The world today faces an economic crisis. Trade wars, tariffs, and selfish policies are hurting millions. The negative externalities of these protectionist measures and short-sighted decisions hit the poor the hardest. Inflation, unemployment, and poverty are rising, especially in economically weaker nations. Income inequality is increasing and wealth is concentrated in the hands of a few. This is both a failure at the policy as well as the ideological level. After the demise of communism, Western neo-liberal capitalism has taken a fatal hit, with the edifice of the new world order collapsing under the weight of its own contradictions. The slogan of globalization, privatization and liberalization has been rejected in the very bastions where it was first coined.
The Global Trade Crisis
The world finds itself in the midst of a trade war after Donald Trump became US President again. His politics is built on engaging in trade and tariff wars to strengthen his vote bank and showing that he is making America great again. He has sparked an all-out tariff war with China and other countries with a 10% tariff on all imports and over 60% on some countries.
Retaliating with their own tariffs, other nations have escalated the conflict. Global trade is becoming volatile and this disruption is having cascading effects on production and procurement. Jobs are being lost, prices are rising, and supply chains are breaking down. All this is burdening the common man. This crisis demonstrates the dangers of greed and selfishness.
When nations prioritise their own interests over global good, everyone suffers. When exports from poorer nations decline due to tariffs and trade wars, their economic growth decelerates, resulting in macroeconomic instability and sometimes even leading to defaults on loans with reduced spending on the social sector.
India is especially vulnerable to this situation. Indian exports are completely dependent on American and European markets. Small businesses, farmers, and workers will be hurt by high tariffs. Rising prices for everyday goods affect the poorest the most.
A Chance for Change
This crisis is also an opportunity for India. But for that we must rethink our economic strategies. Instead of depending entirely on markets like the U.S., we can build new trade partnerships with other regions. Regions like ASEAN, the Middle East, Africa, and Latin America offer possibilities. These partnerships should be based on equality and mutual respect, not exploitation.
India must focus on self-reliance. By strengthening local industries, supporting small businesses, and investing in agriculture, India can diversify into other sectors and reduce its dependence on exports. A self-reliant economy can create jobs and reduce poverty. The government must act quickly to protect vulnerable sectors. Small and medium enterprises (SMEs), exporters, and low-income workers need support. Subsidies, low-cost loans, and tax relief can help. At the same time, sectors not affected by tariffs such as technology or domestic manufacturing, can be used to create new jobs.
India’s Economic Struggles
India has made remarkable progress in sectors like IT, digital retail, and biotechnology. Our urban infrastructure has also improved. Yet this is not enough as critical sectors like agriculture, rural economies, and small businesses lag behind. Millions employed in these neglected sectors face stagnant incomes leading to urban migration.
This further translates to urban poverty and unliveable conditions in most major cities of India. Experts say India is experiencing “jobless growth”. Wealth inequality keeps widening. A handful of industrialists and corporates prosper while the common man is trapped in poverty.
This imbalance cannot last. Wealth must flow to all, not just the elite. Deeper challenges also persist like inadequate access to food, healthcare, and education. While subsidies for the poor are being reduced, tax breaks and loan waivers flow freely to corporates and the organised sector. The powerful get priority over the impoverished. There is an urgent need for the government to reverse this policy.
Building a Just Economy
Islam offers a clear vision for a just economy. Wealth should be generated and shared justly. Trade and production should be free but guided by compassion. Basic needs like food, shelter, and healthcare are rights, not privileges.
First, the government must focus on creating jobs. Investing in agriculture, rural economies, and small businesses can help. Farmers need fair prices for their crops. Rural infrastructure, like roads and markets, needs improvement. Small businesses need tax relief and access to affordable loans. These steps can create millions of jobs and reduce poverty.
Second, spending on social sectors must increase. Education and healthcare are not luxuries, they are necessities. Every child deserves a good school. Every citizen deserves quality medical care. These are investments in India’s future. Welfare programmes for the poor, including Muslims and other minorities, should be expanded, not cut.
Third, the tax system needs reform. Indirect taxes, like GST on essential goods, hurt the poor the most. These should be reduced or eliminated. Instead, luxury goods and excessive wealth should be taxed more. This would reduce inequality and fund welfare programmes. Islamic economics supports taxing wealth to help the needy, as seen in the concept of Zakat.
Finally, India must reject exploitative capitalism. The current system favours the rich and ignores the poor. Islamic economics offers an alternative. It balances profit with social good. It encourages trade but forbids exploitation. By adopting these principles, India can build an economy that works for everyone.
A Global Call to Action
The global economic crisis is a wake-up call. It shows what happens when greed and selfishness guide policy. Powerful nations must stop using trade to dominate others. Tariffs and sanctions should not harm weaker countries. Instead, the world needs cooperation and fairness. Muslims have a unique role to play in the current situation. We must advocate and push governments to adopt equity-based finance and avoid too much debt.
The Holy Quran teaches us to follow the golden mean when it comes to spending and saving. It says – “Make not thy hand tied (like a niggard’s) to thy neck, nor stretch it forth to its utmost reach so that thou become blameworthy and destitute.” (Quran 17/29)
By promoting ethical economics, we can show the world a better way. Self-reliance, compassion, and justice should guide us. Academic institutions can help by researching ethical economic models, including Islamic finance. Implementing the economic vision of Islam is the best way to show that Islam is truly the divinely ordained way of life which guarantees success both in this world and the hereafter.