By Ahmed E. Souaiaia*
One of the basic principles of capitalism is the idea that the concentration of wealth in the hands of the few would generate wealth, which was assumed to trickle down to the benefit of all. This principle worked fine until greed overwhelmed the process. In their pursuit of maximizing return on investments, financial institutions went beyond the concentration of wealth and became engaged in the concentration of debt.
It is possible to stimulate production by investing in the future and in the potential of the human and natural resources of a country. But it is fatal to overestimate the capacity of such resources. The global economic crisis that was caused by the collapse of the U.S. and U.K. economies is rooted in the excessive greed that mortgaged the prosperity of their peoples beyond their limits.
The financial problem for the US may prove to be beyond repair when we consider both national as well as individual debts.
The outstanding national public debt has now reached $11,050,690,133,504.00. That number is staggering for it cannot be truly understood unless put in the context of what it means for every American to owe that much money. Given that the US population just surpassed 300,000,000, it means that each American citizen is saddled with nearly $37,000.00 of debt. Factoring in the interest that is accruing on this debt and the continued spending, the national debt continues to increase daily by an average of $3,000,000,000.00. Astonishing as these figures are on their own, the actual personal debt each adult American carries in the form of outstanding loans and credit card balances, which is now estimated at about $11,000.00, renders any attempt to reign in the national debt by increasing it like trying to escape an avalanche by attempting to outrun it.
Given the interconnectedness of the world today, this endemic collapse has overwhelmed all countries of the world. However, there are several countries and communities that will remain immune for local and cultural reasons, and, interestingly, as a byproduct of sanctions imposed by the Western.
Some Muslim countries are minimally affected by the financial crisis because of the culture that shuns debt. Generally speaking, classical Islamic law gives priority to paying debt. For example, wealth transfer by way of inheritance is not cleared until all debt is paid off even if paying the debt were to exhaust the entire estate. Moreover, in Muslim societies, most people do not borrow money with interest to build or buy a home. Instead, they would use savings to incrementally build homes one stone, one wall, one room at the time. This practice frees banks to provide loans for profit making adventures.
There is another reality that shielded many Muslim countries (Gulf countries excluded) from this worldwide economic depression: These countries have been for a long time in “economic depression” and their economies can only improve. These communities might now benefit from any cooperative efforts to create a healthier global economy.
Lastly, there are those countries that I would call ‘economic sanctuaries.” These are the countries, like Iran (Cuba, North Korea, and Libya, too), that were under Western economic embargoes. Since they were isolated from the Western nations led prosperity, they became automatically immune to economic collapse that started in the US and the UK. In other words, the sanctions and embargoes that the West imposed on these countries had unintended consequence: place these countries in quarantine.
These are the countries that do not use “plastic,” they do not have branches of Citibank; they are not wired to the global economic system. In the case of Iran, the 30-year isolation forced it to create its own network of friends, its own technology, and its own micro economy that is only linked to the rest of the world through oil markets. Sure the world economic crisis brought the price of oil down, but when they can make up for falling prices by pumping more oil, the impact on the local economy will be mitigated.
All these events should teach the capitalist block several things: 1. prosperity cannot be mortgaged through a system build on debt. 2. Diversity in world financial systems has virtues: loans and funds should not be made conditional on embracing a model that we know very little about its applicability in different cultures; no single paradigm ought to be imposed on everyone. 3. Western leaders cannot dictate to the rest how to react to a crisis that they created. For a financial crisis to cripple the entire Western world and all countries dealing with it in record time, it is reasonable to assume that there was something systemically faulty with such a model.
If personal debt, devalued private properties, and shift in industrialization are some of the primary causes of the financial collapse, it is utterly counterintuitive to attempt to solve this crisis by offering the disease as medicine: This problem was caused by debt and it cannot be solved by accruing even more debt. If the natural resources of a country cannot mirror the money it is printing, such money will be rendered valueless unless it is minted on gold and silver coins.
*AHMED E. SOUAIAIA is a member of the faculty of International Programs, Religious Studies, and College of Law at the University of Iowa.