanized

COVID-19 reminded businesses of the necessity of humanization again. It has once again become clear that companies that make big gains via the labour power they employ should not see people as only a “commodity”. Especially the companies that cannot work with the remote working model have faced the fact that a business cannot exist without “human”. In this case, it should be underlined that human beings should be considered as values and assets, not as a resource. In terms of Islamic economics, the labour of a person is superior to the capital itself. The moral ethics of ahi-order inspired by Islamic economics, with the tradition it creates, encourage the humanization of businesses, the value of labour and the ethical attitudes in the workplace.

Social Justice is Not a Discourse but a Necessity

An economic order in which half the world’s population has the same wealth as a handful of people has been proven to only cause inequalities. The reason for this inequality and injustice is the concentration of the capital, and its root cause is the economic order based on capitalism, which gives free rein to capitalists to exploit all kinds of resources. Eradicating this order and replacing it with social justice is possible only with Zakat, which is the first order of Islamic economics, and abolishing of interest, which is the second. While it is possible to use the wealth for the benefit of the society only with zakat, sadaqah and infaq (Islamic charity institutions), the capital can only provide fair earnings when put it into production by prohibiting interest and derivatives. With the COVID-19 period, social justice has become an indispensable fact, beyond a discourse.

A Holistic Change and Not a Partial One is a Must

Solutions to get out of this crisis proposed by Islamic economics such as changing the centre of financing, making social aid development-oriented, securing the basic level of welfare, humanizing businesses and rendering social justice essential are not only necessary for the Islamic societies, but for the entire humanity. These suggestions for a new economic order, which have been redesigned with the concepts of utilization and social distance, will show how bad our condition currently is if they are fulfilled with great devotion and purpose, and it will be clear that a world under the guidance of these principles offers a life befitting human dignity.

The COVID-19 epidemic revealed both the value attached to human health and the fragility of the economic system. In particular, inadequacies in social security networks and health services in capitalist economies and injustices with regards to accessing these services indicate that a new system is needed. The finance-centred evolution of capitalist economic thought threatens the welfare and happiness of all humanity, except for a small community. The traditional policy measures taken against the emerging economic crisis aim for the survival of the system and do not go beyond postponing the problems. This debt-based economic system causes the capital to grow continuously with interest income and causes the income distribution to deteriorate every day. Individuals and businesses that are crushed under debt fall into captivity of financial giants. Everyday life interrupted by COVID-19 has revealed the economic burden and fragility of individuals and businesses with no security. Even a short interruption leads to loss of income and prosperity.

A decent fair order can only be established with a new system. Islamic Economics proposes to all humanity the basic principles and implementation of this new system. The financial system-real sector relationship, practices that encourage social solidarity and the examples it presents as an alternative to the interest-based debt system provide concrete directions for the future.

The crisis after the COVID-19 pandemic actually allowed us to see the problems of the economic and social life we currently reside in more clearly. On one hand, there’s a large production capacity and technical development, and on the other hand, millions are suffering from depravation and lack of resources. While riches are accumulating wealth on one side, ravaging poverty is increasing on the other. These problems lead humanity towards the swamp of violence, disease, addiction and terrorism. A solution to these problems is possible by following the principles and practices of Islamic economics that put social justice at the forefront in a stricter manner.