Thursday, October 13, 2005

And Introduction to Ibn Khaldun (1332-1406)

Jawad Anani, an economic expert in Al Basira Consultants, in Dar Al-Hayat ( 13 October 2005, Saudi Arabia) writes to the theme, “Preserving Wealth… A Challenge for the Gulf Countries” and asks:

“Will Arabs succeed in creating a viable and long-lasting wealth by continuously investing in the real estate sector? Will such investment generate surpluses that can be reinvested in other sectors, thereby enabling nations to create wealth? Which state is stronger, the one that generates income or builds up wealth? Does this question seem, by contrast contradictory? What are the conditions needed to ensure that wealth will be preserved from generation to generation and in hard times?”

“Ibn Khaldun has tackled these questions in his well-known "Muqaddimah" (Introduction) published in 1378. [1375?] Adam Smith, the Father of Modern Economics, has also sought to answer these questions in his book, "The Wealth of Nations" published in 1776, four centuries after Ibn Khaldun's. Besides, Ibn Khaldun used terms, such as "industry," i.e. the economic human activity, including trade, agriculture, and manufacturing. He also referred to expressions, like "the disparity between countries in building up wealth," clearly stating that the "sovereign's control over wealth heralds the beginning of the demise of civilization.”

“As for Adam Smith, who toured Europe for a decade [actually for two years, 1764-6, and the tour was confined to France and Geneva] and was affected by the French Liberals, mainly because of his friendship with their leader, Voltaire, he realized that producing wealth depends on three factors: One, leave the individual [to] work and trade freely, for he can achieve the best good for all thanks to his selfishness. [Not a view of Adam Smith’s] Two, specify the relation between the governed and the governors and determine their roles and obligations without giving clout to one party over another. Three, ensure the free trade and economic activity between countries.”

“In this context, we do not intend to draw a brief comparison between Ibn Khaldun and Adam Smith. For many authors have previously elaborated on this issue. [Worth pursuing] But, we want to benefit from the writings of such creative authors to see whether the Arabs create a wealth likely to last and expand even when its causes and current motives vanish.” [Comments in square brackets are mine].

Comments

Jawad Anani in his article does not define what he means by “wealth” and it is not clear how rental income or capital value in real estate would add to the real wealth of the Gulf, an area he points out that is suffering from inflation and declining real incomes, plus some other problems for foreign investors.

His reference to Ibn Khaldun (1332-1406), however, is most interesting and worthy of readers searching under his name in Google.

A quick google (
www.answers.com) found the following reference to a quotation on economics from his "Muqaddimah":

"In the early stages of the state, taxes are light in their incidence, but fetch in a large revenue...As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow...owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects...[and] sharply raise the rate of old taxes to increase their yield...But the effects on business of this rise in taxation make themselves felt. For business men are soon discouraged by the comparison of their profits with the burden of their taxes...Consequently production falls off, and with it the yield of taxation."
This sociological theory includes the concept known in economics as the
Laffer Curve (the relationship between tax rates and tax revenue follows an inverted U shape).”

From this extract, Ibn Kaldun, is worth a more detailed study.

Ibn Khaldun’s biographical details suggest he had a most ‘Machiavellian’ personality (and that he was successful at it too!), serving many rulers in Tunisia, Spain, and Egypt. His book on World History appears to be praised widely .

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