Opinion

Trump should heed French economist Piketty and levy an Islamic tax

French economist and academic Thomas Piketty poses on May 12, 2014, in his book-lined office at the French School for Advanced Studies in the Social Sciences, in Paris. Photo courtesy of Reuters/Charles Platiau *Editors: This photo may only be republished with RNS-NASSER-OPED, originally transmitted on Nov. 22, 2016.

(RNS) “Why did America vote for Donald Trump?” is the question of the year. The answer can be found buried in rock-star economist Thomas Piketty’s highly acclaimed 700-page tome, “Capital in the 21st Century.” By Trump’s own admission, he is too busy watching Megyn Kelly to read books, so I’m going to pick out its best bits for him (and you).

Piketty “proves” that the more one’s income derives from wealth than from wages, the richer one becomes, faster. Specifically, he showed that the yearly rate of return on wealth (think houses, land, gold, etc.) usually exceeds the yearly increase in wages, known as the growth rate. The inter-generational consequence, says Piketty, is that “people with inherited wealth need save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole,” making it “almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin.”

Piketty goes on to show that on the eve of World War I, the top 10 percent owned around 90 percent of the wealth in the U.K., with the top 1 percent owning 70 percent. Today, those figures stand at 70 percent and 30 percent respectively, a decline due to the shocks to wealth during the tumultuous period of 1914-1945. This trend was the same across the Western world, and strikingly, the data show that the levels of economic inequality are now returning to pre-World War I levels.

Thus, when Trump promised an economy that works for the working class, his win became inevitable. The masses, disillusioned with Washington’s decadeslong failure to prevent their slide into poverty, voted in a renegade, loudmouth outsider. If Trump wants to do any better than them, though, he better pay attention.

Piketty advocates for a modest capital tax of 1 percent on fortunes between $1 million and $5 million, and 2 percent on fortunes above $5 million. Such a tax would exempt his voter base – the working class — yet would bring in large amounts of revenue. Piketty claims that such a tax, related to market value of assets, is a “new idea.”

Piketty’s recommendations are sound. Bad news for Mr. President-elect is that Piketty’s solutions, contrary to his claims, are not new, but have actually been a part of Islam for the past 1,400 years in what is known as zakat. Zakat (meaning “that which purifies”) is taught in the Quran (2:278):

Surely, those who believe and do good deeds, and observe Prayer and pay the Zakat, shall have their reward from their Lord, and no fear shall come on them, nor shall they grieve.

Piketty’s claim that no society ever enacted capital taxation on assets valued at market rates is simply wrong. The Prophet of Islam levied zakat at 2.5 percent on net assets greater than the market value of 87.48g of gold or, if one’s assets were diversified beyond gold holdings, 612.36g of silver. For centuries, millions in the largest empire the world had ever known practiced what Piketty advocates. Sadly, Piketty stands at the end of a long line of European scholars who fail to recognise the contributions of the thriving Islamic civilization that dominated the world for 800 years.

In fact, Quranic teachings go further than Piketty’s recommendations, and here, Trump needs to pay attention. By specifying that zakat should be spent on the least-well-off in society – the poor, the needy, for freeing of slaves, those in debt, and for travelers, as well as others – the Quran significantly diminishes the cause of economic inequality Piketty unearthed: the gap between the rate of return on capital and the growth rate.

The Quran further drives the growth rate by firstly, forbidding financial tools that have no relationship to the “real economy,” and secondly, by levying zakat only on assets unused after a year, thereby incentivizing investment over hoarding. As Yanis Varoufakis, the former Greek finance minister, recently remarked in response to Trump’s anti-free-trade stance, “It isn’t free-trade that is the problem. It is the free movement of profits from trade.”

Finally, if Trump wants to really help those white working class who elected him, he needs to recognize what Piketty has failed to: the root cause of economic inequality. Sure, Piketty recognizes that one need “save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole,” but this is a secondary effect enabled by the fact that wealth is already accumulating faster than income. So what causes the primary rapid rate of capital accumulation?

The Quran correctly identifies interest as the culprit. Interest drives rapid wealth accumulation by inflating capital without increasing production of goods or services. The rich get richer, quicker, and banks are incentivized to make riskier loans, driving asset prices sky-high (think houses and stocks). This leads to greater firm equities, enabling executive directors to claim exorbitant portions of national income by attributing rising profits to their managerial skills.

For the poor, interest serves to push the indebted further into debt. Money printed for interest enters the pockets of the rich first. They drive up prices in the marketplace, so that by the time such money reaches the poor, their income is already devalued as compared to assets. Thus, the poor whose income comes from wages and not assets have rising interest-driven debts to pay with money that is increasingly devalued, while trying to buy assets that are always increasing in price.

The Quran summarizes all this by explaining that interest, though appearing to increase wealth in society, does not. It is zakat, the Quran emphasizes, through which money is circulated in society from the bottom up that increases standards of living across the board.

Unless Trump enacts policies to redress economic inequality, he will be a failure to half his country and remain a buffoon to the rest. The problem is that he would have to take a lesson from the Quran, to do so. Lord knows the last thing Trump would want to do is look like he is implementing Islamic teachings!

“Creeping Shariah” if ever I heard it.

(Tahir Nasser is a 27-year-old physician and a regular contributor and commentator in British media. Find him on Twitter: @TahirNasser)

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Tahir Nasser

6 Comments

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  • “Finally, if Trump wants to really help those white working class who elected him,…”

    I think people forget, that while the white working class skewed for Trump, doing something to strengthen the working class helps all ethnicities in the US. The working class is the largest most diverse group in the US, and in the immortal words of George Baily,

    “they do most of the working and paying, and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?”

    The “white” working class, which is often used as a means to erroneously confirm Trumps racist supporters, have done all working class Americans a favor by bringing attention to the plight of people that were forgotten whether they were white, black, brown, what ever color or ethnicity. There is no higher social justice cause that any society can achieve than providing each and every member the ability to take care of themselves through what ever work they find to do. If we removed egos out of what type of job someone has, we will realize that each job great or small has its importance and worth. That is what Trump more so than Clinton can do for America.

    George Baily again speaks prophetically, ” Doesn’t it make them better citizens?”

  • I agree with your sentiments re: poorer people in society. You are absolutely right. Every person in society builds on the work of others.

    Whether Trump will deliver social justice for the poorer sections of society is a matter of individual opinion. I don’t think he will.

  • Mr. Nasser,

    You say that “Piketty stands at the end of a long line of European scholars who fail to recognise the contributions of the thriving Islamic civilization that dominated the world for 800 years.” I understand the period of domination you speak of, but I am wondering how much of the influence survived the recession and collapse of that domination. Was there a maintenance of these practices and Quranic professions or did they die out in the political shift? Would you kindly provide a reference to indicate the lineage between Quranic practices and European scholastic thinking on sociopolitical economics?

    I appreciate your references to the parts of the Quran that speak on the benefits of the zakat. Would you also provide a reference for this claim:

    “The Quran further drives the growth rate by firstly, forbidding financial tools that have no relationship to the “real economy,” and secondly, by levying zakat only on assets unused after a year, thereby incentivizing investment over hoarding?”

  • Dear Barry, thanks for the comment. Re: your questions, please see below:

    1. “how much of the influence survived the recession and collapse of that domination.”

    Please see the following documentary: https://en.wikipedia.org/wiki/When_the_Moors_Ruled_in_Europe

    There is good evidence that without the Muslim civilisation and the thousands of texts that spread westward into Europe, the “englightenment” wouldn’t have happened. Interestingly, many of the discoveries made by individuals in the West we are now finding out, were already made by Muslims earlier.

    2. “Would you kindly provide a reference to indicate the lineage between Quranic practices and European scholastic thinking on sociopolitical economics?”

    I suggest you read Ibn Khaldun’s Muqaddimah, a famous Arab sociologist and economist, who Arnold Toynbee referred to in the following terms:

    “The Muqaddimah is…a philosophy of history which is undoubtedly the greatest work of its kind that has ever yet been created by any mind in any time or place.

    As for the general effect of Arab science on Western european thinking, I suggest you read the works of George Saliba for a comprehensive look at the issues. The most important contribution Muslim’s made was the elucidation of the scientific method, and the importance they gave to requiring data to verify theory:

    “The duty of the man who investigates the writings of scientists, if learning the truth is his goal, is to make himself an enemy of all that he reads, and… attack it from every side…He should also suspect himself as he performs his critical examination of it, so that he may avoid falling into either prejudice or leniency.”
    -Ibn Al Haytham

    3. Would you also provide a reference for this claim:

    I suggest you read this work for the information you seek: http://www.alislam.org/library/books/Economic-System-of-Islam.pdf

    Kind Regards
    Tahir Nasser

  • Thank you, I will check out those resources.

    There is one issue I want to resolve before I go any further here, though. When you talk about the “effect of Arab science on Western european thinking” and, in the same paragraph, mention the “most important contribution [sic] Muslim’s made,” are you implying that Arab and Muslim are synonymous? If there is a distinction to be made, I feel it is important as my question pertained to the influence of Quranic philosophy on European thinking, not Arab philosophers making secular contributions who happened to be Muslims.

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