UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for July 28, 2012

Democracy in Capitalist Societies is Questionable

Dubai Nights

 

“The most important feature of capitalism is interest.  It essentially manifests in (interest-based) loans.  Loans of this sort are founded on self-interest, which excludes the lender from the outcome of the way they are used.  This means that the borrowers – mainly firms – take responsibility for the outcome of their business.  In most cases, they have the power to pass the interest burden on to consumers in the form of higher prices.  In fact, the interest cost is part of the costs of production.  The individualistic nature of such contracts is itself the underlying assumption of capitalism.  The share stock is not a loan but a ‘cut’ in the ownership of a firm, in the form of a fraction of the ownership of means of production.  (Wilken 192:36)  Unlike loans, the financial essence of shares is that it need not be paid back.  Thus, the majority share (equity) capital controls the firm.  In some circumstances, less than half of the shareholders may, in practice, be sufficient to control the firm.  This has far-reaching consequences and provides the basis for the concentration of capital into a few hands.  Economic power, in turn, reaches a point where it exerts significant impact in political matters.  Under such conditions, democracy and the democratic society become questionable.” – Iraj Toutounchian  

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