Remodelling global financial establishments
Thursday, 8 April 2010
Talha J Ahmad
A national conference in the UK on global poverty was recently held with participation of Christians, Muslims, Sikhs and other leaders from across the country to discuss the issue of third world debt and the devastating consequences it has on the advancement of a poor nation. The whole programme mostly devoted to finding ways to convince western governments to cancel debts owed by poor countries.
The conference in many ways was an eye opener for many. It dwelt on the effects of the debt on the poor nations. For example, Bangladesh pays more than $800 million to service debt annually, which could be used to advance the country's move to achieve the millennium development goals. This means 40 million or so people who live for less than a dollar a day in Bangladesh could have had $20 dollar extra per year to live. Therefore, it sounds lucrative and irresistibly noble.
If all the debts owed by the very poor countries are cancelled by the lenders the poor nations will have, in the short term, some scope to focus on economic development. However, soon they will accrue more loans or, in the alternative, stagnate as a nation from an economic point of view. In fact, the state of our world, that is the economic imbalance between the poor and rich nations, the latest recession brought to us by the irresponsible banks and the abuse of cheap labours by large corporations are the results of an economic order, or even ideological rhetoric which allows wealth to concentrate in the hands of the few leaving the vast majority to work hard only for mere survival. The financial model of the current capitalist world is driven by stronger bargaining position than by the consideration of justice and fairness. This has the inevitable consequence that when two parties enter into financial agreement, the vulnerable party having no choice accepts less favourable conditions. This applies at all levels of transactions be it loans, grants or business.
An increasing gap between the rich and poor, the prevalence of extreme poverty while prosperity has seen phenomenal growth and the latest melt down of our financial world tell us one thing: time has come to closely scrutinise our ideological and pragmatic stand adapted for so long to shape the economy in a modern and diverse world. We need to challenge the status quo that exists in the financial systems of the world. We need to question the fairness, effectiveness and indeed the validity of institutions such as the IMF, World Bank and more broadly the principles governing our economic philosophy.
We need to move to a system in which only real assets matters. White collar criminals creating wealth by speculating will have no place in such system. Instead of concentration of wealth in the hands of a few, we need a model which circulates wealth to generate income for those who need it most, to address poverty, facilitate creativity, encourage entrepreneurship and most importantly ensure justice. Islamic Economic/ Financial model in recent years has attracted much attention from many quarters as a model which perhaps has an answer to our dilemma.
Unfortunately, it seems though that leading nations, most notably the western ones, are keen to bring short term fixes giving increasingly more power to themselves. They seem to be satisfied that the broad principles governing our economic and financial affairs are appropriate and just. On the other hand, those who have succeeded in the alternative financial systems such as the Islamic Economic/Financial model are noticeably absent from the debate. They are perhaps unwilling and/or unable to articulate their experience to offer a solution to the current crisis.
The current state of economic injustice, deprivation and exploitation is hurting us greatly. On the one hand, we are seeing increasing number of millionaires while on the other, the poorer are getting even poorer. Take China for example, it is now the 4th largest economy of the world and soon will be the largest yet it has the largest concentration of poor people of any nation. We cannot, therefore, afford to remain silent. We need to pro actively expose the injustices, unfairness and the bias of the current economic system and forcefully present alternative models so badly needed. We need to have a complete and comprehensive overhaul of the entire system. The financial world needs an ideological, philosophical and structural paradigm shift.
(The writer is based in UK. He can be reached at email: mailto:talha.j.ahmad@gmail.com)
A national conference in the UK on global poverty was recently held with participation of Christians, Muslims, Sikhs and other leaders from across the country to discuss the issue of third world debt and the devastating consequences it has on the advancement of a poor nation. The whole programme mostly devoted to finding ways to convince western governments to cancel debts owed by poor countries.
The conference in many ways was an eye opener for many. It dwelt on the effects of the debt on the poor nations. For example, Bangladesh pays more than $800 million to service debt annually, which could be used to advance the country's move to achieve the millennium development goals. This means 40 million or so people who live for less than a dollar a day in Bangladesh could have had $20 dollar extra per year to live. Therefore, it sounds lucrative and irresistibly noble.
If all the debts owed by the very poor countries are cancelled by the lenders the poor nations will have, in the short term, some scope to focus on economic development. However, soon they will accrue more loans or, in the alternative, stagnate as a nation from an economic point of view. In fact, the state of our world, that is the economic imbalance between the poor and rich nations, the latest recession brought to us by the irresponsible banks and the abuse of cheap labours by large corporations are the results of an economic order, or even ideological rhetoric which allows wealth to concentrate in the hands of the few leaving the vast majority to work hard only for mere survival. The financial model of the current capitalist world is driven by stronger bargaining position than by the consideration of justice and fairness. This has the inevitable consequence that when two parties enter into financial agreement, the vulnerable party having no choice accepts less favourable conditions. This applies at all levels of transactions be it loans, grants or business.
An increasing gap between the rich and poor, the prevalence of extreme poverty while prosperity has seen phenomenal growth and the latest melt down of our financial world tell us one thing: time has come to closely scrutinise our ideological and pragmatic stand adapted for so long to shape the economy in a modern and diverse world. We need to challenge the status quo that exists in the financial systems of the world. We need to question the fairness, effectiveness and indeed the validity of institutions such as the IMF, World Bank and more broadly the principles governing our economic philosophy.
We need to move to a system in which only real assets matters. White collar criminals creating wealth by speculating will have no place in such system. Instead of concentration of wealth in the hands of a few, we need a model which circulates wealth to generate income for those who need it most, to address poverty, facilitate creativity, encourage entrepreneurship and most importantly ensure justice. Islamic Economic/ Financial model in recent years has attracted much attention from many quarters as a model which perhaps has an answer to our dilemma.
Unfortunately, it seems though that leading nations, most notably the western ones, are keen to bring short term fixes giving increasingly more power to themselves. They seem to be satisfied that the broad principles governing our economic and financial affairs are appropriate and just. On the other hand, those who have succeeded in the alternative financial systems such as the Islamic Economic/Financial model are noticeably absent from the debate. They are perhaps unwilling and/or unable to articulate their experience to offer a solution to the current crisis.
The current state of economic injustice, deprivation and exploitation is hurting us greatly. On the one hand, we are seeing increasing number of millionaires while on the other, the poorer are getting even poorer. Take China for example, it is now the 4th largest economy of the world and soon will be the largest yet it has the largest concentration of poor people of any nation. We cannot, therefore, afford to remain silent. We need to pro actively expose the injustices, unfairness and the bias of the current economic system and forcefully present alternative models so badly needed. We need to have a complete and comprehensive overhaul of the entire system. The financial world needs an ideological, philosophical and structural paradigm shift.
(The writer is based in UK. He can be reached at email: mailto:talha.j.ahmad@gmail.com)