Non – subjective fiscal policy with automatic stabilizers could help in stabilizing the cycle of business. In this article, we would argue about how the institution of Zakat acts as automatic stabilizer in an Islamic Economy.
Institution of Zakat as Automatic Stabilizer
Zakat is a must payment to the government on one’s income and wealth in an Islamic economy. Zakat is imposed on everyone who is wealthy enough to pay and the source of income is pure in the eyes of Islam, and through this Zakat is must to be paid on all forms of wealth and income.
Verse 60 of Chapter Al-Tauba lists the heads of Zakat and directs the government in an Islamic economy as to who should be the beneficiaries of Zakat.
"Alms are for the poor and the needy, and those employed to administer the funds; for those whose hearts have been (recently) reconciled (to truth); for those in bondage and in debt; in the cause of Allah; and for wayfarer; (thus it is) ordained by Allah, and Allah is full of knowledge and wisdom (Al-Tauba: 60)".
Beyond Nisab, Wealth Zakat of 2.5% and Income Zakat of 5% (when productive enterprise uses both labor and capital as major inputs) and 10% (when productive enterprise uses both labor and capital as major inputs) is prescribed.
Proportional Zakat Linked with income becomes an automatic stabilizer. When total sum of personal income increases, more Zakat is collected and much remains at governments for the allocation as transfer payments to Fuqura (poor and needy), Masakeen (extremely poor and needy) and Gharimeen (borrowers in trouble).
When the total sum of personal income decreases, Zakat also decreases providing the person a sign of relief as he/she is already going through crisis.
Moreover, the proportional income collecting, Zakat on wealth redistributes wealth too. So, if an Islamic Economy goes unstable and principles fail to recover and increase incomes, wealth Zakat enables the distribution that works independently, and helps them stabilize the extremes of business cycles.
Transfer Payments as Automatic Stabilizer
When the total sum of income of any person declines because of recession, more people will be in need of Zakat. Since Zakat is imposed on both a person’s income and his/her wealth. The redistribution of will always is an operation that will be carried out in an Islamic economy, irrespective of the phase of business cycle. Transfer payments to unemployed, poor, needy etc. will continue if the economy faces a mode of recession.
According to this, it’s easy to believe that low tax rate policy with widen Zakat base will confirm stable situation, increase the sum of demands, motivating the investors by decreasing costs. At the same time, microeconomic unstable situation in market could be resolved by increasing competition and helping to reduce market power.
For further research, visit IEP’s website:
www.islamiceconomics.viviti.com
Tuesday, January 17, 2012
More see class conflict between rich and poor
People are getting aware of the differences between rich and the poor in America. People are of the view that increasing differences create increased conflicts between the two distinct groups. Wednesday by Pew Social & Demographic Trends found out through a comprehensive study that about 2/3rd of the people think that conflicts between the rich and poor are clear and sharp. This also makes 19% increase in what people had to say in 2009. 23% of the people thought that the conflict did exist but of mild value. As low as 7% people, neglected any presence of conflict in this context. This survey comprised of 2000 American respondents and it was carried out in December.
Pew Study reveals that this rising conflict is gaining significance. The extent of it can be understood by its comparativeness with the conflicts between locals and immigrants or Negroes and Americans. Pew study also revealed government policies that provoked this conflict. Moreover, people continue to have similar views on the issue in the past few years.
Pew Social & Demographic Trends
As much as the equal percentage of the respondents are of the opinion that people are not wealthy by default rather, their wealth is by virtue of hard-earned money through education, hard work and or may be by ambition. On the other side, around 4 out of 10 respondents opine that the reason why people are wealthy, chiefly because they are the off-shoots of the rich families.
“As the results of the survey exhibit the tendency that quite a notable change persists in the American lifestyle that calls for the class conflict in the public perception, however, their inclination or tendency does not indicate growing grievances toward wealthy people” as indicated in the report, irrespective of vacuum created between the high and low class is not really a hot issue in recent times.
The movement namely; The Occupy Wall Street turned out to be the evident sign of frustration for amongst the upper strata and the poor class which naturally prompted national attention in the length and breadth of country as a protest.
The income of middle class nation has gone down slightly due to the persistent effects of recession in the market, considering the fact that a huge amount of Americans have endeavored against the unemployment wave. Until 2009 officially, the vaccum between the American moneyed people and the poorest widened owing to the recession period.
Owing to the peculiar situation in the country, lawmakers made tax system as a focal point. Warren Buffett triggered a massive debate with lawmakers with a view to impose more tax on rich people – telling off “billionaire-friendly Congress” in order to overprotect himself and his rich friends. Gathering the data about the wealthy people, it was revealed last month by The New York Times that not only most of the elected people are wealthy, but also the 50% of the Congressmen are millionaires. Beside this, just in the last 6 years bulk of the Congress members have turned out to be the wealthier. Apart from this, in the primary electioneering activities, the sensitive or a focal point was the wealth of The Republican Presidential candidate. Another victim of wealthiest candidate was Mitt Romney who was seriously criticized for offering one of his friends Rick Perry an amount of a bet of $10,000. In due course of time, Romney took shots on the wealth of his rival whilst insinuating last month about another fellow Newt Gingrich; being out-of-touch who was known to be “a very wealthy man.”
For more info, please visit
http://lifeinc.today.msnbc.msn.com
http://www.pewsocialtrends.org/
Pew Study reveals that this rising conflict is gaining significance. The extent of it can be understood by its comparativeness with the conflicts between locals and immigrants or Negroes and Americans. Pew study also revealed government policies that provoked this conflict. Moreover, people continue to have similar views on the issue in the past few years.
Pew Social & Demographic Trends
As much as the equal percentage of the respondents are of the opinion that people are not wealthy by default rather, their wealth is by virtue of hard-earned money through education, hard work and or may be by ambition. On the other side, around 4 out of 10 respondents opine that the reason why people are wealthy, chiefly because they are the off-shoots of the rich families.
“As the results of the survey exhibit the tendency that quite a notable change persists in the American lifestyle that calls for the class conflict in the public perception, however, their inclination or tendency does not indicate growing grievances toward wealthy people” as indicated in the report, irrespective of vacuum created between the high and low class is not really a hot issue in recent times.
The movement namely; The Occupy Wall Street turned out to be the evident sign of frustration for amongst the upper strata and the poor class which naturally prompted national attention in the length and breadth of country as a protest.
The income of middle class nation has gone down slightly due to the persistent effects of recession in the market, considering the fact that a huge amount of Americans have endeavored against the unemployment wave. Until 2009 officially, the vaccum between the American moneyed people and the poorest widened owing to the recession period.
Owing to the peculiar situation in the country, lawmakers made tax system as a focal point. Warren Buffett triggered a massive debate with lawmakers with a view to impose more tax on rich people – telling off “billionaire-friendly Congress” in order to overprotect himself and his rich friends. Gathering the data about the wealthy people, it was revealed last month by The New York Times that not only most of the elected people are wealthy, but also the 50% of the Congressmen are millionaires. Beside this, just in the last 6 years bulk of the Congress members have turned out to be the wealthier. Apart from this, in the primary electioneering activities, the sensitive or a focal point was the wealth of The Republican Presidential candidate. Another victim of wealthiest candidate was Mitt Romney who was seriously criticized for offering one of his friends Rick Perry an amount of a bet of $10,000. In due course of time, Romney took shots on the wealth of his rival whilst insinuating last month about another fellow Newt Gingrich; being out-of-touch who was known to be “a very wealthy man.”
For more info, please visit
http://lifeinc.today.msnbc.msn.com
http://www.pewsocialtrends.org/
US trade gap widens, biggest since June
With the cascading decrease in trade benefit, which in November rose to highest value in past five months, it was identified that economy suffered the load of increasing import pressures more than expected. Against the forecast of $45 billion by the analysts, the deficit rose to $47.8 billion out of the expectations, revealed by the Commerce Department.
According to the revised analysis for trade deficit by the government, the trade gap for October was estimated to be around $ 43 billion. This was the largest recorded increase for past 5 months, confirmed from statistics. Use of imported oil brought up increase in price to up to $102.5/ barrel, which is 3.7 % from the last month. Furthermore, with increase in price, increase in volume was reported.
Domestic utilities imported from foreign markets increased to a record value. Such a value of trade gap signifies trends of usage of products belonging to international markets. Furthermore, the reason behind it was not only an average citizen, but also larger firms and businesses. This caused imbalance in the economy. To add to the pressure, exports also decreased by 0.9 % by November. It develops the fact that increase in imports depicts increasing demands in the country, while decreasing exports depict lowering value of local products.
Trends of using industrial utilities and oil products from foreign markets increased the imports to $225.6 which makes 1.3 % increase compared to the last value. Nevertheless, it was mentioned in the report that economy did not fell down for US in context to comparison of US trade versus trade in China. US trade gap lowered to $ 26.9 billion by the end of November. This was largely due to astonishing $ 9.9 billion export from US to China. Furthermore, China happened to be large importer of US products and imports from China reduced as recorded since December 2010.
For more info, please visit
http://bottomline.msnbc.msn.com
According to the revised analysis for trade deficit by the government, the trade gap for October was estimated to be around $ 43 billion. This was the largest recorded increase for past 5 months, confirmed from statistics. Use of imported oil brought up increase in price to up to $102.5/ barrel, which is 3.7 % from the last month. Furthermore, with increase in price, increase in volume was reported.
Domestic utilities imported from foreign markets increased to a record value. Such a value of trade gap signifies trends of usage of products belonging to international markets. Furthermore, the reason behind it was not only an average citizen, but also larger firms and businesses. This caused imbalance in the economy. To add to the pressure, exports also decreased by 0.9 % by November. It develops the fact that increase in imports depicts increasing demands in the country, while decreasing exports depict lowering value of local products.
Trends of using industrial utilities and oil products from foreign markets increased the imports to $225.6 which makes 1.3 % increase compared to the last value. Nevertheless, it was mentioned in the report that economy did not fell down for US in context to comparison of US trade versus trade in China. US trade gap lowered to $ 26.9 billion by the end of November. This was largely due to astonishing $ 9.9 billion export from US to China. Furthermore, China happened to be large importer of US products and imports from China reduced as recorded since December 2010.
For more info, please visit
http://bottomline.msnbc.msn.com
Lessons to learn from the Economic Crisis of US
The rate of consumption is far high from the present means. Increasing rate of debts and fast rate of credit creation is the key factor of crises faced by sovereign states in US and Europe. These factors crest a large fear of huge recession usually named as “double dip recession”
The national debt of US was $2 trillion approximately in 1980 which rose to $15 trillion in 2011. The biggest economy of the world is US economy, but for the very first time the debt rate to GDP ratio has increased up to the extent of riskiness as its credit to GDP ratio has increased over 100% of GDP (gross domestic product)
The Americans who wants full time jobs, but are unable to get it because of current recession is about 25 million. The rate of unemployment in United States has increased to 7 million in last four years.
The technological and manufacturing edges have merged overseas due to the up-rise of BRIC. It is the main cause of decrease and de industrialization in national wealth of US economy.
The fiscal stimulus is targeted again as an undisciplined sector of creating finance, because it does not extend the creation of credit to private sector as it is required. Since 2008, by keeping the interest rate to zero level, it is said that the monetary policy is ineffective in the last few years
There are some causes of the crises that are being faced by the economy of USA that are generated due to the ignorance of Islamic principles. They are briefly discussed below to make the solution of the problem clearer.
1. Taking more and more credit and spending it on extraordinary things which are just a luxury for people, cause a huge increase in the financial deficit of USA to a level of $1.3 trillion (2011 estimates).
2. The rate of consumption is far higher then of resources in hand. This habit of spending more than income creates a vicious circle for the one who is saver and taxpayer. The debt of consumer has increased by 1700 over last 40 years. The fluctuations of business cycle are unsustainable.
3. Corporate finance makes up 40% of the total income. This helps the productive sector in a positive way. However, even such a high rate of earnings in the corporate finance sector could not make the essential business links between the investors and savers. Savers were the primary victims of the matter.
4. A thoughtful measure of economical welfare was quantitative easing. This measure focused on diminishing savings which caused varying property prices. However, it involved profit generation through more probable market anticipation, contrary to orthodox productivity which provides higher job rates
5. Financial intermediation is gaining roots rapidly whereas productive sector is being suppressed. Joseph Stieglitz identified that economic crisis in 2007-09 was a money game for a few economic giants who used the policy of social losses and personal gains. He added that the trustworthy financial organizations played negative role and proved to be a participant in the evil policies.
For more info please visit
http://www.halaltamweel.com
The national debt of US was $2 trillion approximately in 1980 which rose to $15 trillion in 2011. The biggest economy of the world is US economy, but for the very first time the debt rate to GDP ratio has increased up to the extent of riskiness as its credit to GDP ratio has increased over 100% of GDP (gross domestic product)
The Americans who wants full time jobs, but are unable to get it because of current recession is about 25 million. The rate of unemployment in United States has increased to 7 million in last four years.
The technological and manufacturing edges have merged overseas due to the up-rise of BRIC. It is the main cause of decrease and de industrialization in national wealth of US economy.
The fiscal stimulus is targeted again as an undisciplined sector of creating finance, because it does not extend the creation of credit to private sector as it is required. Since 2008, by keeping the interest rate to zero level, it is said that the monetary policy is ineffective in the last few years
There are some causes of the crises that are being faced by the economy of USA that are generated due to the ignorance of Islamic principles. They are briefly discussed below to make the solution of the problem clearer.
1. Taking more and more credit and spending it on extraordinary things which are just a luxury for people, cause a huge increase in the financial deficit of USA to a level of $1.3 trillion (2011 estimates).
2. The rate of consumption is far higher then of resources in hand. This habit of spending more than income creates a vicious circle for the one who is saver and taxpayer. The debt of consumer has increased by 1700 over last 40 years. The fluctuations of business cycle are unsustainable.
3. Corporate finance makes up 40% of the total income. This helps the productive sector in a positive way. However, even such a high rate of earnings in the corporate finance sector could not make the essential business links between the investors and savers. Savers were the primary victims of the matter.
4. A thoughtful measure of economical welfare was quantitative easing. This measure focused on diminishing savings which caused varying property prices. However, it involved profit generation through more probable market anticipation, contrary to orthodox productivity which provides higher job rates
5. Financial intermediation is gaining roots rapidly whereas productive sector is being suppressed. Joseph Stieglitz identified that economic crisis in 2007-09 was a money game for a few economic giants who used the policy of social losses and personal gains. He added that the trustworthy financial organizations played negative role and proved to be a participant in the evil policies.
For more info please visit
http://www.halaltamweel.com
Housing more affordable than ever … for foreign buyers
Keeping in view the present state of affairs, only Florida is inviting the attraction of investors from Colombia, Haiti and Cuba. The environment is favorable for planting business roots in US. Credit Sesame, serving in the capacity of a loan management and online credit firm, conducted a study about real estate business using data of National Association of Realtors. The findings show that Sunshine State enjoys the largest market share among foreign residents by attracting almost 31 percent of the total home purchases.
The business generated by foreign buyers, in 2009 in the market of real state was 66 billion USD. In 2010, it increased up to 82 billion USD. According to a real estate and finance teacher, Susan Wachter who works at The Wharton School in the University of Pennsylvania, “the housing sector is now much cheaper and more affordable than it was previously.” It is however suggested that it is a lot more difficult to gain credit or loans but there is still an inflow of cash that comes in from abroad through investors mostly.
The buyers of residential places abroad presume that the United States is a favorable place to invest money in as a bet. “It can be stated that with the increasing uncertainty prevailing in the world, the real estate sector is one of the safe places to put your money in.” She says that the possession of homes is slowly increasing in importance and is becoming more affordable for the foreigners as compared to the US residents, as stated by Credit Sesame Report. “Almost 80 percent of the US residents who are not born there are in possession of a house since 2009 as found by National Association of Realtors. The nominal ownership rate at that time was almost 64.5% and has now gone up to 66.3%.
USA’s Southern neighbor, Mexico is known to be on the top when it comes to the foreign buying and selling of the US homes. Other states involved in this business include the following:
• The first state is Florida with approximately 12% of the entire home purchases that take place among foreigners. This is closely followed by California. The vast majority of the foreigners’ inflow is from Mexico, China, Vietnam, Philippines, and India.
• At the third position comes Texas contributing almost 9% with its international residents where most of them belong to China, Philippines, Vietnam, India as well as Mexico.
• Next is Arizona which proves to be the fourth largest contributor to the market giving in 6% of the foreign purchases of the homes. The people from Mexico, India as well as Iraq are the ones with the highest possibility of buying homes in these regions.
The audits that were carried out in Apple reflected a huge usage of child labor. There have been breaches seen in the amount of pay received, the benefits extended towards the employees and the work environment given in China.
This Friday, Apple Inc gave out an audit report of the largest suppliers they had and said that numerous violations had been brought to light in relation to the pay rates, the fringe benefits as well as the work environment in the huge plants operating in China. Cupertino is a Californian company which was questioned for its secretive supply chains and what the reason was why they never revealed the supply chain they had.
The company conducted 229 audit reports which showed an 80 percent increase from 2010. Important suppliers and the final assembly of Apple’s supply chain were explored. It was decided that in order to solve the issues regarding the working conditions at the factory, the consumer giant device would allow an independent auditing team from the Fair Labor Association to interfere in the matter.
As per an audit report, Apple stated that “It's a level of transparency and independent oversight that is unmatched in our industry." Moreover, it claimed that although 6 on-going and 13 old cases of child labor were found at some of its component manufacturers but none were found at its final assembly manufacturers. In another report, "Supplier Responsibility Progress Report", it was also noted that Apple had asked its 67 suppliers to repay the workers whose pay had been reduced in order to penalize them. In the same report, it was also mentioned that apple had stopped doing business with one of its manufacturers and rectified the performance of another one, both of which had been accused of continuous crime.
The business generated by foreign buyers, in 2009 in the market of real state was 66 billion USD. In 2010, it increased up to 82 billion USD. According to a real estate and finance teacher, Susan Wachter who works at The Wharton School in the University of Pennsylvania, “the housing sector is now much cheaper and more affordable than it was previously.” It is however suggested that it is a lot more difficult to gain credit or loans but there is still an inflow of cash that comes in from abroad through investors mostly.
The buyers of residential places abroad presume that the United States is a favorable place to invest money in as a bet. “It can be stated that with the increasing uncertainty prevailing in the world, the real estate sector is one of the safe places to put your money in.” She says that the possession of homes is slowly increasing in importance and is becoming more affordable for the foreigners as compared to the US residents, as stated by Credit Sesame Report. “Almost 80 percent of the US residents who are not born there are in possession of a house since 2009 as found by National Association of Realtors. The nominal ownership rate at that time was almost 64.5% and has now gone up to 66.3%.
USA’s Southern neighbor, Mexico is known to be on the top when it comes to the foreign buying and selling of the US homes. Other states involved in this business include the following:
• The first state is Florida with approximately 12% of the entire home purchases that take place among foreigners. This is closely followed by California. The vast majority of the foreigners’ inflow is from Mexico, China, Vietnam, Philippines, and India.
• At the third position comes Texas contributing almost 9% with its international residents where most of them belong to China, Philippines, Vietnam, India as well as Mexico.
• Next is Arizona which proves to be the fourth largest contributor to the market giving in 6% of the foreign purchases of the homes. The people from Mexico, India as well as Iraq are the ones with the highest possibility of buying homes in these regions.
The audits that were carried out in Apple reflected a huge usage of child labor. There have been breaches seen in the amount of pay received, the benefits extended towards the employees and the work environment given in China.
This Friday, Apple Inc gave out an audit report of the largest suppliers they had and said that numerous violations had been brought to light in relation to the pay rates, the fringe benefits as well as the work environment in the huge plants operating in China. Cupertino is a Californian company which was questioned for its secretive supply chains and what the reason was why they never revealed the supply chain they had.
The company conducted 229 audit reports which showed an 80 percent increase from 2010. Important suppliers and the final assembly of Apple’s supply chain were explored. It was decided that in order to solve the issues regarding the working conditions at the factory, the consumer giant device would allow an independent auditing team from the Fair Labor Association to interfere in the matter.
As per an audit report, Apple stated that “It's a level of transparency and independent oversight that is unmatched in our industry." Moreover, it claimed that although 6 on-going and 13 old cases of child labor were found at some of its component manufacturers but none were found at its final assembly manufacturers. In another report, "Supplier Responsibility Progress Report", it was also noted that Apple had asked its 67 suppliers to repay the workers whose pay had been reduced in order to penalize them. In the same report, it was also mentioned that apple had stopped doing business with one of its manufacturers and rectified the performance of another one, both of which had been accused of continuous crime.
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