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Abdu’l-Baha on Economic Policy

According to Abdu’l-Baha, wealth inequality, can be attributed to the “extreme greed and rapacity of the manufacturers and industrialists.” He furthermore  identifies  the root cause of income disparity as the defunct operations of the legislative branch of government:

“The principal cause of these difficulties lies in the laws of the present civilization; for they lead to a small number of individuals accumulating incomparable fortunes, beyond their needs, while the greater number remain destitute, stripped and in the greatest misery.”

Abdu’l-Baha introduces concepts into His discourse that rarely find equivalent parallels in the modern discourse on economic policy. Instead of dominant values such as “economic growth”, He emphasizes “justice”; instead of  “profits” He emphasizes “humanity” and “equity”. His appeal to new concepts is grounded in a metaphysics that transcends the modern foundations of economics, which are outdated. The remedy to economic injustice He specifies lies in legislation designed to ensure that private profits go to meet the needs of the impoverished masses:

“…Rules and laws should be established to regulate the excessive fortunes of certain private individuals and meet the needs of millions of the poor masses; thus a certain moderation would be obtained…”

The exact proportion of workers wages as a function of CEO or owner income that is most conducive to justice, Abdu’l-Baha specifies as 20-25%. Therefore the average laborer should earn 20-25% of the total income earned by an owner or CEO. The majority shareholder of a corporation for example could expect to see approximately 4-5 times as much share in the profits as the average worker would. No more.

“Laws and regulations should be established which would permit the workmen to receive from the factory owner their wages and a share in the fourth or the fifth part of the profits…The body of workmen and the manufacturers should share equitably the profits and advantages…”

Today the average CEO “earns” 360 times as much as his average employee.  According to Abdu’l-Baha’s vision, the ratio of reward for investment vs reward for labor is not as distorted in favor of investment as is today’s market. The power balance between the labor and capital markets today is not tenable in the context of justice. Furthermore, honest labor should come with the guarantee of social security and retirement packages for aging populations. According to Abdu’l-Baha,

“The capital and management come from the owner of the factory, and the work and labor, from the body of the workmen… Either the workmen should receive wages which assure them an adequate support and, when they cease work, becoming feeble or helpless, they should have sufficient benefits from the income of the industry; or the wages should be high enough to satisfy the workmen with the amount they receive so that they may themselves be able to put a little aside for days of want and helplessness.”

The accumulation of excessive wealth is itself a burden and carries with it natural and moral dangers for individuals. Extremes of wealth and poverty engender social unrest between classes. Violence and crime become means of survival for the poor as well as weapons of retribution for their suffering against the rich. Wealth in itself is a transient entity that will not endure beyond its utility in this world. Large sums of wealth carry with them the burden of responsibility and administration for its owner. In the words of Abdu’l-Baha:

“If the fortune is disproportionate, the capitalist succumbs under a formidable burden and gets into the greatest difficulties and troubles…[for] the administration of an excessive fortune is very difficult and exhausts man’s natural strength”

Abdu’l-Baha advises people who control vast means of production that they exercise moderation in the acquisition of profits, instead diverting the majority of their funds to the infrastructure of their company, the needs of employees, or the welfare of society:

“It lies in the capitalists’ being moderate in the acquisition of their profits, and in their having a consideration for the welfare of the poor and needy”

For Abdu’l-Baha, the profits of a corporation do not belong to whoever arbitrarily purchased more of their stock. On the contrary, there is a moral right intrinsic to the workers who created the products to ownership of a fixed and definite proportion of the profits:

“Workmen and artisans receive a fixed and established daily wage—and have a share in the general profits of the factory…” “And it is from the income of the factory itself, to which they have a right, that they will derive a share…”

Moderation in the profits of the owner are linked to the retirement security of the laborers as well as the cost of caring for and rearing the worker’s offspring. The social security net of work covers not only the individuals who work but their family and children until they become old enough to be independently financially responsible:

“It would be well, with regard to the common rights of manufacturers, workmen and artisans, that laws be established, giving moderate profits to manufacturers, and to workmen the necessary means of existence and security for the future. Thus when they become feeble and cease working, get old and helpless, or leave behind children under age, they and their children will not be annihilated by excess of poverty.”

Abdu’l-baha advises congress to legislate on matters of workers rights and the share of profits to be apportioned to owners vs laborers in a just and impartial manner. By this statement He rules out the legitimacy of lobbyists or special interests swaying the partiality of the law-makers. It would be important for them to remain “impartial” in this regard and to legislate laws of profit distribution in accordance with principles of justice.

“But the mutual and reasonable rights of both associated parties will be legally fixed and established according to custom by just and impartial laws.”

If owners oppress laborers by refusing to pay them their share of the profits or treating them poorly or providing abusive working conditions, the judicial branch is responsible for passing a ruling in defense of the laborers, and the president and department of justice would be responsible for penalizing the corporation, procuring the profits due to the unpaid workers and establishing measures for the continuation of a just relationship:

“In case one of the two parties should transgress, the court of justice should condemn the transgressor, and the executive branch should enforce the verdict; thus order will be reestablished…”

Abdu’l-Baha clearly situates the relationship between employers and employees within the public sector, endorsing the validity and importance of state-run workers rights regulations:

“The interference of courts of justice and of the government in difficulties pending between manufacturers and workmen is legal, for the reason that current affairs between workmen and manufacturers cannot be compared with ordinary affairs between private persons, which do not concern the public, and with which the government should not occupy itself.

A coherent conception of society underlies Abdu’l-Baha’s vision of the relationship between the private and state sectors and the role of governance and law in ordering and regulating capital and labor markets:

“If one of these suffers an abuse, the detriment affects the mass. Thus the difficulties between workmen and manufacturers become a cause of general detriment.”

The Baha’i principle of unity is the nexus through which all things are connected. Pain of the part necessitates pain of the whole. Prosperity for the whole implies prosperity for each part. Can any body part maintain the position that only some distant body part is in pain, but that it itself is immune to the feeling? Surely not. The body experiences pain and pleasure as one. Likewise, the body politic experiences prosperity or privation as one. Abdu’l-Baha explains:

“In reality…these difficulties between the two parties produce a detriment to the public; for commerce, industry, agriculture and the general affairs of the country are all intimately linked together.”

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11 replies on “Abdu’l-Baha on Economic Policy”

For example the McDonald’s CEO earns a base salary of $979,167 and $13,751,919 in stocks and incentives. I’m not exactly sure what their profits are…I think they had a quarterly net income of $1.4 Billion.

Does this mean that Abdul Baha would give the average fry-cook 20% of the $1.4 Billion in profits, or divide it up by the 400,000 employees?
Thanks for the help!

The CEO of a multinational corporation such as McDonalds, is overseeing many thousands of stores/franchises, and thus the difficulty in using the formula for workers. However, it might work out if the number of stores was entered into the equation, and each store shares the profits as Abdu’l-baha, suggests, and the franchise owner is considered the CEO. But even then he has t earn his million plus investment back, so the formula is still complicated. Would love to learn more about this.

I appreciate your drawing out a number of points. However, I wanted to bring up a couple issues.

One, the full quote you cite in the beginning does not refer only to the greed and rapacity of manufacturers and industrialists but also to labor:

“Strikes are due to two causes. One is the extreme greed and rapacity of the manufacturers and industrialists; the other, the excesses, the avidity and intransigence of the workmen and artisans. It is, therefore, necessary to remedy these two causes.”

FWIW, the new authoritative translation of Some Answered Questions indicates this passage as follows:

“The origin of these difficulties is twofold: one is the excessive greed and rapacity of the factory owners, and the other is the gratuitous demands, the greed and the intransigence of the workers.”

As far as your statement that ‘Abdu’l-Baha indicates 20-25% as the “exact proportion of workers wages as a function of CEO or owner income”, I think that this is not speaking of wages, but of how collective profits would be divided between capital and labor as two groups. Here is another quote attributed to ‘Abdu’l-Baha (though from a source which not yet been confirmed as to its authenticity):

“…every factory that has ten thousand shares will give two thousand shares of these ten thousand to its employees and will write the shares in their names, so that they may have them, and the rest will belong to the capitalists. Then at the end of the month or year whatever they may earn after the expenses and wages are paid, according to the number of shares, should be divided among both.”

(Foundations of World Unity, p. 43)

There are some more quotes on the topic, in works of varying degrees of authenticity: http://bahai9.com/wiki/Profit-sharing .

Despite there being some specificity as per the above, I don’t think the Writings make clear how the division should occur within a group–for example, is the labor share to be distributed evenly among workers, or somewhat proportional to their wages, seniority, etc.

(Btw, you mention capitalists “diverting the majority of their funds to the infrastructure of their company”–did you have a separate source for that?)

As far as your statement that “The social security net of work covers not only the individuals who work but their family and children until they become old enough to be independently financially responsible”, I think that the idea here is true, but ‘Abdu’l-Baha does not seem to take a position on whether social security should be provided as a separate fund set aside for this purpose or whether it should simply be an addition to a minimum wage to allow workers to save to take care of themselves; as per the new translation:

“The workers could either be granted a wage that adequately meets their daily needs as well as a right to a share in the revenues of the factory when they are injured, incapacitated, or unable to work, or else a wage could be set that allows the workers to both satisfy their daily needs and to save a little for times of weakness and incapacity.”

And ‘Abdu’l-Baha qualifies in a number of places regarding His economic prescriptions that His ideas could or even would need to be adapted (e.g., His suggestion for a right to a share in the revenues of the factory when they are injured might have been aimed at the society of the time which had not yet accepted the notion of government-provided social security, and now that it does, a Baha’i position might perhaps find a government-provided system to be preferable to one which relies on a company’s profits, since the company could possibly go under).

I appreciate your drawing out a number of points. However, I wanted to bring up a couple issues.

One, the full quote you cite in the beginning does not refer only to the greed and rapacity of manufacturers and industrialists but also to labor:

“Strikes are due to two causes. One is the extreme greed and rapacity of the manufacturers and industrialists; the other, the excesses, the avidity and intransigence of the workmen and artisans. It is, therefore, necessary to remedy these two causes.”

FWIW, the new authoritative translation of Some Answered Questions indicates this passage as follows:

“The origin of these difficulties is twofold: one is the excessive greed and rapacity of the factory owners, and the other is the gratuitous demands, the greed and the intransigence of the workers.”

As far as your statement that ‘Abdu’l-Baha indicates 20-25% as the “exact proportion of workers wages as a function of CEO or owner income”, I think that this is not speaking of wages, but of how collective profits would be divided between capital and labor as two groups. Here is another quote attributed to ‘Abdu’l-Baha (though from a source which not yet been confirmed as to its authenticity):

“…every factory that has ten thousand shares will give two thousand shares of these ten thousand to its employees and will write the shares in their names, so that they may have them, and the rest will belong to the capitalists. Then at the end of the month or year whatever they may earn after the expenses and wages are paid, according to the number of shares, should be divided among both.”

(Foundations of World Unity, p. 43)

There are some more quotes on the topic from works of varying degrees of authenticity: http://bahai9.com/wiki/Profit-sharing .

Despite there being some specificity as per the above, I don’t think the Writings make clear how the division should occur within a group–for example, is the labor share to be distributed evenly among workers, or somewhat proportional to their wages, seniority, etc.?

(Btw, you mention capitalists “diverting the majority of their funds to the infrastructure of their company”–did you have a separate source for that?)

As far as your statement that “The social security net of work covers not only the individuals who work but their family and children until they become old enough to be independently financially responsible”, I think that the idea here is true, but ‘Abdu’l-Baha does not seem to take a position on whether social security should be provided as a separate fund set aside for this purpose or whether it should simply be an addition to a minimum wage to allow workers to save to take care of themselves; as per the new translation:

“The workers could either be granted a wage that adequately meets their daily needs as well as a right to a share in the revenues of the factory when they are injured, incapacitated, or unable to work, or else a wage could be set that allows the workers to both satisfy their daily needs and to save a little for times of weakness and incapacity.”

And ‘Abdu’l-Baha qualifies in a number of places regarding His economic prescriptions that His ideas could or even would need to be adapted (e.g., His suggestion for a right to a share in the revenues of the factory when they are injured might have been aimed at the society of the time which had not yet accepted the notion of government-provided social security, and now that it does, a Baha’i position might perhaps find a government-provided system to be preferable to one which relies on a company’s profits, since the company could possibly go under).

I would love to see the Universal House of Justice’s thoughts on this topic. So much has changed in commerce over the years, that it is often difficult to relate to the simpler model of an early 1900s factory. That being said, the idea of “profit sharing” has taken root, and seems to be a fairly common incentive today.

Clarity or elaboration on different scales of compensation for different levels of performance would be great as well. For example, if an employee is underperforming, should they receive the same compensation as an employee who has stellar performance? Having a security network that compensates employees when injured or sick is great, but how do you deal with the type of person who claims injury, just to get benefits without having to work?

And then there’s the question of education. Should a person who has taken the time, made the sacrifices, and shown the discipline to obtain an advanced degree not be given preference in positioning and compensation? In many cases, I believe this to be true…that promotion and compensation should be based on accomplishment and not whether or not someone has a degree…but there are some jobs where the degree really matters.

And then there’s the founder issue. A company founder often makes huge personal sacrifice to start their business. They take all the risk, raise all the capital, work ungodly hours, and cover the role of everything from the janitor to the CEO, and can do so for many years. How is this person compensated fairly. Does he get his investment and time back before profit sharing begins, or is it best to go forward with his dream, with the profit sharing model firmly in place and a primary goal.

However, when all is said and done, I think that ‘Abdu’l-Baha’s concept of economic fairness is something much needed. Can we go wrong if we share the wealth as fairly as we can? Is there a threshold that should be watched for? Does the Universal House of Justice have guidance on “building a business”?

Thanks Thane and Bret! This is such an exciting discussion, and the points and questions raised are valuable. I don’t know that much about economics, but the Universal House of Justice wrote a letter, 2 April 2010, to the Baha’is in Iran, as part of a series of letters to that community. In this message, they build on a previous one regarding the “subject of the family and its role in the advancement of civilization”, and cite the family as an economic unit as one way it can “play a significant part in alleviating a variety of problems born of the economic inequalities so prevalent in the world today.” Maybe a few insights from that letter can help.

They first note, “The relative prosperity enjoyed by the Bahá’ís of Iran in the past can be attributed to a culture that lays great emphasis on education and learning and which recognizes as an act of worship the assiduous and honest pursuit of a useful trade or profession, undertaken in the spirit of service.” So education is, obviously, indispensable to material prosperity. They then identify a number of concepts that are essential to understanding is social and economic development – “the true purpose of life, the nature of progress, the meaning of true happiness and well-being, and the place that material pursuits should assume in one’s individual and family life.”

One idea is regarding means and ends, that they must be distinguished. Wealth is a means: “it is acceptable and praiseworthy to the extent that it serves as a means for achieving higher ends—for meeting one’s basic necessities, for fostering the progress of one’s family, for promoting the welfare of society, and for contributing to the establishment of a world civilization. But to make the accumulation of wealth the central purpose of one’s life is unworthy of any human being.” Another related idea is that ends don’t justify means, including welfare. The House of Justice writes that “directors of financial markets, executives of multinational corporations, chiefs of commerce and industry” succumb to social pressure and act against this principle.

They cite ‘Abdu’l-Baha’s guidance on this topic: “The legitimacy of wealth depends, ‘Abdu’l-Bahá has indicated, on how it is acquired and on how it is expended. In this connection, He has stated that “wealth is praiseworthy in the highest degree, if it is acquired by an individual’s own efforts and the grace of God, in commerce, agriculture, crafts and industry”, if the measures adopted by the individual in generating wealth serve to “enrich the generality of the people”, and if the wealth thus obtained is expended for “philanthropic purposes” and “the promotion of knowledge”, for the establishment of schools and industry and the advancement of education, and in general for the welfare of society.

The acquisition of wealth should be governed by the requirements of justice, and they note: “Here, the relationship between minimum wage and the cost of living merits careful evaluation—this, especially in light of the contribution workers make to a company’s success and their entitlement, as noted by ‘Abdu’l-Bahá, to a fair share of the profits. The wide margin, often unjustifiable, between the production costs of certain goods and the price at which they are sold likewise requires attention, as does the question of the generation of wealth through measures that “enrich the generality of the people”. What such reflection and inquiry will no doubt make abundantly clear is that certain approaches to obtaining wealth—so many of which involve the exploitation of others, the monopolization and manipulation of markets, and the production of goods that promote violence and immorality—are unworthy and unacceptable.

Of course, there is no formula given by the House of Justice. Yet, wide profit margins are seen as unjust, whether through high product prices or low workers wages – both of which, in the end, are different ways to place the same financial burden on the general people. The principle here, without providing formulas, is that a company should pay its workers (whether by wages or profit sharing or some combination) and price its products in a way that enriches the people, instead of leading to someone else’s poverty. The question is: how can corporations and companies create a sustainable economic model that adheres to this principle? We know the question, we know the principle; now we have to participate in a learning process of action, reflection, and consultation, to generate insights towards this end 🙂

In the final analysis, systems and structures are within cultures; and the dominant world culture is one of consumerism, founded on materialistic assumptions of the nature of the human being and society. Laudable are efforts to address issues related to the economic life of society; yet, they cannot be divorced from the endeavor of bringing about the transformation of the whole of humanity, which includes cultivating a new culture that recognizes the nobility of every human being, the oneness of humankind, the complementarity of science and religion, the centrality of knowledge to community life, and that justice is the single most important instrument for the establishment of unity. Nor can the changes in economic practice be separated from either structural changes of other social systems (agriculture, health, education, politics/governance, etc) or spiritual growth at the level of the individual.

Hopefully this helps!!

Wow Sana…that’s a whole other angle to look at! Great read my friend. Thank you.

Wouldn’t it be great if the UHJ put out a correspondence course on doing business as a Bahai, and another on Bahai Economics. I think people are sincerely thirsty for such knowledge…especially actionable knowledge.

With today’s “on-line” technology, we’re ripe for a whole new set of studies and curriculum that will have an actual and rapid impact on immediate environments.

Going to hit the sack now, and think about the family’s role in economics. 🙂

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