Economic Justice and Banking System: A Brief Bahá’í Perspective
by Hooshmand Badee
by Hooshmand Badee
“O Son of Spirit! The best beloved of all things in My sight is Justice; turn not away therefrom if thou desirest Me, and neglect it not that I may confide in thee. By its aid thou shalt see with thine own eyes and not through the eyes of others, and shalt know of thine own knowledge and not through the knowledge of thy neighbor. Ponder this in thy heart; how it behooveth thee to be. Verily justice is My gift to thee and the sign of My loving-kindness. Set it then before thine eyes.” (From the Writings of Bahá’u’lláh, the Prophet – Founder of the Bahá’í Faith)
Justice can be defined as the simultaneously fair treatment of individuals in a given situation with the result that everybody gets what they deserve. The crucial ethical issue with this definition is the question of what exactly ‘fairness’ means and by what standards we can decide what a person might reasonably deserve. According to Beauchamp and Bowie (1997), theories of justice typically see fairness in two main ways:
Fair procedure - Fairness is determined according to whether everyone has had an equal opportunity to achieve a just reward for his or her efforts (Procedural justice).
Fair outcomes - Fairness is determined according to whether the consequences are distributed in a just manner (Distributive justice).
Throughout the history of economics, the distribution of income and wealth among the members of society has been a major concern. There has not only been a desire to explain the pattern of distribution, but also a belief that basic issues of justice and fairness and morality were involved. Consequently, most of the theories of economic justice focus on distributive justice. Philosophers and economists have been debating the concept of economic justice for so long. Although what constitutes justice may vary from time to time and from culture to culture, or based on historical contexts; however, all forms of justice are founded on the basis of ethical assumptions that include ideas about morality, fairness, and the law. Issues related to extremes of wealth and poverty and the justification of principles of equity and equality have been raised and discussed by contemporary economists and at governmental levels. The role of government is crucial in administering distributive justice and the Bahá’í literatures supports those activities.
Economics and religion are in agreement that redistribution of income and wealth is necessary and desirable. Taking care of the poor is encouraged in all Faiths. For example, in the Judaism tradition wealth redistribution includes, compassion for those who could not help themselves, care for the strangers, and charity. The Christian tradition of redistribution of income and wealth is the parable of the ‘Good Samaritan’, which is helping the stranger, sharing of resources, loving the enemy, supporting and healing, security for all, getting the poor back on his or her feet, and being fully integrated in the life of those in need. Similarly, the Islamic tradition of dealing with poverty through wealth redistribution includes the basic principles of sharing, the law of Zakat, sincere spirit of generosity, and Islamic finance, which is the rejection of interest on borrowing.
In the Bahá’í scriptures, Bahá’ís are encouraged to become “a source of social goods”. Although begging is prohibited in the Bahá’í Faith, but the deserving poor have very special place in the Bahá’í writings. The rich are told to have the utmost regard for the poor. In numerous writings, the central figures of the Bahá’í Faith encourage the wealthy to take care of the poor. Instructing the rich, Bahá’u’lláh said “O ye rich ones on earth! The poor in your midst are My trust, guard ye My trust, and be not intent only on your own ease.” He, also said, ‘They who are possessed of riches … must have the utmost regard for the poor…” These passages clearly confirm that the Bahá’í writings have targeted the rich and made them responsible for alleviating poverty or funding development projects to improve the living standards of the poor. However, the nature of giving should not be to receive public recognition, or derive more benefits from the act of giving itself than from the benefits that a given contribution generates for others. The intention of the donors should be sincere altruism. It seems that the focus on begging certainly needs to be coupled with a focus on the rich and their extravagant practices that has created the need for begging in the first place. Virtues such as generosity, compassion, kindness, thoughtfulness and justice require action otherwise these qualities will be confronted and questioned.
If economics is defined as ‘The best use of resources’, and justice as ‘giving to each one what he or she is due’, then the two principles of economics and justice are partners both functionally and morally. The whole financial market will be sustainable if these two go hand in hand. We also need to define social justice for banking institutions, because they are interacting with people. Social justice covers economic justice. Social justice is the virtue, which guides us in creating those organized human interactions we call institutions. In turn, social institutions, when justly organized, provide us with access to what is good for the person, both individually and in our associations with others. Social justice also imposes on each of us a personal responsibility to work with others to design and continually perfect our institutions as tools for personal and social development. The financial institutions including banks and insurance companies need to be reformed with greater social responsibilities. The following recommendations about effective functioning of financial institutions are the author’s personal views:
1. Disproportionately profit driven economic activity of banking system and insurance industry harms the poor and the lower income group in the UK. These groups are not able to survive under the policies of these institutions - which aim for profit maximisation. It is becoming increasingly evident that the solution to the banking crises is the restoration of trust in the financial institutions. Therefore, a total restructuring of the financial institutions is required with a great consideration of ethical values.
2. Social justice and equitable growth must be accorded top priority by the government and financial institutions. In particular, the banking system must be assigned a significant role to achieve the objective of equitable distribution of wealth among citizens through financial inclusion. The UK banks must be given the responsibility of acting as prime movers in the process of planned development with the objectives of economic growth and social justice.
3. The banking system as mobilisers of savings and suppliers of credit should play as catalyst to bring about increased output through capital formation. The improvement of the banking system through adjustment and regulation, and the provision of funds for start-up businesses are significant.
4. The banking system should act for the public interest and participate in various poverty alleviation programmes.
5. To facilitate the process of serving the community, and for proper functioning of the market, a ‘just and moderate interest rate’ needs to be applied in financial transactions. Such a policy creates an environment where there would be room for economic growth to boost confidence in the market, and encourages investments by local and foreign investors. Bahá’u’lláh has sanctioned the charging of interest on financial loans as a normal business transaction, provided that this is done ‘with fairness and moderation’.
6. All professions – in particular journalists, advertising, insurances, banks, financers and investors should have a clear, professional, ethical code that its members are required to observe.
7. A model of reward and punishment should be used in the banking system. Reward is related to success and good performance. Punishment is related to failure and poor performance. If the financial institutions follow the model of reward and punishment, then there is no need to pay excessive bonuses to chief executives for their poor performance and failure.
8. The system of free market economy must be regulated, controlled, and reformed. This needs a concerted effort by the government, the banking system, the insurance industry and Faiths.
9. To build a society based on trust we have to start in school, if not earlier. Children should learn that the noblest life is the one that produces the least misery and the most happiness in the world. This rule should apply also in business and professional life.
On the importance of commerce Bahá’u’lláh states: “Commerce is as a heaven, whose sun is trustworthiness and whose moon is truthfulness. The most precious of all things in the estimation of Him Who is the Sovereign Truth is trustworthiness: thus hath it been recorded in the sacred Scroll of God. Entreat ye the One God to enable all mankind to attain to this most noble and lofty station.” In this passage the concept of commerce is related to exchange of goods and services, which requires people to be in association with others. The foundation of exchange of thoughts, associating with others and effective communication are truthfulness and trustworthiness. The Bahá’í scriptures counsel Bahá’ís to “Consort with all the people, kindreds, and religions of the world with utmost truthfulness, uprightness, faithfulness, kindness, good-will and friendliness.” Also, trustworthiness and truthfulness can reduce or stop the misleading advertisements and promotional activities; banks become more responsible in the management of people’s money; farmers will receive a fair price for their products; and may stop tax avoidance and tax evasion. Such virtues may prevent producing those goods and services that are damaging to human health and the environment.
The Golden Rule of all Faiths stating ‘Desire not for anyone the things that ye would not desire for yourselves’ or ‘treat others the way you would like to be treated’ requires action to be performed by individuals. There is a remarkable parallelism in the world’s great religions, with all saying exactly the same thing. All Faiths have put great emphasis on the principle of justice in the Golden Rule. However, without human action to be fair towards others, the concept of justice is valueless, and this includes individuals, corporations, the banking system, and regimes that contribute to poverty and social unrest.