Even though private equity funds have been around since the early twentieth century and today manage over one trillion dollars’ worth of capital worldwide, most people may not have paid attention to them until Mitt Romney chose to make his experience at Bain Capital an issue for his bid to be the next President of the United States. Two questions surround the controversy. Are private equity funds indeed the job-creators that Mitt Romney claims them to be? Are profits generated by private equitytaxed at a fair rate?

Mitt Romney bases his job-creator credentials on anecdotal tales of Bain’s successes with Staples and Domino’s Pizza, among others. His detractors point to a Florida company Dade Behring, which Bain bought using borrowed capital but two years later had to shut down leading to 850 lost jobs in Miami alone. A new academic study shows that between the years 1980 to 2005 private equity eliminated almost as many jobs as they created, what the authors conclude were, “modest net impact on employment.”

The nature of creative destruction, which private equities often engage in, will naturally cause jobs to be both created and destroyed. Counting the jobs lost via downsizing is easy but accounting for the number of new jobs created is tricky. Partly because many of the jobs created by private equity firms accrue as a result of a merger or an acquisition. But can such increases really count as job creation? Less controversial is the fact that post-acquisition, target firms often see gains in productivity, which simply means that the firm is able to produce more with fewer workers.

Mitt Romney created yet another furor when he declared, and later his tax returns showed, that he paid a lower tax rate than most others in his income bracket. IRS tax code allows profits from partnerships to be treated more favorably than other forms of compensation. Private equity fund managers typically collect an annual management fee, approximately 2 percent of the capital invested in the fund. If the fund makes a profit, usually above a certain hurdle rate, then managers collect an additional 20 percent of the future profits. This method of compensation, often called the “two and twenty” rule, allows the partners to convert labor income into capital gains, which are taxed at a lower rate. Not illegal, but certainly raises eyebrows.

A New York University Law Review paper contends that this method of compensation is “untenable” mainly because it is an “economic distortion.” The current law needlessly advantages partnerships over corporations. A second concern,

“(it) allows some of the richest workers in the country to pay tax on their labor income at a low effective rate.”

On the whole, private equities are not “vulture capitalists,” as Texas Governor Rick Perry misguidedly called them. Private equities, along with public investment banks, play a significant role in ensuring that our capitalist system to continues redirect economic resources to their most productive use. Private equities by incubating companies to success and rescuing firms in distress are an essential lubricant in our economy.

To characterize private equities as “job creators” is also an over-exaggeration. The goal of any capitalist venture is not to “create” jobs but to maximize value for their shareholders. But in pursuing legitimate business interests, public equity managers receive special tax treatment, which ought to be an anathema to free market purists. This government subsidy gives extra help to those people who need them the least. Moreover, the lucrative financial incentives at private equity are likely to lure the best and the brightest to become financiers rather than inventors and entrepreneurs, thus in the long run discouraging innovation and creativity.

Almost a decade ago, William Greider in his book, Soul of Capitalism, lamented that even when our market based economy works as intended, it generates,

“greater maldistribution of assets and incomes and, not coincidentally, imposes on most citizens the sense of loss of self-sufficiency and independent control over one’s destiny.”

Setting aside the politics, the attention on private equity ought to spark a greater debate about economic fairness and efficiency. It appears that over the last two decades the system has become lopsided so as to leave the 99 percent feeling helpless and hopeless. Meanwhile special interest groups continue to rig the system disproportionately in favor of the 1 percent.

A Malaysian political leader has asked political parties in his country to stop using the word “Islam” in their names so that, “nobody can make use of the religion for their political gains.” This progressive thought is ironically closer to the classical understanding of Islam’s sacred texts. For in the early century of Islam, use of the word “Islamic” (Islamiyyah in Arabic) was limited in its scope. When opining on the permissible (halal) and the impermissible (haram) the classical scholars eschewed the blanket usage of “Islamic” or “un-Islamic” often opting instead to using terms such as “valid”, “accepted”, and “allowable” or their antonyms.

Attaching Islam or Islamic to otherwise secular activities such as politics or art is a newer innovation whose proliferation is traceable to the identity movements that sprang up in the Muslim world in the 1960s and 70s. Even if one were to provide convincing raison d’être for the fields of Islamic Art or Finance, how does one explain Islamic Olympic Games, Islamic Music, Islamic Quizzes, etc.? In their quest to preserve identity, Muslims may have lost sight of the big picture.

The proponents of “Islamic-anything” perform a difficult juggling act. In his book “Islamic Finance”, Mahmoud El-Gamal outlines the dilemma faced by the Islamic finance industry, for example. On one hand the Islamic finance industry tries to be similar to conventional finance so as not to be in any jeopardy of national or international laws. On the other hand, the industry portrays itself to be different by using Arabic words to describe mundane secular contracts and attempting to conform to the sacred texts of Islam, even when such conformity is no more than form over function. This dilemma of being same and yet different is also faced by other Islamized disciplines.

Continuing with the example of Islamic finance, it is common knowledge that Islam prohibits riba (usury), gharar (excessively risky) and maysir (gambling) in financial transactions. But creating a separate industry called “Islamic Finance,” has not eliminated riba, gharar and maysir even in financial transactions branded “Islamic” or “Sharia-compliant.” Moreover, Islamic finance has not led to more equitable distributions of wealth or the elimination of the many vices that plague the finance industry. Thus, even in Muslim majority countries, the success of Islamic finance is limited, because users find little to differentiate it from conventional finance.

Since Islam makes no distinction between the sacred and the secular (defined in Webster as “of or relating to the worldly or temporal”), the rebranding of otherwise secular ideas in religious terms, is a contradiction. A cobbler once asked the Protestant reformer Martin Luther how he could serve God within his trade of shoe making. Luther did not ask the cobbler to make “Christian” shoes. He asked the cobbler to make the best shoe possible and sell it at a fair price. Thus affirming a theme consistently present in the sacred texts of almost all religions, namely that being fair and striving for excellence is part of being religiously righteous.

Islam cannot be of service to all humanity if Muslims confine discussions about Islam to issues related to identity only. Instead of being separate but equal, Muslims should integrate without assimilating. A Muslim women weightlifter is trying to do exactly that. Instead of competing in Islamic Games, she is competing in regular weightlifting competition but petitioning the respective sports bodies to allow her to compete wearing modest clothing including a headscarf.

Islamic games or Islamic political parties limit their participation to Muslims. It is natural for people of other faiths to feel excluded even when the limits are not explicit, much the same way Muslims will feel excluded if someone tried to organize “Christian Games.” The Quran in Chapter 49, verse 13, “We have created you from a male and female and made you into nations and tribes that you may know each other,” celebrates the plurality of people having a singularity of purpose – getting to know each. How can we know each other if we use identity to seclude us?

Our global struggles today are not between Islam and the rest but between the forces of divisiveness and the champions of inclusiveness, between general welfare for all and the preservation of privileged status for a handful. In such a struggle, Islam can be a force of moderation as long as Muslims treat Islam more as a system of values that can benefit all humanity and less as a “club” where people with certain cultural habits congregate. It is not coincidental that Turkey’s AKP party has grown in popularity despite practicing Muslims governing a secular state, while the identity-driven Islamists in the rest of the Muslim world struggle to find their voices in democratic politics.

Creating an apartheid system of Islamic versus un-Islamic will not address the bigger issues at stake. Subjecting secular endeavors of politics or finance to parochial tests of religiosity will neither benefit Muslims nor the rest of humanity. Rather Muslims should follow Luther’s advice of honestly making the best possible shoe and selling it at the fairest price possible. Actions that benefit the broadest cross section of people, best fulfills the Prophetic mission of being “rahmatul lil alamim” – a mercy to all humanity (creations to be exact).