GLOBAL UMMAH SOLIDARITY

The International Congress of Imam Khomeini (s) and Realm of Religion Regarding Religion and Development
The Institute for the Compilation and Publication of Imam Khomeini’s Works
June, 2010 (Khordad, 1389 AHS)


THE IRANIAN REVOLUTION ? A WAY FORWARD

Rodney Shakespeare

Bismillah ar-rahman ar-rahim

The Iranian Revolution is unique and forms the impulse for Iran’s modern and successful development.  Imam Khomeini opposed tyranny, upheld the independence of nations and wanted justice for the poor.  He rejected aggressive militarism and wanted Iran to be exemplar, realising values firstly within Iran itself and only then exporting those values abroad. The Imam’s aims can be achieved if nations firstly stop banks from creating money (although the banks may lend their own capital and, with permission, the deposits of customers).  Then, secondly, there should be a supply of national bank-issued interest-free loans, administered by the banking system, and directed at the development and spreading of productive (and associated consuming) capacity to all individuals in the society.  Such loans would halve (even quarter) the cost of capital for micro-credit, public projects, clean electricity generation, small businesses, student loans and homes, while also enabling the spreading of ownership in the medium and large business sectors.  All these uses should be interest-free but all other uses of the money supply should have higher interest rates.  Moreover, it is a big mistake to rely on foreign capital.

The use of the national bank as the ultimate source of the interest-free money supply is essential if countries are to become genuinely independent.  Moreover, without the use of the national bank interest-free money supply, the Iranian Revolution will not, in practice, be capable of developing sufficiently so as to give the world a political, economic and moral lead to a world sorely in need of such a lead.

1. INTRODUCTION

The Iranian Revolution is unique and can only be understood in its own terms.  Neither communist nor capitalist, it has its own impulses; its own ethos; and its own aims. Quite remarkably, the Revolution is a modern phenomenon and has resulted in effort and success in almost every conceivable field.  Thus, of many possible areas, Iran is making developments in medicine and nanotechnology; it has an aeronautical industry and builds its own ships; it wins prizes for its films; and there is excellent architecture.  Moreover, on a 2009 visit to Iran as a guest of the government, the author of this paper noticed an extensive tree planting program and he spent a most pleasant evening hearing modern Iranian music which puts to shame most of the modern music heard in London’s Festival Hall.

It can also be noted that women have progressed in Iran and are now active, for example, in fields such as science, health, government and broadcasting.  Part of that progress can be explained as a consequence of the war with Iraq when the women worked shoulder to shoulder with the men ? whatever else can be said about war, it always has social consequences.  At the same time, Iran is a modern society and the progress of women seems natural.

Very significantly, Iran is developing new international policy.  As yet, the thrust of that policy is not understood in those capitals of the world that think they have a right to bully everybody else; to control their economies; to rip off their wealth; and to demand subservience.  Quietly and courageously, Iran is resisting the bullying.  

Furthermore, right across the world, people are beginning to realise that Iran is giving leadership.  The realisation has not come easily because the world’s main media are still controlled by corporations promoting narrow Western interests and perpetuating outdated, arrogant attitudes.  Fortunately, modern communication methods (e.g., the internet and satellite television) are gradually breaking the grip of the corporations and there is hope that more balanced presentations of news and information will come to influence the international body politic.

2. BACKGROUND

The history of Iran goes back beyond Persepolis.  More recently, it includes the aggression of Great Britain (UK) and Imperial Russia who, in 1907, regardless of Iranian national sovereignty, divided the country into “spheres of influence”.  During the First World War the two countries invaded Iran; and they invaded again during the Second World War. In 1953 there were shameful events.  Prime Minister Mohammed Mosaddeq had received parliamentary and popular support to nationalize the British-owned oil industry.  However, the American CIA and the British MI6 organized Operation Ajax ? a military coup which overthrew the democratic forces and reinstated the autocratic Shah.

Having no democratic basis the Shah’s regime came to rely on the ghoulish methods of Savak, the dreaded secret police.  In particular, the Shah began to move Iran away from its religious, cultural and historical heritage towards a “Westernized”, atheistic society.  This was to prove a mistake.  In 1963 Imam Khomeini was becoming increasingly influential and made a notable speech against the Shah.  By the early 1970s other clergy had become increasingly vociferous and in 1973 the Shah was forced to return the oil industry to national control.  

The spiritual, moral and intellectual leadership of Imam Khomeini then had its reward.  On February 1, 1979 millions of Iranians greeted the exiled Imam on his return from Paris and, within a few weeks, the Revolution was complete having received overwhelming national approval.

Then, presuming that because of the Revolution Iran had become physically weak, Iraq (under Saddam Hussein) invaded Iran.  There followed a ghastly eight year war (1980 – 1988) in which the West consistently backed Iraq including supplying it with the materials with which to make poison gas.  About one million Iranians lost their lives.

Unfortunately, since that time, the leaders of the world’s capitalist countries, headed by the United States, have continued to make every effort to isolate and demonise Iran.  They claim that Iran's civilian nuclear activities are for making atomic bombs and they use that claim as a tool to isolate the country and undermine its independent political and economic policies.  They particularly want to force Iran into abandoning its revolutionary zeal and policies in the Middle East.  In short, they try to coerce Iran into accepting the hegemony of the imperialist powers.  

Consequently, the 1980 -1988 war experience and the overt hostility of the Western powers have impressed a simple message upon Iranians ? if Iran is to survive in this world, it has to develop itself in every respect and become as independent as possible.  Thus revolutionary zeal and the harsh reality of Western hostility have combined to ensure Iran’s self-development and its growing economic and political strength.  Moreover, internationally, Iran’s influence has increased of late particularly because of the failed American invasion of Iraq and Israel’s atrocious war crimes in Gaza (2009).  

3. POLITICAL AND ECONOMIC AIMS OF THE REVOLUTION

Everything is a name of God.  The winds that blow are a name of God.

It is now time to set out some of the political and economic aims of the Revolution in an endeavor to try to determine whether the aims are being achieved and, if not, what might be done.  

Aims as stated by Imam Khomeini

The speeches and writings of Imam Khomeini ? a far-sighted politician, statesman, nationalist and moral leader ? can be broadly compared with Ba’ath and Wahhabis political philosophy which is essentially intellectually and morally bankrupt.  Thus both Ba’ath and Wahhabistic political systems are authoritarian with little thought other than their own self preservation, and Wahhabism, for example, is largely antagonistic towards educated women.

At the back of the Imam’s thought is monotheism and the concept of tawhid (unity of understanding and practical consequence).  He explained the need for Sunnis and Shias to be united and for the ummah, at the very least, to become a genuine comity of nations.  And, whereas Shia tradition in the past has been essentially apolitical, it became directly political under Imam Khomeini.  Indeed, he spelt out the responsibility that each generation has for its own destiny.

The Imam’s nationalism was undoubtedly strong and he well understood that a great power cannot survive without having a national base.  But his nationalism was not the usual nationalism which divides people; rather it was infused by something greater than the mere historical, linguistic or ethnic.  Thus he said, ““Our movement is Islamic before being Iranian” and he explained that:-

“Our aim is that Islam, the laws of Islam, the universal laws of Islam, would be revived and implemented and that everyone would live a comfortable and free life.  We want everyone to be independent.”

It is, however, to be a just power:-

“We hope that an Islamic power would emerge, a just power, a power which would depend on justice, and not on bayonets……..I want to tell you that there will be no more bullies and bullying.”

Yet, as was inevitable, he always addressed the immediate national issues being deeply conscious of Iran’s history and its suffering under tyranny:-

“After 2,500 years of oppression and tyrannical regimes and after 50 years of treachery, injustice, tyranny and plundering, we hope that we can establish this justice.”

Opposition to despotic and colonialist powers

The Imam had a concept of opposition to despotic and colonial powers ? he wanted freedom from the West, and freedom from dependency on the West:-

“We want our country to be independent in every respect.  Hence, for the satisfaction of God, we must pursue this matter so that not only our country, but all of the peoples of the world will be independent.”  

He further thought that world peace and sanity are geared towards the overthrow of the arrogant powers; yet the overthrow, unlike the French revolution under Napoleon or the Soviet communist revolution, should not imply a desire to embark on imperial adventure:-

“When we say that our revolution must be exported everywhere, they should not misinterpret it to mean that we would want to take over other countries…..All countries should stay as they are…………The meaning of exportation of revolution is that all nations would wake up, and would save themselves from this predicament that they face: They are being dominated: they are living in poverty while their resources are being plundered.”

Opposition to tyranny and promotion of social justice

The Imam recognised that all people are equal before God; that there is a link between people and leadership; that no individual has the right to force another man to submission; and that a government is a small group of people serving the nation, rather than being above it.  

His concept of independence, however, was not merely political ? it encompassed cultural, economic and social issues:-

“You must closely guard your independence, cultural independence, economic independence and social independence.”

The concept particularly extended to the poor so that they should have, for example, clean water, hospitals and education:-

“It is incumbent upon the ulema (Islamic scholars) and Islamic researchers and experts to propose constructive and universal plans which safeguard the interests of the Deprived and the dispossessed in order to replace the incorrect system of economy prevalent in the world of Islam, thereby liberating the Deprived and the Muslims from the straitjackets of poverty.”

Detail missing from the Imam’s speeches and writings

Those things said ? and remembering that the author of this paper cannot claim to be expert in Imam Khomeini’s speeches and writings ? it has to be admitted that there is apparent weakness in some of the detail necessary to give effect to overall policy.

Thus a call for national independence will not have much meaning if a colonial or political subservience is replaced by an outside financial domination which can control a country, for example, by trapping it into huge amounts of debt, just as control can be achieved by the gun.

Then there is the question of exactly what is meant by the removal of poverty because, in such matters, the exact methods, and associated consequences, are crucial.

And what about markets and private property?  Are they a good thing?

And is there not a need to affirm the importance of the real economy rather than the Wall Street casino?  And is it not vital to develop and spread the real economy?  Furthermore, is there not a desire to be free from inflation?

Islamic opposition to riba/interest

In particular, what about riba/interest?  The Islamic tradition is strongly opposed to interest. Furthermore, modern Islamic Economics and, in particular, Islamic Banking, either does not discuss, or is ambivalent about, or obfuscates, the subject of interest.  The truth is that interest is at the heart of the Western system, a system which essentially dominates global finance including most Islamic economics and, just as Christianity and Judaism were corrupted by interest, so modern Islam is largely (but not wholly ? there are genuine exceptions) corrupted as well.

Brief summary of political and economic aims of the Revolution

Some of the main political and economic aims of the Revolution can be summarized as follows:-

Islam has responsibility to the world

tyranny and subservience must be rejected

all nations should be independent

social and economic justice must be forwarded and solutions found to the problems of the poor

Islam and Iran to help solve the problems of other people in other nations

rejection of aggressive militarism

Iran to be exemplar.  Therefore values should be realised first within Iran and only then should there be attempt to export values abroad.

probable favouring of markets, real economy and  private property

if possible, elimination of riba/interest.

4. A WAY FORWARD

So how exactly do you save humanity from oppression and tyranny?  How exactly do you ensure a country’s independence, and a people’s release from poverty?  In short, how is Iran to give to the world the balanced, human leadership, and the moral, intellectual and political lead that Imam Khomeini wanted it to give?

Main cause of the present global crisis

The answer is first to consider the main cause of the present global crisis which is what finance capitalism claims is the secret of the ‘free market’s’ purported success ? namely, conventional endogenous loan money ? but, in reality, is the cause of its failure.  This loan money:-

is created out of nothing (by the pressing of computer buttons) by the banking system has interest (as distinct from administration cost) added

is not directed at the development and spreading of productive (together with the associated purchasing) capacity so as to achieve a Say’s Theorem (Law) balance of supply and demand (with producers and consumers being the same people) while, at the same time, forwarding social and economic justice.

Conventional mainstream economics claims that conventional endogenous loan money serves the needs of the economy by efficiently allocating resources.  But this is not true ? the banking system money does not allocate its interest-bearing money to new productive capacity and its spreading.  Instead, it allocates it to derivatives; to the bidding up of existing asset prices (such as house prices); to consumer credit; to putting individuals, companies and societies into debt, indeed, to anything except the real, productive economy.

Moreover, the paying of interest diminishes the capacity of borrowers to repay and diminishes their capacity to consume.

Lastly, conventional endogenous money requires two lots of financing (one for production and one for consumption when only one lot ? for both production and consumption at the same time ? is necessary).  The result of the two lots of financing is that there is continued inflation.

In short, conventional endogenous loan money concerns itself with the making of money out of money and NOT with the true purposes of the real economy and society, particularly the creation of a true, balanced market economy in which everybody is directly involved.

The purported ‘free market’ is not free, fair or efficient

The failure of conventional endogenous loan money takes place against a background of deceitful propaganda and deception about the ‘free market’.  The truth is that the ‘free market’ is not free, not fair and not efficient and there cannot be true democracy unless all individuals (whether or not in conventional jobs) have their own independent productive capacity giving them their own income.

Furthermore, throughout the world, capital ownership is concentrated ? in some ‘free market’ countries only a handful of families own most of the stock market.  Over-concentration of economic power and the prevention of the operation of a true free market (in which producers and consumers are the same people) are prime causes of autocracy and poverty.

Indeed, mainstream economics is fundamentally flawed and that is because it is based on many false assumptions ? fifty three false assumptions have been discovered.  This is a matter of considerable importance because if only one assumption is false (or, at the most, two or three assumptions are false) then the whole structure of neoclassical economics becomes invalid.  

All nations are controlled by the Western financial system

But the worst thing of all is that virtually all nations are controlled by the Western financial system which locks nations (and cities, towns, corporations and individuals) into often unrepayable debt.  Nations cannot be truly independent unless they are prepared to strike at the heart of the Western financial system.  That means that all nations must take control of their own money supply; they should avoid relying on foreign capital; and they should have capital controls.

Conventional endogenous loan money to be eliminated

So, because it has detrimental effects and does not serve the purposes of a true, fair, free market, let alone the purposes of society, conventional endogenous loan money must be gradually eliminated.  This can be done by a gradual rise in banking reserves eventually to 100%.  Banks will then be left with the duties of lending (as they are supposed to do) their own capital and (with permission) the deposits of their customers; and of administering interest-free loans stemming from the national bank.

NB.  Banks should be able to lend their own money and that of depositors (with permission) at interest.  But newly-created money is society’s money and so should be used for spreading the real economy, interest-free, to everybody.

The national bank

The interest-free loan money starts with a country’s national bank.  This is important because it means that ultimate ownership of the money is society’s ownership rather than that of private individuals.  Furthermore, the national bank can control the overall volume of money.  

The money is then issued (from the national bank) as interest-free loans to the banking system, to be administered by the banking system only for productive, real economy and wide ownership purposes.  The loans are administered generally on free market and efficiency principles (i.e., provision of collateral; ability and intent to repay) and are repaid, firstly, to the commercial bank which then repays the money to the central bank.  In essence a commercial bank would be able to make an administrative charge but not add interest because it would not actually own the money. Because no riba/interest is involved the general result is of a halving or more of the cost of new productive capacity; a wider distribution of productive and consuming power; a much greater efficiency, and a much greater social and economic justice.  Just as importantly, debt is reduced and national independence is increased.  All this is known as binary economics.

5. BINARY ECONOMICS

Specific uses of national bank-issued interest-free loans

Binary interest-free loans combine efficiency with social and economic justice.  They are directly related to the real economy, made repayable and, when repaid, are cancelled or cancellable thus ensuring that productive assets always back a society’s currency.  

Crucially ? because interest is not necessary ? the binary loans allow capital projects to be constructed for one half, or one third, or even less, of the present cost.  Moreover, the loans cannot be inflationary ? the loans must be repaid and, when repaid, are cancelled thus leaving the assets behind in existence.

NB.  All binary uses of the money supply should be interest-free, but other uses of the money supply should have higher interest rates.

Mechanism for, and uses of, the binary interest-free loans

In the case of public capital projects (e.g., roads, bridges, hospitals, schools, waterworks, fire stations, sewage works, etc.) the mechanism for the binary loans is simple ? the central bank creates and then lends interest-free money to the government for the purposes of the government’s own capital expenditure.  However, the capital projects can still, if wished, be built by the private sector, and managed by the private sector.  For the private sector, the central bank lends interest-free money to the banking system which then administers it on market principles including the existence of collateral as well as ability and willingness to repay.  In the case of large corporations, the key condition for the use of interest-free loans is that the investment is associated with the creation of new shareholders thereby distributing the ownership of new capital assets throughout the population.

Thus the essence and rationale of the binary  loan mechanism is that, as long as the money is lent for defined productive purposes including wide ownership, the government and the commercial banks should be able to administer a supply of interest-free money (from the central bank) to be lent, interest-free, to satisfy those purposes.  

The purposes in the private sector divide into three main areas:?

For small businesses

When small or start-up businesses, including farms, have to borrow interest-bearing money, the chances of thei survival considerably diminish.  But interest is not necessary when money is put into productive capacity, as in a small business.  Tehre is no need for a small business to be burdened with the crushing burden of interest-bearing debt.  As long as there is scrutiny to ensure that the business has a viable proposal and there is appropriate provision for collateral and administration cost, there is no reason for there to be interest at all.  

For micro-credit

The Grameen Bank (which has a 96%+ repayment rate) could receive interest-free money, lend it on to its usual clients and then repay the money to the central bank thereby halving the cost to the clients.  Other micro-credit organisations could similarly halve the costs of borrowing for the customers.

For large corporations

The interest-free lending to large corporations is only if the investment creates new owners of capital and is part of policy to enable all individuals, over time, on market principles, to become owners of substantial amounts of productive capital.  By using central bank-issued interest-free loans, administered by the banking system on the market principles of binary economics, a large corporation would get cheap money.  Wide ownership ? on the principles of binary economics ? uses interest-free money to enable any person in the population, over time on market principles, to have a basket of shares paying out their true, full earnings.

In practice it means that not only employees but people not in formal employment (e.g., women carers and children) may have an income because they have been connected to what truly creates wealth ? the productive capital assets of large corporations.  This is important because, the spreading of capital ownership and its associated income will, over time, enable all members of society to have a basic income independently of whether or not they are in the conventional labour market.  Thus all people become productive and so have the income that comes from their production as capital owners) thereby enabling them to be consumers.

However, a key condition for the use of interest-free loans is that the investment must be associated with the creation of new shareholders thereby distributing the ownership of new, future capital assets throughout the population.  The assets pay for themselves out of what they will earn in the future.

Another key condition would be that all large corporations would be required to pay out all their earnings except for reserves for research, depreciation and development.  This requirement is necessary to ensure that:-

corporations are encouraged to accept interest-free loans with the associated responsibility of widening ownership in the economy

the loan is repaid at a competitive rate over a reasonable period of time

the beneficiaries receive all the income coming from capital productiveness

the entire economy is able to achieve sustainable aggregate growth and distributive justice on market principles.

For medium companies/corporations

Interest-free loans should also be available for medium-sized companies and corporations if the loans are associated with the widening of ownership.  However, unlike large corporations, medium-sized corporations would not be required to make a full payout of earnings (except for reserves for research, depreciation and development), so that they would have the option of expanding via retained earnings.  

Once the interest-free loan is accepted, however, full payout of earnings in future would be required.

Lastly, green capital investment is essential, particularly for clean, renewable energy.  At present, using interest-bearing loans, a lot of green technology is not financially viable.  With interest-free loans, however, it would become viable.  Thus we could have, for example, clean electricity through tidal barrages, dams, windmills, wave machines, solar electricity, and geothermal power stations.  

Visual summary of binary economics

A gradual rise to 100% banking reserves requirement stops the banking system from creating money out of nothing.  Banks may lend their own money or that of depositors (with permission) and such lending may be at interest.

NB.  All the uses of newly-created money are to be binary uses in which the money is lent interest-free.  Other uses of the money supply should have much higher interest rates.

Interest-free loans for productive purposes come from

OR and are lent to approved institutions which may charge for

administration cost but may NOT add interest as they lend for thereby halving or more the cost

Binary Economics spreads ownership

The use of the national bank as the ultimate source of the money supply is essential if countries are to become genuinely independent.  Moreover, without the use of the national bank interest-free money supply, the Iranian Revolution will not, in practice, be capable of developing sufficiently so as to give the world a political, economic and moral lead to a world sorely in need of such a lead.