In The Name of Allah, the Beneficent, the Merciful
WORLD ECONOMY UNDER GLOOM – THE CAUSE & THE ONLY CURE
[Shamim A Siddiqi,
INTRODUCTION: The structure of world economy is dwindling fast along with it the fundamentals of capitalism that provide its edifice. It is a man-made system, providing all incentives towards its growth but no proper checks and balances to keep it under moderation except the inevitable market forces that are inherited in its nature, formation and growth. It depends on the natural laws of demand and supply which in turns are governed by the whims, caprices and the human urge to maximize his profit or gains one way or the other – a great pitfall for the system to plunge itself into the precipice of the vagaries of human nature. In fact, under Capitalism, man is totally free to earn and maximize his profits to any extent he can with no restrictions in his quest to control even the entire global means and resources except the market forces that are constantly operative beyond his control. So one day it was destined to collapse. Artificial feedings are providing “oxygen-tents” here and there along its route but when it becomes colossal and global all the means to revive are being succumbed to their own fallacies and inherent shortcomings.
THE GLOOM AND THE CAUSE:
The free-fall of the economic system that we see today around us is man’s own creation through misusing its facilities, monopolizing the means, hording the products and speculating about the available sources that his Creator and Sustainer provided and arranged for him for sustenance and maintenance of his species on this earth. Man’s nature of greed, self-possessing and maximizing his personal profit, pleasure and gains is the root cause of this man-made calamity that human society is confronted with currently.
In its wake:
* Interest rates, the backbone of the capitalistic economy are falling – may soon touch the zero percentage point at many places, if situation warrants so;
* Unemployment rates are rocketing high in every economy, creating extreme unrest in labor field, the wage-earners and the middle class strata of the society;
* Booming economies around the world are bursting like bubbles – the
* Recession is global – productions are falling every where and in every industry;
* Banking industry is collapsing and begging help from Governments and Central Banks – bailing out Banks and lending agencies are rampant;
* Oil prices are sharply falling along with it perhaps to its lowest in years with the fall of its demand in trade, transport, commerce and industries – Oil cartels are hopelessly watching the situation;
* Government revenues
are sharply falling, resulting in budget failures every where – the deficit in
* Housing industry
has collapsed specially in the
* Economy of many poor and under-developed countries are facing collapsing situation and most of them are begging or about to beg for loan from IMF and World Bank to help and face their treacherous draconian conditions to survive for a while;
* Stock markets around the world are daily plunging and the share holders are facing losses of Dollars in trillions;
* The sub-prime rates and the speculative trading, the gems of capitalism are the invincible ghost torpedoing the world economy from within the system;
* The very genesis of Capitalism - “Personal Profit and its maximization”, the blood artery of the system had let it down to nowhere and failing to create incentive in the market towards investment in the falling economy and in adventuring new investments;
* The worst scenario in these failing situations is the prevailing corruption of the Corporate World making every move and effort to monopolize the world trade and commerce and its agencies for the favored few through the process of Globalization and controlling by World Trade Organization;
* In short, the “world economy is facing worst downturn since the Great Depression” of 1930’s;
* A United Nations Report says: “The major countries will see significant contraction in the immediate period ahead and that recovery may not materialize any time soon, even if the bail-out and stimulus pace succeed; per capita income in developing countries as a whole is expected to fall in 2009 - a pessimistic scenario of 0.04 % contraction in world economy” as presented by Rob Vos, Chief Economist, UN Secretariat.
If one wants to describe the existing uncertain chaotic situation of world economy allegorically, he can presume it as a rider sitting on a horse with no reign in his hands and no legs in the saddle. The fast running horse will topple him down any where in any vale and dale, meeting the inevitable that he is likely to face in his uncontrolled and unbridled ride. The World Economy is heading fast, sooner or later, to such a catastrophic end one day.
The main cause of this human tragedy is the greed, the insatiable lust of man to maximize his profit, personal pleasure and gains even by hook or by crook. Capitalism has set this instinct of human free and calls it as the prime inherent motive of man to take risk, invest in business ventures, make money as the free agent or work as the means of fair “return” to the entrepreneur for his risk-taking adventures.
This is the inherent weakness of capitalism. It capitalizes the “profit – incentive” as the free-agent to maximize his profits by fraudulent means, resorting to speculative trade practices, future sale and purchase out of “nothing,” betting and gambling in share market making its index rise and fall in forward trading for making extra profit. The entrepreneur coins or invents excuses to exploit the labor and deny a fair return to him for his toil. He, thus, fills the earth both in private and public sectors with the emblem of his greed for profit and profit alone. It submerges him in the pitfalls of selfishness, exploitation, fraudulent trade practices, causing often and on trade circles, inflation and deflation in market, recession and frequent economic booms and bursts at local, national and international levels.
THE CRUX OF THE PROBLEM: The tragedy of capitalistic economy does not end here. It goes further one step down the road. Unfortunately, the concept of free and unfettered entrepreneurship goes without accountability at any stage and that is the crux of the problem. If one pays taxes on what he earns he is free to make money in any way he can and expend it in any way he likes as per his free will. It has made the investors reckless, irresponsible and extremely courageous to try their luck in any kind of dealing without least caring for the slaughtering of moral values and ethical standards. Maximizing the profit becomes his goddess and he worships it for the whole of his life. He lives and dies for it. He tries his best to earn it by using both the fair and unfair means in his business that I have enlisted above and makes a mess of it as we see today around us and globally.
This is the essence of capitalism and what we see today are its natural bitter fruits, the signs of its decay and the symptoms of a terminal patient who is counting his days. Capitalism may not die today or tomorrow or in near future but its death knell is wringing at hand. Temporary aid-patches may give it a transitory lease of life. However, it has lost its utility. World has to find out some other trustworthy economic system to give new incentives to its economic life that is free of capitalistic ailments and casual crises that have marred the beauty of human abode for centuries together. Let us trace out where lies the system that maintains the capital growth and investment and keeps the incentives of profit alive without its dragon’s teeth that spoil the world economy at frequent intervals.
THE ONLY CURE:
It must be noted carefully that the concept of Accountability is common
amongst all the three Abrahamic faiths. However, when
Had the concept of Accountability been there in the blue print of Capitalism, the system would have worked efficiently? The entrepreneurs, the investors would have planned and worked as conscious and responsible agents of capitalism with enormous feelings of being answerable to the Creator and Sustainer. Capitalism, thus, would have been free from most of its pitfalls and man-made quagmires that the world economy has been experiencing for ages and with what it is confronted today.
In brief, the alternative to Capitalism is nothing but the Economic System that is recommended by Islam and it is based on these fundamentals:
* Whatever man possesses – time, talents, energies and material resources are only trust in his hands. He is their trustee and not the master at all. He is to use them as the Creator and Sustainer has ordained him to do. If he follows His guidelines, he will be rewarded with eternal bliss, if not will be doomed with eternal punishment.
* On the production and earning side, Islam permits the individuals to become even a multi-trillion man NOT through wrongful means but by resorting only to rightful honest means of living. Islam prohibits totally all the fraudulent trade practices like speculation, forward trading, gambling, adulteration, interest and the other means of exploitation, and introduces the system of trade and business on the basis of “Profit and Loss sharing.” Thus, it debars all the inherent evil practices of business, trade and commerce, making the entrepreneurs to earn only through rightful means and reach to any zenith of profit making through dint of his personal honest efforts.
* On the consumption side, Islam prohibits all extravagancies and promotes the life of moderation and gives to all the factors of production their respective due share honestly and promptly as it is due. It results in a lot of savings leading to investment all around. It introduces its own Self-sustained Welfare System for the poor, the needy, the unemployed, the under-employed and the incapacitated. It increases the purchasing power of the have-nots through constant flow of wealth from the influent to have-nots through the Institution of Zakah and Infaq [spending in the way of Allah] and, thus, establishes equilibrium of a constant demand and constant supply, thereby helping the economy to reach to the ideal “Optimum” point within a short while.
What a boon it is both for the affluent and the have-nots.
* The lovers of Capitalism are invited to study the Economic System of Islam in depth and adopt it as a panacea for its inherent economic evils that keeping the system constantly under the shadow of gloom. This is the only CURE for the ailing World Economy of today and for all times to come.
Friday December 13, 08