20 Jun, 2020
Covid-19 pandemic and its impact on the global economy was the focus of two keynote lectures delivered on the fourth day of the 12th International Conference on Islamic Economics and Finance, hosted online by Istanbul Sabahattin Zaim University, Turkey from 14-20 June 2020.
The conference, with the theme ‘Sustainable Development for Real Economy,’ is jointly organized by the Islamic Research and Training Institute (IRTI), Istanbul Sabahattin Zaim University, and International Association for Islamic Economics (IAIE).
Professor Abbas Mirakhor of INCEIF delivered one of the lectures in which he focused on how to address the economic impact of the coronavirus pandemic. In the other keynote lecture, Professor Arif Ersoy of Istanbul Sabahattin Zaim University talked about ‘Post Covid-19 World Order’, highlighting the issues of peace and security.
Prof. Mirakhor described the extent to which the global economic growth and employment is getting adversely affected by the pandemic. The solutions attempted under the conventional economics are only targeting the symptoms and economists have failed to comprehend that the real problem is a systemic one. That would require changing the priorities and a new system to address them. Social systems are collapsing, and so are the ethical and moral foundations. Islam offers an alternative system based on Qur’an and Sunnah. The principal objective of this system is social justice.
Economists think that there is a tradeoff between efficiency and justice. Hence, trying to achieve efficient economic growth the global economy has accumulated an unsustainable debt to GDP ratio of 340%. This ratio is further increasing under the economic and financial policies to contain the adverse ‘economic’ impacts of the pandemic. Therefore, the post-Covid-19 world may experience a debt pandemic again effecting the social and economic order across countries.
In order to address this, Islamic rule-based system is needed, Prof. Mirakhor said. In economic matters it calls for elimination of riba in all its forms, promotion of risk-sharing and cooperation for social good. Fiscal policy needs to be rearranged to invest in education, health, guaranteeing a minimum income. Many collective action problems can be solved using Islamic principles-based system. They can help achieve social justice, reduce unnecessary frictions and provide better outcomes.
The keynote lecture by Prof. Ersoy, entitled ‘Post-covid-19 world order: A new paradigm for global peace and stability’, started by highlighting that the present world order has resulted in increased tensions. The reasons being that the fight for economic and financial hegemony over other countries. Financial monopoly and bureaucratic monopoly thinking have created problems at national, regional and global levels.
He gave examples of some problems the present approach has created, such as highly skewed income distribution, volume of international financial flows much greater than the trade flows and increase in the global GDP. all indicating speculative nature of most of these transactions, debt traps, racial tensions and environmental pollution.
He asked the question why the current world order is not able to solve the problems. Giving a history of how the present world order evolved after the World War II, Prof. Ersoy pointed out that instead of the monopoly and hegemony thinking the new world order needs to find solutions in human rights centered mutual harmonic interest approach. Costs and benefits of cooperation should be justly shared among the participants of social activities, and there should also be balanced international relations based on justice. Islam and Islamic economics are human-centered approaches that call for just economic order with the premise that all things in the heaven and earth are created for mankind, he noted.
The fourth day of the conference also had two parallel sequence of sessions in which a total of 22 papers were presented in English and Arabic languages.
An Economist at IRTI, Dr. Mahmoud Bekri delivered a paper entitled ‘On the relationship between cryptocurrencies, real economy, Islamic economy and sustainability’. Dr. Bekri notes that the usefulness of cryptocurrencies is not yet a settled matter and opinions among the academia and practitioners are divided some supporting, some criticizing and the rest just observing the developments in this field. The paper summarizes the major views of all sides and provides a commentary on how to maintain the link of cryptocurrencies with real economy and how to use them for sustainability. It thus evaluates potential of cryptocurrencies from Islamic economic perspective.