Saturday, October 25, 2008
The financial crisis is full of irony.
For example, the loudmouth cheerleaders for free-market deregulation, such as Goldman Sachs CEO Henry Paulson, are now implementing socialism in America.
And the U.S. - which has long lectured third-world countries about the benefits of American-style neoliberal capitalism, is now a bankrupt debtor nation begging for loans from its creditors (including the countries we previously lectured).
But the biggest irony of all may involve America's depiction of Muslims and the "clash of civilizations" against the Middle East.
It turns out that the Muslims that the American neocons painted as barbarian, devil-worshippers who hated us because of our successful capitalist freedoms, may weather the financial storm a lot better than us, because they have avoided the most of the derivatives and other scams and - in some ways - practiced capitalism more faithfully than we have.
As an expert on Saudi-American relations writes:
Ironically, least affected by the crisis are Islamic banks.
They have largely been immune to the collapse because Islamic banking . . . forbids the buying and selling of a debt as well as usury. Additionally, [Islamic] banking laws forbid investing in any company with debts that exceed thirty percent.
"Islamic banking institutions have not failed per se as they deal in tangible assets and assume the risk" said Dr. Mohammed Ramady, Professor of Economics at King Fahd University of Petroleum & Minerals. "Although the Islamic banking sector is also part of the global economy, the impact of direct exposure to sub-prime asset investments has been low" he continued. ... Instead, said Dr. Ramady, oil surplus Arab nations are "reconsidering overseas investments in financial assets" and speeding up their own domestic projects.
Eight years ago, in May 2000, Saudi Islamic banker . . . Dr. Nayef bin Fawaaz ibn Sha'alan publicly gave a series of economic lectures in Gulf states.
He warned then that it was a certainty that the US economic system was on the verge of collapse because of its cumulative debts, ever-increasing deficit and the interest on that debt. "When the debts and deficits come due, they just issue new Treasury bonds to cover the old bonds due, with their interest and the new deficit too." The cycle cannot be stopped or the debt cancelled because the US would no longer be able to borrow. The consequence of relieving this cycle would be a total collapse of their economic system as opposed to the partial, albeit massive, crash of 2008.
"Islamic banking", said Dr. Al-Sha'alan, . . . has the best of capitalism - filtering out its negatives . . . ."
The whole exercise in democracy by force against Arab Muslim nations has almost bankrupted the US. The Cold War is over and the US has nothing to offer: no exports, no production, few natural resources, and no service sector economy.
The very markets that resisted US economic policies the most, having curbed foreign direct investments into America, are those who will fare best and come out ahead.
In other words, the Islamic barbarians may weather the storm much better than us because - in some ways - they practiced a form of true capitalism, buying and selling real things, while we abandoned Adam Smith's vision and turned America's economy into a rigged casino which collapsed under its own weight of manipulaton and greed.
Note: I know virtually nothing about Islamic banking, and am not promoting or endorsing it.
I am not a Muslim, and I despise fundamentalist Muslims as much as fundamentalists of any religion.
Finally, I do not support or criticize the leaders of any country in a vacuum based on religion or race. Instead, I look to their historical actions to see if they benefit or oppress people.