Journal of Globalization for the Common Good

This paper investigates from an Islamic perspective the consequences of globalization in general. To specify my argument in accordance with my understanding of Islam, I would strive to argue that globalization might be very harmful before society reaches maturity but very useful after that. Allow me a brief prefatory note about my methodology in this essay: in the first part, I provide many specifics about how Islamic texts and sources view the human being as God’s creation and his ultimate goal in the world. In the second part, after a brief definition of globalization, I apply the analytic method employed in the conventional literature of economics to show why the market mechanism fails to satisfy equality and eradicate poverty in the globalization era. Finally, I try to explain how a free but virtuous, mature society can satisfy equality throughout the world in this era. Obviously, my argument relates, to some extent, to normative aspect of economics. However, it does not follow the ideological methodology at all.

Let me begin by elaborating briefly on the ultimate goal of man’s creation in Islam, since this is so essential to understanding my argument.

The Human Being as God’s Creation

From monotheism, the pivotal pillar of the Islamic worldview, we can conclude that the universe is the best and perfect manifestation of God’s beautiful names and that there is no better alternative system to govern the universe. Indeed, this principle refers to the conception of creation. That is, God is like a secret treasure, so He creates and expands the universe not only to give a clue to His throne but also to reveal His beauty and His brilliance. Some facets of His attributes such as His majesty may manifest themselves in a deterministic environment such as with galaxies and other physical phenomena. There are, however, other facets of His characteristics such as His wisdom and His mercifulness that are impossible to manifest themselves except in indeterministic form.

There seem to be many common elements in the explanation of the philosophy of man’s creation in all Abrahamic religions of which Islam is believed to be a sequel and culmination. By investigating the quality of Adam's creation, which stands as the symbol of human being in the Quran, we can infer the kind of status he occupies in the sight of God in Islam, as well as in other religions.

In the beginning the Lord addresses all the angels[1]that He wants to create a viceroy[2] on earth. This position will be held by man. The angels object to Him and say that He wants to create a vengeful and vindictive creature to commit crime and bloodshed on earth again! But God responds that He knows something they do not know. And so, God became engaged in creating man. And this is the point which symbols, loaded with profound anthropological connotations, come into being.

From a faithful Muslim point of view, God is the greatest and most exalted. Thus, with this providential address the mission of man on earth is clarified. That is, man's mission on earth is to fulfill God's creative work in the universe. Therefore, man's first superiority is that he represents God on earth.

Since God wants to create a viceroy for Himself on earth, He must, as a rule, choose the most valuable and sacred material. Yet He selects the basest matter. In the Quran there are three references relative to the material that man was made of: from sounding clay[3], like unto pottery[4], and from mud[5]. Finally, the Lord blew His spirit into the dry mud and man came into being.

In the human tongue, God is the most sacred and exalted being so the spirit of God refers to the most exalted, and the noblest manifestation of His being, while mud stands as a symbol of the meanest and the basest thing. Accordingly, He blew His own Soul, not something else like His breath, blood, or flesh, into man in its creating process. God is the most sublime being and His spirit is the finest entity for which man can possibly have an epithet in his language.

Thus, man who was formed from mud and God's spirit is a two- dimensional being. For unlike all other beings which are one dimensional, man is two-dimensional; one dimension tends towards mud, lowliness, sedimentation, and stagnation while the other aspires to the loftiest imaginable point possible. Thus man's significance and grandeur lie in the fact that he possesses two poles: mud and the spirit of the Lord. It is up to man to choose where to go, towards mud or providence. And as long as he has not selected either of the poles as his fate, struggle will perpetually rage within him.

Another surprising point in man's creation in the Quran is that God calls upon the whole universe that He has a trust to offer it, but everything refuses to accept this offer except man[6]. This is indicative of the fact that man possesses another virtue; that is, his acceptance of a trust that everyone else refused. This means that man is a representative of God in the universe as well as His trustee. As to what the trust is, Islamic scholars mention many things. Some of them such as Mawlavi and Shariati[7], believe that it is will and choice. I agree with that, however, it means much more than that. It means that man has adopted a great responsibility to personify all His beautiful names; individually and collectively. Of course, such responsibility requires the ability of will and choice.

Shariati (1981) says that the only superiority that man has over all other beings in the universe is his will. He is the only being that can act contrary to his nature, while no animal or plant is capable of doing so. It is impossible to find an animal which can fast for two days. And no plant has ever committed suicide due to grief or has done a great service. Man is the only one who rebels against his physical, spiritual, and material needs, and turns his back against goodness and virtue. Further, he is free to behave irrationally, to be bad or good, and to be mud-like or divine. The point is that possession of will is the greatest characteristic of man and it throws light upon the relationship between man and God.

Man is a viceroy of God on earth as well as His trustee among the universe, and the spirit of both quenches their thirst from the same fountain of virtue: possession of will. God, the only being in the universe, who possesses an absolute will and can do whatever He wishes, blew His spirit in man. Hence, man is capable of working like God (not on par with Him, only as an image of God), or acting against the physiological laws of his own nature. Therefore, as in the Old Testament[8], He has created mankind as a potentially perfect image of Himself. Obviously, this perfect image goes beyond the interpretation that some distinguished scholars have given it[9]. It shows that all God’s beautiful names may manifest themselves with man and human society. Consequently, it requires the ability to mastery and rule over the universe.

Two kinds of rationality

As mentioned above, according to my Islamic understanding, man is a two-dimensional being. During his spiritual evolution, he should pass from being mud-like to approaching God-like. In other words, God has invited him to pass through an important reference point, maturity[10]. Thus, we can imagine that he has two distinct parts of his life: an individualistic, selfish period (before maturity of society, when the real love is not the dominant flow in the society); and a God-like, selfless period (after maturity of society). Clearly, each specific period requires a certain and separate corresponding rationality. The rationality[11] discussed in the conventional literature of economics, which is based on a low-level self-interest, only corresponds with the period of childhood. Mainstream economics, based on Adam Smith’s invisible hand and the market mechanism, quenches its thirst from this fountain of rationality. In the next part, I will explain how the market mechanism increases the gap between poor and rich countries as well as the gap between poor and rich classes. That is, the more international trade and the more integration of financial markets, the more market failure and more divergent economies! However, when society evolves from selfishness and being mud-like to altruism and being God-like, this rationality will not be effective at all and will collapse instantaneously. The alternative and mature rationality creates a special dynamism for the economy which is very powerful and without any failures. The driving force of this rationality is still self-interest, but a high-level one rooted in being God-like.

I would like to refer to one verse of the Quran, which clearly argues that the individual desires derived from a low-level self-interest lead to harm and corruption[12]: “Corruption doth appear on land and sea because of which men's hands have done, that He may make them taste a part of that which they have done, in order that they may return.” We may deduce this corruption is only a part of the consequences of what man has done as a result of his selfishness, and that there might many other bad consequences washed clean by God’s forgiveness. In other words, the invisible hand in an immature society not only is not able to optimize social benefits, but also it creates a great deal of harm and corruption that surpasses our imaginations. However, most of this corruption will be removed by the mechanism provided in the universe by God. The remaining corruption serves to warn the people and deter them from being selfish.

Due to self-interest maximization in immature society, we may also observe clearly many, many problems such as global warming and environmental destruction which will definitely jeopardize future life, while the market mechanism and its price signals fail to reduce these consequences, much less to motivate sustainable development.

Globalization and the issue of equality

In this part of my essay, I would like to show why globalization in the context of low-level self-interest motivation and based on the market mechanism may not lead to equality. Instead, it is biased to developed countries where there is located a complex of various industries and the benefit of economies of agglomeration can be utilized. To do this, it is necessary to have a brief definition of globalization first.

The definition of globalization

As globalization is a multi-layer concept and it has become a buzzword in recent years, globalization has already been defined in many ways. I, in some extend, agree with what Thomas L. Friedman defines globalization. He says: “it is the inexorable integration of market, nation-states and technologies to a degree never witnessed before- in a way that it is enabling individuals, corporations, and nation states to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that it is enabling the world to reach into individuals, corporations, and nation states farther, faster, deeper and cheaper than ever before” (Friedman 2000, 9). He says: globalization "also has one overarching feature- integration. The world has become an increasingly interwoven place, and today, whether you are a company or a country, your threats and opportunities increasingly derive from who you are connected to. This globalization system is also characterized by a single word: the Web"(ibid, 8). This system is a dynamic ongoing process, with a driving idea of free-market capitalism, and "its own dominant culture" involving "the spread of Americanization" (ibid, 9). It has its own defining technologies, and is measured by its speed, "speed of commerce, travel, communication and innovation" (ibid, 10). He suggests that "globalization is not simply a trend or a fad but is, rather, an international system. It is the system that has now replaced the old Cold War system, and, like that Cold War system, globalization has its own rules and logic that today directly or indirectly influence the politics, environment, geopolitics and economics of virtually every country in the world" (ibid, IX).

What I want to focus on is strictly the economic layer of globalization. In my view, economic globalization refers to a completely different process of internationalization. Although in internationalization the cross-border relations between countries will increase, the nation-state institution will play the main role in the economies, they can still make economic policies and decisions. Economic globalization, however, refers to the process of removing government-imposed restrictions on movements between countries in order to create an "open", "borderless" world economy' (Scholte 2000: 16) so that the nation-state institution will be eradicated and no longer play no role in economy. Instead, the Transnational Companies (TNCs) will be the main players in the economy. More technically speaking, the nation’s Production Possibility Frontier (PPF) makes nonsense in the literature and there is only the worlds PPF and TNCs follow fragmentization policy in their production and distribution which is definitely alien from conventional international trade and international finance.

The Inevitability of Asymmetry in Globalization

According to mainstream economics, policies of openness through liberalization of trade and investment regimes, and capital movements have been advocated worldwide for their growth and welfare enhancing effects on the basis of the propositions embedded in the well-known economic theories of international trade and investment (i.e. the Ricardian comparative advantage theory, the Heckscher-Ohlin-Samuelson (HOS) model, the new trade theories of Krugman, or the model of intertemporal international borrowing/lending or portfolio allocation models). In these models, the main goal of openness is assumed to increase social welfare through: (i) static efficiency gains associated with improved resource allocation for national economies as well as for the world economy due to increased specialization; (ii) dynamic efficiency gains from such factors as economies of scale, diffusion of information, technology transfers, knowledge spillover effects as well as intertemporal trade gains from cross-border borrowing/lending for increased investment and consumption smoothing and portfolio risk diversification.

Convergence in accordance with international trade theories is still a serious dilemma. That is, there is no doubt that the level of social surplus will increase totally after free trade or integration of financial markets. However, there is a lasting concern regarding how these gains are distributed between trade partners; are they biased toward developed countries or at least unbiased. Mainstream economics’ theories including static and dynamic insist that international trade will reduce the per capita income gap amongst the open countries. For instance, one of the main theorems that derived from the static model of HOS Theory, implies that when the prices of the output goods are equalized between countries as they move to free trade, then the rewards of the factors (capital and labor for instance) will also be equalized between countries. Therefore we should expect that the increase of free trade due to globalization will reduce the North-South per capita income gap. The dynamic version of this model also suggests a convergent per-capita income trend between north and south countries.

To explain cross-country differences in economic performance, Matsuyama (1996) employs symmetry-breaking methodology. Symmetry-breaking creates asymmetric outcomes in the symmetric environment. It is the key concept for understanding self-organized (a.k.a. endogenous) pattern formations[13].

As a key answer to the increasing gap between North and South countries in the level of cross-country differences as well as the increasing gap between poor and rich classes inside the countries, Matsuyama (2005), rejects coordination failures as the key notion to understand these questions. Instead, he argues that such emphasis is misplaced; the key to understanding the diversity is symmetry-breaking. The notion of coordination failures is not only irrelevant but also misleading when thinking about diversity.

Quoting Matsuyama’s (1996) explanation briefly, it will be shown how globalization can be considered as an endogenous (or a self-organized) factor to create the inequalities.

He offers a model of the world economy, where many (inherently) identical countries trade with one another. It is shown that cross-country differences in the standard of living and in income appear as a stable outcome of international trade. According to his model, the coexistence of rich and poor countries is not just a possibility. It is an inevitable aspect of the world trading system. Although his model adopts many assumptions for the sake of simplification and concreteness, the logic behind the result is fairly general and can be understood intuitively.

Imagine that there is a list of goods that need to be consumed. Furthermore, there are some agglomeration economies in the production of each of these goods. In the absence of international trade, these goods must all be produced in each country. Without any innate difference across countries, each country produces these goods in the same amount, and there is no cross-country difference.

Now introduce the possibility of international trade in these goods. As different countries start acquiring comparative advantage in different goods, the production of each good concentrates into some countries, which leads to an emergence of a system of international division of labor. The stable cross-country difference appears as a result of ‘‘symmetry-breaking’’ in the world economy, caused by international trade. Some countries become rich if they are lucky enough to acquire comparative advantage in goods associated with large agglomeration economies, while other countries, those which happen to acquire comparative advantage in goods with small agglomeration economies, become poor. They fail to achieve a necessary coordination to reach a Pareto-superior equilibrium and find themselves in a Pareto-inferior equilibrium. The problems thus seem just a matter of coordination failures. The global perspective, however, offers a different view. The international division of labor requires different countries to take charge of producing different tradable goods with differing degrees of agglomeration economies. International trade thus creates a kind of ‘‘pecking order’’ among nations. Not all countries can be rich: some countries must be excluded from being rich, just as in a game of musical chairs[14]. At the same time, the model does not rule out the possibility that some (but not all) countries might succeed in overcoming the coordination failures, and becoming rich. This feature of the model makes it possible to talk about the effects of such an ‘‘economic miracle’’ in the world economy.

Since the economies of agglomeration requires the diversity of industries which produce intermediates available in the marketplace, we can conclude that only those countries which have already bypassed the threshold of diversity have a chance to be industrialized and reach to a Pareto-superior equilibrium. Hence, this shows how the phenomena of economies of agglomeration cause a symmetry-breaking to separate the otherwise identical regions into the manufacturing belt and the agricultural hinterland.

Globalization in Mature Society

To explain how globalization in mature society accomplishes beneficial goals, first we have to take into account the two following challenges:

1. The problem of static market failure: This problem arises mainly because of externalities (including public goods, pollution and common pool resources), transaction cost, asymmetric information (such as incomplete markets[15], moral hazards and adverse selection), as well as organization failures. The most common response to a market failure in the literature of the public sector is to use the government to produce certain goods and services. However, government intervention may cause non-market failure. Besides, as mentioned above, globalization causes nation-state eradication so there will be no effective government in such an era. Furthermore, I can hardly believe that international institutions are able to fulfill this responsibility, even if they were independent from the USA.

2. The problem of dynamic market failure: As Matsuyama showed accurately, international trade creates a specific chaos in the symmetric environment so that the operations of markets normally lead to increasing inequality across the countries over time. Likewise, inequality across inherently identical households is caused endogenously by symmetry-breaking. Matsuyama (2004) explains how the class structure is an inevitable feature of capitalism. Even if every household starts with the same amount of wealth, the society will experience “symmetry-breaking,” and will be polarized into the two classes in steady state, where the rich maintain a high level of wealth partly due to the presence of the poor, who have no choice but to work for the rich at a wage rate strictly lower than the “fair” value of labor. Hence, in the capitalistic context we may consider these increasing gaps –whether between countries or inside countries – as an indication of market failure in a dynamic version.

It is now necessary to show how mature society, using a different rationality, may bypass these challenges. This rationality formally is very similar to the conventional one. It is, however, very different in content. I would like to refer to a few verses of Quran related to this subject. God says: “Man has been created restless, so he panics whenever any evil touches him, and withdraws when some good touches him; except for the prayerful who are constant at their prayers and whose wealth comprises an acknowledged responsibility towards the beggar and the destitute; and the ones who accept the Day for Repayment.” These verses show sufficiently that the rationality that guides immature people is definitely different than that which guides mature people, although they benefit from the same potential characteristics. The main distinction between mature and immature is that the mature direct these potentials toward a transcendental personality which is beyond selfishness. They are concerned with all human beings’ needs in all generations rather than their own selves individually or at most their families.

It is very appropriate to ask about the driving motivation in this society. Of course, conventional self-interest cannot motivate people efficiently to be concerned about others. It is extremely in need of a stronger motivation based on an exalted worldview. This worldview should consist of specific beliefs that grant the greatest reward to the doer when he considers all people of all generations altruistically. As I understand, the mature society may not be blind and aimless. Society can achieve this reference point of maturity only when the true beliefs such as the belief in oneness of God, the Day of Judgment, Justice drive it entirely. Passing this reference point is a necessary condition, but divine love, which requires perfection in selflessness, is the sufficient condition for the maturity. In general speaking, love when it appears, has no room but for itself and the lover thinks of no one except the beloved. In other words, selfishness destroys love and it can never be considered as co-existent of love. Nonetheless, worldly love is too weak and ineffective to last and motivate society toward its transcendental goals. In contrast, divine love is quite sustainable and powerful. Since nature is the realms where God’s beautiful names are exhibited, divine love implies, in turn, love of the entire world and the whole creation particularly human beings, the most comprehensive fruit of existence. Therefore, love is at the core of the concept of mature rationality and creates a specific invisible hand to satisfy social benefits including prosperity and equality for all regions and all generations.

Now, allow me to explain how globalization might be useful in a mature world society. As mentioned above, a mature society is a society where all God’s beautiful names have flourished. Therefore, as God provides mercifully all necessary requirements for all creatures, in such a society, each person possesses a certain portion of natural resources consistent with his area of interest. All initial endowments are redistributed by lump sum among the people so technically speaking, all individuals move to the central points of Edgeworth’s box. All members subject to all generations’ benefits do their best to produce more and more creatively because they are His representatives. According to symmetry-breaking methodology, there is still some potential of asymmetry. However, people will share their incomes voluntarily to produce public goods and to reduce the existent gap.

The communist system is as far away as the capitalistic system from the system based on love. The lack of motivation in people’s activities as well as the inefficiency of government –especially when the size of society grows enough- are the essential issues in communism while there is no concern about them in mature society. It is because the people are mature enough to understand that more being active means being closer to God. Besides, there is no need for the presence of strong and big government because this society is governed by many small components of authority connected together in a world wide network. There is hardly conflict of interest between these components because selfishness is the main source of confliction while here the people are selfless. Moreover, they are tolerant and educated enough to avoid violence and to discuss their problems peacefully.

It should be noticed that the economy in mature society serves only as a means by which we can improve the level of virtue so that we are not allowed to sacrifice humanity and its dignity and virtue because of economic benefits.