Turkey’s Economic Problems Will Give Conservative Muslims Another PR Challenge

Summary
Turkey’s inflation problem is serious, although it did used to be much worst many decades ago.
Blaming it on the Islamic economic paradigm is flawed because the Turkish government does not adopt, and probably cannot adopt a fully Islamic economic model anytime soon.
The Turkish government and people should brace themselves for an economic recession, but timeless wisdoms can be readily found in the Quran on how to deal with this.
The Scene
Over the past year, the Turkish lira has fallen by circa 28% in value against the US dollar. The trend is even worse when compared to a decade ago: a depreciation of more than 80%.

The official inflation rate in 2021 is over 20%. There are daily price hikes to common goods and services, and that is making life tougher for the Turkish people. Except for the rich, the general masses are experiencing a more difficult time and coming closer to poverty.
There are many factors affecting the depreciation of the lira. But there is one posited factor that you will hear about frequently, and the subject of my article: the “unorthodox” economic theory of Erdogan in reducing interest rates when inflation is high. Some observers have called this phenomenon Erdoganomics.

Conventional economic wisdom goes something like this: raising interest rates during high inflation is needed, because it will make borrowing money more expensive. And as people and businesses borrow less money, they have less money to spend, and that reduces the demand for goods and services. This will dampen the “velocity of money” – the speed at which money circulates through the economy – and that will then halt or reduce the price of goods and services. That way, there will not be too much money chasing the same goods and services, and as such, the problem of inflation is addressed.

Of course, the issue with an interest rate hike is that this will most likely – if not certainly – also cause an economic recession. The problem then is which is the lesser of the two evils: an immediate recession, or continued inflation leading to gradual decline into poverty?

Not to lose track of the purpose of this article, Erdogan justifies his action of cutting interest rates by appealing to Islamic grounds. As he puts it, usury “is the mother of all evil”.[1] So here comes our problem: people – by which I mean the general non-Muslims and even liberal Muslims – will look at this so called Islamic economic tenet on the prohibition of usury and point at its terrible consequences by citing Turkey as their case study. It is this criticism of this Islamic economic tenet which I take issue with, but I am very much open to a critique of the Turkish government – the two are not the same!

The Defence

Firstly, there is no validity to the basis of this complaint because it does not consider the Islamic economic model as a whole; to use Turkey as an example of one is invalid because it does not abide by a complete Islamic economic model. The two biggest contentions are the usage of a fiat currency, and interest-bearing debt as an investment instrument.

Moreover, just because a country is having an economic problem, it does not necessarily mean that their economic tenets are flawed or wrong. The fact is that all governments – regardless of their economic policies, age, or era – face economic problems and recessions. People have short memories: what caused the economic crisis of 2008-9? Pick up any encyclopaedia of your choice and read about recessions going back decades and even centuries ago.

The stories we read of the Madinan era – where stones were tied around stomachs to alleviate hunger – are strong indicators of an economic recession. This is during the time of the Prophet ﷺ, who led the best Muslim government ever to have existed.

Economic adversity seems to be a divine decree; all civilisations are afflicted by it, and this is readily deducible by a quick survey of history. The reason for this is quite simple: there are too many factors outside the control of any government to avoid recessions:

  1. Issues relating to climate, such as droughts,
  2. Disease and pandemics,
  3. Wars,
  4. Sanctions, blockades, and tariffs by foreign antagonising entities,
  5. Last but not least, fiat money must be added to this list.

This takes me to the point about why Turkey is facing such staggering rates of inflation. Firstly, to blame it all on Erdogan is not supported by the data; decades ago, Turkey had a painful experience of high and chronic inflation from 1985 to 2004, which was well before Erdogan; during this time, overtly secular forces were comfortably in power. So much for Islam and the Islamising of Turkey being the cause of all its problems.

In 2001, an independent central bank was established just to fight inflation; the initiative was successful and subsequently led to an economic boom into the country and lifted millions out of poverty.

Source: IMF

But what is the cause of the latest inflation problem?

Here is my summary of the main reasons:

1

The usage of fiat currency. This is by far the most important factor, and the one you will not read about often because popular media does not take exception to fiat currency. When the underlying medium of exchange has no intrinsic value and can be easily and readily manipulated through the increase of money supply, then it should be no surprise we open ourselves up for the possibility of too much money chasing the same too-few goods and services.

The supply of money in Turkey has shot up quite radically over the past decade.

Source: The World Bank – Broad money supply

In a global environment where fiat currency is ubiquitously used, the underlying control of inflation consists of trust in the government to enable valuable goods and services to be produced, so that they can be paid for by other countries. Think about trying to buy something with Zimbabwean dollars. Once confidence tumbles, the value of the fiat currency falls.

Inflation is tricky because it is subject to self-fulfilling prophecy: the expectation of rising inflation causes inflation to rise. Since conventional wisdom requires interest rates to increase when inflation is high, and since the Turkish government is refusing to do that, the appetite for investment in Turkey has fallen; what is the point of investing in a country when your investment will automatically depreciate by more than 20% within a year just due to currency fluctuation? This lack of investment will impede – if not reduce – the goods and services that can be produced, and therefore inflation becomes a bigger problem.

One of the critical flaws of choosing to run an economy with fiat currency is the large degree on which the wealth of the population depends on the government. It is also tied to what other nations think it is worth. This takes me to another point: is that exposure risk really worth the capability of manipulating the domestic supply of money, especially for a government and people who do not subscribe to the norms of the rest of the world? I am reminded of the statement attributed to the French philosopher Voltaire: “Paper money eventually returns to its intrinsic value – zero.”

2

The Turkish economy is a net importer; it brings in sources of energy and intermediate goods. The problem is those goods have seen supply disruption problems and price hikes, and that is passed on to the consumers in Turkey. This problem is actually seen all over the world right now.

3

Emerging market currencies have all depreciated against the dollar recently, and the US Federal Reserve estimates it will reduce its asset purchase programme. This means interest rates in the US will rise, and the money seeking higher interest rates in developing countries will be brought back home to developed countries. This leads to an appreciation of the dollar against emerging market currencies, and the lira is no exception.

4

Trump’s tariffs on Turkish steel in 2018 caused a 20% fall of the lira against the dollar. [2] This effectively made Turkish exports more expensive, and the demand for their goods fell substantially.

There are probably a few more things to add to this list.

Some Thoughts for the Turkish Government and People

Firstly, we need to concede to the reality of economic adversity. The Turkish people should prepare themselves for more economic problems in the near future. When a recession does come, then addressing it fundamentally requires consistently working hard, observing patience, and yet still undertaking investments.

Allah gives us an example of an economic adversity and how it should be handled:

يُوسُفُ أَيُّهَا الصِّدِّيقُ أَفْتِنَا فِي سَبْعِ بَقَرَاتٍ سِمَانٍ يَأْكُلُهُنَّ سَبْعٌ عِجَافٌ وَسَبْعِ سُنْبُلَاتٍ خُضْرٍ وَأُخَرَ يَابِسَاتٍ لَعَلِّي أَرْجِعُ إِلَى النَّاسِ لَعَلَّهُمْ يَعْلَمُونَ (46) قَالَ تَزْرَعُونَ سَبْعَ سِنِينَ دَأَبًا فَمَا حَصَدْتُمْ فَذَرُوهُ فِي سُنْبُلِهِ إِلَّا قَلِيلًا مِمَّا تَأْكُلُونَ (47) ثُمَّ يَأْتِي مِنْ بَعْدِ ذَلِكَ سَبْعٌ شِدَادٌ يَأْكُلْنَ مَا قَدَّمْتُمْ لَهُنَّ إِلَّا قَلِيلًا مِمَّا تُحْصِنُونَ (48) ثُمَّ يَأْتِي مِنْ بَعْدِ ذَلِكَ عَامٌ فِيهِ يُغَاثُ النَّاسُ وَفِيهِ يَعْصِرُونَ (49)

“Yūsuf, O man of truth, explain to us (the interpretation of the dream) about seven fat cows eaten by seven lean (cows), and seven green spikes [of grain] and others [that were] dry – so I may return to the people; perhaps they will know.

“He said: You will plant for seven years consecutively (as usual); but leave your harvest leaves in its spikes except for a little from which you will eat (i.e. you will have seven good years of harvest, so save and be conservative with your consumption in anticipation of bad times to follow).

“Then there will come after that, seven difficult years which will consume what you saved for it, except a little from which you will store (i.e. consume what you saved in the earlier good years except a small amount which you should leave aside for the purpose of seeding the next year’s harvest).

“After that, there will come a year in which the people will be given rain and in which they will press (for olives and grapes).[3]

There are timeless lessons found in this short passage of the Qur’an:

Expect economic downturns in your lifetime. Good times are not perpetual. Similarly, bad times do not last forever either. Thus, you should never be unduly apocalyptic about the future. This is especially important for investors; investing requires a positive outlook of the future, or else it will not yield fruitful results.

Respect wealth (whether it is the harvest, a precious resource, or money), but be indifferent towards it. To create wealth requires hard work; people have to literally toil and spend hours of their daily lives to be economically productive. Therefore, do not let the good times cause you to forget the effort that went into making that wealth. Otherwise, you will end up spending uncontrollably and compromise your future financial security.

At the same time, wealth comes and goes, and consequently do not be obsessed with it. From time to time, you will suffer financial losses when investing – it is simply a part and parcel of the endeavour.

Bad times can last for a significant period. For instance, the famine mentioned here in these verses lasted for 7 years. The Great Depression (1929) lasted for a whole decade. Many of the recessions that followed thereafter lasted for one or two years. History should be used to calibrate our expectations – otherwise short-term thinking can cause misjudgement.

Have the foresight to think about the bad times, and then be competent enough to prepare properly for it. Had the Egyptians consumed all their produce in the good years, they would not have had anything for the bad years. And had they not known how to preserve the produce in the good years, again they would not have had anything for the bad years. Similarly, expect downturns in your life and prepare your budget for when it comes.

Invest even in difficult times, and set yourself up for success for when there is a turn-around. This means that you should not consume everything in the bad years; instead, literally sow your seeds now for the upcoming good years. Therefore, continue to work hard and put capital into your investments, even in bad times, if possible.

Yūsuf عليه السلام was given personal education and insight by Allah to understand and correctly interpret dreams. Although the king himself did not have that insight, nonetheless he was smart enough to recognise the truth when it was spoken. Knowledge is widely available, and as Muslims we have an obligation to continuously educate ourselves. We need to have at least the minimum knowledge to ask the right questions, and correctly judge between a plausible answer from one that is completely wrong.

Economic recessions can even have a cleansing effect in a country, as they lead to the pruning of businesses. Bad businesses die out or are cut down, and new pasture is formed for newer and better companies to grow. If bad businesses are allowed to survive e.g. by government intervention, then bad practices may continue and we will end up with zombie-businesses. This happened during the 1990s in Japan. Having said this, I do advocate for some services to continue to be supported. National services which are for the benefit of society, such as healthcare and infrastructure (both physical and electronic), should be supported receive direct government aid.

There are other points I feel strongly about:

1

An Islamic economy requires the avoidance of interest-bearing debt as an investment instrument. Debt in Islam is wholly reserved as an act of charity, and therefore the lender should not expect to profit from being in the privileged position of loaning money. Therefore, those with money wishing to make a profit should engage in genuine investment where risks are much more equitably shared. Psychologically, the investor has a much stronger urge and interest for the success of the enterprise. That should hopefully lead to better businesses.

As things stand, Turkey – like many other countries – use a tremendous amount of interest-bearing debt for its investment ventures. Such a policy has even had bad historical consequences, e.g. the construction bust of 2018 where debts were not being serviced, resulting in ghost-towns to date. [4] The country needs to wean itself out of interest-bearing debt.

2

Turkey should continue to produce unique goods and services that the world needs and wants. Economically speaking, Turkey is actually in a good place; it has a diversified economy with good exports, an educated populace, and good and conducive demographics for growth into the future.

3

In the short term, I personally do not think raising interest rates is necessarily ‘sinful’, since in cases of necessity prohibited religious injunctions are relaxed:

فَمَنِ اضْطُرَّ غَيْرَ بَاغٍ وَلَا عَادٍ فَإِنَّ اللَّهَ غَفُورٌ رَحِيمٌ

But if one is forced by necessity, without wilful disobedience, nor transgressing due limits, then Allah is Oft-Forgiving, Most Merciful.[5]

It is imperative that a maṣlaḥah/mafsadah (cost/benefit) analysis be carried out which assesses the constraints of the current state, such as living with the problems of fiat currencies.

The pros of increasing the interest rate

1

Avoid runaway inflation. We have a living example of what can happen when inflation gets out of control. In Venezuela, people are literally eating rotting meat just to survive. [6]

The Taliban are the least compromising of people, and even they have not stopped opium production in Afghanistan due to the state of extreme poverty. [7]

2

Reduce the likelihood of a political defeat in the 2023 election. I do not think the younger and poorer Turks will support the Justice and Development (AKP) party if inflation continues to rise.

The cons of increasing the interest rate

1

Implicit and continuous support of the interest-bearing debt investment instrument. This ultimately makes one liable for divine chastisement in this world and the next. I should add that unless the interest rate is zero, lowering the interest rate to even a relatively low amount like 3% does not remove the moral problem for a Muslim. In fact, reducing the interest rate to an attractively low number will increase the uptake of interest-bearing debts, and ironically makes the moral problem even worst.

So in order to avoid usuary, why don’t they make it prohibitively expensive?

This idea has its own problems: all variable-interest contracts will suddenly become extremely expensive and lead to mass bankruptcy. In some way, this will exhibit the exact oppression of usuary which Islam wants to prohibit since the rich will become richer, and the poor will become poorer. This makes me to the next point.

2

The Turkish economy goes into a recession in the short run. If the recession is more painful than just weak purchasing power due to inflation, then I think it could equally lead to the AKP losing the next election.

Source: www.islam21c.com

Notes:

[1] https://www.reuters.com/article/us-turkey-currency-idINKBN1IC1NV

[2] https://data.worldbank.org/indicator/FM.LBL.BMNY.CN?end=2020&locations=TR&start=2009&view=chart

[3] Al-Qur’an, 12:46-49

[4] https://www.theguardian.com/world/2019/jan/28/fate-of-castles-in-the-air-in-turkeys-151m-ghost-town

[5] Al-Qur’an, 16:115

[6] https://www.bbc.co.uk/news/av/world-latin-america-45877524

[7] https://www.bbc.co.uk/news/world-asia-59608474

from:islam21c.com

The biggest enemy of Muslims is….Muslims

As a father, nothing is more painful than seeing our Muslim children around the world suffering. We see the Syrians, Palestinians, Iraqi, Afghani – slaughtered and their blood streaming into rivers.

However, as I sat watching, listening and reading the many many condemnations of the Israeli atrocities against our brethren in Palestine, on websites, in the masjid, on YouTube, news agencies around the world – after seeing all the appeals, petitions, marches, protests and pleas for help from many organizations and people, this is the thought that came to mind: Why would Allah (swt) – hurt his own people who worship him?

Then, I thought – Allah loves his people 70 times more than a mother loves her children. Then why is Allah allowing this to happen?? After opening the Quran and reading numerous Ahadith – the answer was clear. When Allah’s anger is in full force – when his obedience is lost, when His beloved Messenger’s example is mocked, when his people forget his message and his prophetic way — He (swt) will send reminders.
War, blood, pain, killing and the loss of our innocent children — the only reminder we understand.

With over 50 years of Palestinian conflict – years of debate – our eyes, hearts are sealed with the real problem. Syrian massacre in front of us – a country shredded with no end of war in sight. Iraq millions butchered. Afghanistan shelled for decades…and all the other Muslim nations similar and screaming for help.

The cause? The cause is not the Jews, Zionists, Munafiqs, Freemasons, Bilderbergs – they are not the reason – but only a means; a tool Allah has used to wake up this ummah. But 99% are still asleep.

Our minds our engrossed in this world, love of the competition of success – glory, glamour, status and power and forgetfulness of death.

Our race is for the biggest house, a collection of cars, fancy number plates, a glamorous lifestyle, a parade of shops, a huge bank balance – a wardrobe of designer clothes, shoes, phones, holidays, watches…the list is eternal.

Until and unless, the collective ummah, does not STOP the copycat lifestyle of the disbelievers – the kuffar, behaving like kuffar and supporting the kuffar activities, blending our belief — Allah azza wa jall will withhold HIS support. He will turn the mercy OFF until you submit to him 100%.

You can appeal in millions on every street – in every country – but it will be a grain of sand in weight. Millions marched to stop the invasion of Iraq and still – the bombing pounded every city and rubbled masjids. Millions marched in Egypt – their country destroyed.

Millions march and cry….but how many do tawba, repent and change and submit to Allah and follow a real Islam? It is no use criticizing the Jews if we have not changed our appearance, our entertainment and our culture to that of our beloved NABI sallallahu alayhi wa sallam.

We cannot persist in supporting them through watching their filth on t.v, Hollywood trends, dancing to music, wearing their haraam clothing and eating doubtful foods and then cry foul when they eat us alive! The change that is needed is not in Washington, Tel Aviv or London. It is in the homes, lounges, kitchens and workplace — of every single reciter of the kalimah!

I challenge every one of you my brothers & sisters – throw out that evil box that damages our thinking, our morals and our imaan! Then we will see the help of Allah descend. If we behave like Muslims, then Allah has promised,’wa kaana haqqan alaynaa nasrul mumineen’ ‘It is a right upon us to help the believers’.

Making propaganda and insulting Jews is not helping, they are only one nation who Allah is using. Like the Islamophobic groups that are appearing everywhere, who and why were they created? Why would Allah allow groups to terrorize the Muslims and insult his Prophet ṣallallāhu ‘alayhi wa sallam (peace and blessings of Allāh be upon him) . The truth is we are the Insult – the Muslims of the 21st Century.

We the Muslim today say that Islam is too difficult. Let’s blend the east and west, let’s integrate our wives, our children. You don’t need to practice the sunnah – it’s an option. I cant pray at work my boss will get upset. I cant grow my beard or my wife will curse me….my mum will throw me out….I cant get a job….so on, so on…etc.

The question is ‘WHO ARE WE- What type of Muslim are we???’ If you want to make a difference by ‘Boycotting’ then:-

Boycott Interest
Boycott Usury
Boycott Alcohol
Boycott Tobacco
Boycott Drugs
Boycott mortgages – interest
Boycott loans
Boycott Insurance
Boycott ALL Haraam earnings
Boycott ALL doubtful/haraam food
Boycott EXTRAVAGANT WEDDINGS
Boycott EXTRAVAGANT holidays
Boycott zina of the eyes
Boycott zina of the tongue
Boycott zina of the ears
Boycott haraam relationships
Boycott EXTRAVAGANT lifestyles
Boycott music
Boycott backbiting
Boycott slander
Boycott adultery
Boycott fornication
Boycott clubbing
Boycott going out without hijaab
Boycott intermingling of genders
Boycott EVER MISSING A SALAH
Boycott disobedience of parents
Boycott disrespecting husband’s
Boycott ill treating wives
Boycott Wasting hours on whatsapp
Boycott wasting hours on Twitter
Boycott wasting hours on FB/Instagram etc
Boycott spending hours on PS4/xbox
Boycott NATIONALISM
Boycott leaving the SUNNAH
Boycott leaving the SHARIAH
Boycott ALL FORMS OF HARAAM InshaAllah!!!

Change yourself my brothers and sisters. Make your deen like a strong pillar – a fortress – of imaan.

May Allah Give us the true understanding and grant us the success to practice and guide us on the true path till our final abode Jannah in Akhirah (Ameen).

by A Muslim
Source: MuslimVillage.com

Why is riba condemned in Shariah?

Q: Why is riba condemned in Shariah?

A: The western economic system, which is based on interest, has resulted in concentrating the wealth and resources of the world into the hands of a few select individuals.

The money of the rich is pooled in banks and offered to the poor, according to their financial status, under the pretext of fulfilling their needs and requirements with the condition of interest attached, thereby making it extremely difficult for them to continue life and escape their poverty.

The outcome is that the wealthy thrive and prosper through the blood and sweat of the poor. Hence, they create monopolies and become richer while the poor become poorer in slogging to pay off their debts to the rich. In essence, riba has achieved nothing besides widening the gap between the rich and the poor, causing man to fall deeper into the abyss of destruction. Worst of all, it gradually sucks the blood of the poor and entraps them in slavery that is not in the form of shackles and chains, but rather in the form of anxiety and sleepless nights.

Many countries’ deficit accounts run into billions due to the interest-bearing loans that are borrowed from other countries, the brunt of which is borne by none but the citizens of the borrowing countries. The reality of the matter is that today’s ten richest men in the world own more than the combined wealth of 48 poor countries of the world. Millions are malnourished, lack access to pure water, underprivileged in terms of the basic necessities of life and are deprived of education.

In contrast, Islam advocates brotherhood and showing kindness and compassion to the creation. One is permitted and encouraged to earn a halaal living. However, this must be done together with maintaining a balance and with fulfilling the needs of the creation.

And Allah Ta’ala (الله تعالى) knows best.

الَّذِينَ يَأْكُلُونَ الرِّبَا لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ الَّذِي يَتَخَبَّطُهُ الشَّيْطَانُ مِنَ الْمَسِّ ذَٰلِكَ بِأَنَّهُمْ قَالُوا إِنَّمَا الْبَيْعُ مِثْلُ الرِّبَا وَأَحَلَّ اللَّـهُ الْبَيْعَ وَحَرَّمَ الرِّبَا فَمَن جَاءَهُ مَوْعِظَةٌ مِّن رَّبِّهِ فَانتَهَىٰ فَلَهُ مَا سَلَفَ وَأَمْرُهُ إِلَى اللَّـهِ وَمَنْ عَادَ فَأُولَـٰئِكَ أَصْحَابُ النَّارِ هُمْ فِيهَا خَالِدُونَ ﴿البقرة: ٢٧٥﴾

يَا أَيُّهَا الَّذِينَ آمَنُوا إِنَّمَا الْخَمْرُ وَالْمَيْسِرُ وَالْأَنصَابُ وَالْأَزْلَامُ رِجْسٌ مِنْ عَمَلِ الشَّيْطَانِ فَاجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿المائدة: ٩٠﴾

عن جابر رضي الله عنه قال لعن رسول الله صلى الله عليه وسلم آكل الربا وموكله وكاتبه وشاهديه وقال هم سواء رواه مسلم ( مشكوٰة المصابيح ص244)

عن أبي هريرة عن رسول الله صلى الله عليه وسلم قال ليأتين على الناس زمان لا يبقى أحد إلا أكل الربا فإن لم يأكله أصابه من بخاره ويروى من غباره رواه أحمد وأبو داود والنسائي وابن ماجه ( مشكوٰة المصابيح ص245)

وعن عبد الله بن حنظلة غسيل الملائكة قال قال رسول الله صلى الله عليه وسلم درهم ربا يأكله الرجل وهو يعلم أشد من ستة وثلاثين زنية رواه أحمد والدراقطني وروى البيهقي في شعب الإيمان عن ابن عباس وزاد وقال من نبت لحمه من السحت فالنار أولى به ( مشكوٰة المصابيح ص245)

Answered by:

Mufti Zakaria Makada

Checked & Approved:

Mufti Ebrahim Salejee (Isipingo Beach)