276 chapter six
that requires the cooperation of many. Human beings are social by
instinct, he states, and if they are to live in a society they will have
to cooperate in their economic activities. This cooperation, particularly
when further complicated production activities are required, such as
producing what is needed for self defense, leads to, and necessarily
requires, economic integration.
Commercial activities by the ruler (government)
In Ibn-Khaldùn’s view commercial activity on the part of the ruler
is harmful to his subjects and ruinous to the tax system. It is harm-
ful to the subjects in many ways. First, farmers and merchants will
find it difficult to buy livestock and merchandise and to procure
cheaply the things that relate to farming and commerce. As the ruler
is much more able financially to buy than the subjects whose wealth
is restricted principles of competition are harmed. The ruler will be
able to buy what they cannot buy. Second, the ruler can distribute
much of the agricultural produce and available merchandise at will.
He can do this by force or by buying items at the cheapest possi-
ble price. No one will be able to bid against him, and he can also
force the seller to reduce his price. Third, the ruler may force the
buying merchants to buy from him, and this may be at the highest
price. This may lead to exhausting the liquid cash of the merchants
and lead to liquidity problems and hardship in making a living. In
their need for cash, they may have to sell the goods they purchased
from the ruler dearly at a low price. This may lead to the merchants
being forced out of the market.
State competition with the public may lead to work disincentive
and the ruin of the fiscal structure. As most of the revenue from
taxes, and custom duties, come from farmers and merchants, and
with farmers giving up farming and merchants going out of business,
the revenue will be dangerously reduced. If the ruler compared the
revenue from taxes with the small profits he achieved from his com-
mercial activity, he would realise that the latter is much smaller than
the former. The finances of the ruler can be increased and the
resources of the state improved only through the revenue from taxes,
with no royal commercial activity. The tax revenue can be increased
through the equitable treatment of the people with property and
regard for them. This raises their aspiration and incentive to work,
make their capital grow. In turn, this increases tax revenue.
Furthermore, the misuse of the commercial activity by the ruler