UK Recession: Is just the Pandemic to Blame?

Ahmed Danyal Arif, London

On the morning of 12 August 2020, the UK woke up with an economic hangover. Latest figures confirm that the UK is enduring the worst recession on record. Even if expected, it is a still a shock to see the scale of the decline in GDP across all sectors. Despite an encouraging pick-up in activity in June as lockdown ended, the output plunge of 20.4% in the second quarter makes UK among the worst hit country among its G7 peers so far.

As if this is not enough, latest figures also add to the evidence that Britain is paying a heavy price for being slower than most of its peers to enter a lockdown in March. Hundreds of thousands of people have lost their jobs, and the country also has Europe’s highest death toll. Britain’s economy – heavily dependent on the services industry as compared to the rest of Europe – was especially hard hit with a 19.9% decline.

There is no crystal ball to see the future of the UK economy but we need to step back in the flock in order to recover and move forward.

For several decades, the mantra in all advanced nations has been to urge for an improvement in living standards. GDP remained the main tool of measurement for the production of goods and services in the economy. However, it was a very poor indicator of the total welfare of a country or its citizens.

Islamic principles highlight the fact that the mad race for rising living standards rob the advanced nations themselves of their peace of mind and contentment of heart. The whole society is tantalised in the pursuit of artificially created needs so that everyone lives in a constant state of wanting something to keep up with the Joneses. Islam does not promote asceticism; it simply revolts against reckless spending.

Psychologically, consumers are persuaded to feel proud of themselves if they are in possession of something novel as compared to others in their social circles. But such a system of value tends to stigmatize all who fail to acquire the new items possessed by their peers and neighbours as inferior. This creates an impulse to catch up and beat others leading to a never-ceasing rat race. In fact, the Holy Qur’an explicitly states:

‘And covet not that whereby Allah has made some of you excel others.’  [1]

‘Hast thou considered the case of him who has taken his own low desire for his god…’  [2]

But this is not all. Such a situation is potent with dangers for poor countries as well. When the advanced countries suffer from new challenges and their own economies begin to stagnate, they would become more callous in their relationship with poorer countries. This is inevitable because, somehow or other, richer countries aim to maintain a reasonable standard of life for the people who have become addicted to them. Ultimately these situations fan the flames of frustrations and culminate in factors, which create wars. It is such wars that Islam seeks to prevent.

It should also be highlighted that the growth model prevailing in the world today is essentially based on the fuel of debt. Debt certainly promotes growth but this growth is only borrowed. We are stealing the reserves of the future, and debts can also turn those who abuse it, into slaves. It is no coincidence that in Dutch and German, for instance, the word Schuld means both ‘debt’ and ‘guilt.’ A similar linguistic association is found in the Hebrew word Chayav. These terms illustrate the deep-seated cultural anxiety attached to debt and the powerful feelings of shame it can provoke.

This practice is extremely dangerous. Ancient philosophers and monotheistic religions warned against credit and interest. These debts are concluded for decades, and no one can calculate what will happen in the future. Of course, in times of economic crisis it can be important to spend money to set the economic wheels in motion. But we should do it in a balanced way. We are running further and further into debt, but we have forgotten to stockpile and make financial reserves during ‘good years.’

The Holy Qur’an presents an example of economic cycles are through an incident of Joseph (as), when asked by the King to interpret his dream,

‘‘Joseph! O thou man of truth, explain to us the meaning of seven fat kine which seven lean ones devour, and of seven green ears of corn and seven others withered; that I may return to the people so that they may know.’ 

He replied, ‘You shall sow for seven years, working hard and continuously, and leave what you reap in its ear, except a little which you shall eat.

‘Then there shall come after that seven hard years which shall consume all that you shall have laid by in advance for them except a little which you may preserve.

‘Then there shall come after that a year in which people shall be relieved and in which they shall give presents to each other.’’  [3]

Thus, as far as Islam is concerned, a growth model predicated upon debt is strongly discouraged. The Islamic model presents a society in which people live within their means and there is some saving for the future; not only at an individual level, but also on a national basis. If an emergency arises and an unusual situation is created by war or famine affecting food and other means of subsistence, Islam ordains that all resources must be pooled together so that none should suffer unduly. For those who spend within their means Islam does not penalize for spending on good things. Many Muslim companions of the Holy Prophet (sa) were very wealthy and also spent on fine things within their means, but also gave their wealth to the needy. Islam presents a balanced approach which neither condones living beyond ones means, nor encourages the hoarding of one’s wealth. The very concept of Zakat, one of the fundamental pillars of Islam, is that excess wealth should be spent in the in the way of helping the poor and needy. Thus, it is stated in the Holy Quran:

‘And in their wealth is a share for one who asked for help and for one who cannot.’  [4]

In fact, for this very reason, the Holy Prophet (sa) was commanded by God to distribute the wealth which he – as the Prophet of God – received in spoils. God Almighty instructed:

‘Whatever Allah has given to His Messenger as spoils from the people of the towns is for Allah and for the Messenger and for the near of kin and the orphans and the needy and the wayfarer, that it may not circulate only among those of you who are rich.’  [5]

All of this points to the importance of joint actions and the value of sharing. We must realise, once and for all, that all the resources around us have been created to benefit all of humanity.

ENDNOTES:

^[1] The Holy Qur’an 4:33.

^[2] The Holy Qur’an 45:24.

^[3] The Holy Qur’an 12:46-50.

^[4] The Holy Qur’an 51:20.

^[5] The Holy Qur’an 59:8.