Causes of Income and Wealth Inequalities: Perspectives of Economists from the Fields of Conventional and Islamic Economics

Abstract

Inequality in income and wealth is a tremendous problem within the capitalist system. Piketty succeeded in bringing the issue into the limelight with his 2013 book. The reasons given for income inequality differ from the explanations put forward by Islamic finance. Piketty blames inheritance, while Muslim economists blame defectiveness in the capitalist system. The central cause—rate of interest—fronted by Islamic finance and economics scholars is mentioned in parting and as a minor component. Some Western movements such as Positive Money recently highlighted interest as the culprit, but this is a whisper compared to the loud voices of Piketty and Stiglitz, who are looking in another direction. This theoretical and analytical chapter examines the views of economists from conventional and Islamic finance. It shows that conventional economists largely fail to admit that interest is the fundamental causative factor in generating income and wealth inequalities, something Muslim economists have identified for a long time.