Crisis solutions back to basic

CORPORATE greed and Wall Street financial and market manipulations are now the subject of US Federal investigation. Brave investigative reporters/authors have written books on this "greed is good" culture.

For example John Nofsinger and Kenneth Kim authored "Infectious Greed: Restoring Confidence in America's Companies" (2003).

They specifically asserted that corporate financial scandals have shaken investor confidence more than any event since the Great Depression. "Investors believe they have been thoroughly betrayed by the managers, boards, accountants and investment advisors they once trusted..."

Another book: "Wall Street versus America: A muckraking look at the thieves, fakers, and charlatans who are ripping you off" by Gary Weiss (2006).

Ravi Baltra wrote "Greenspan's Fraud: How two decades of his policies have undermined the Global Economy".

Also relevant books, such as: "The Trouble with Capitalism: An Enquiry into the causes of Global Economic Failure" by Harry Shutt (1998).

"The Decline of Capitalism: Can a Self Regulated Profits System Survive" by Harry Shutt (2005).

This make-believe Western virtual financial sophistication, dynamism, and its current by product of deep, widespread financial turmoils have a direct bearing to what the West banking/financial wizards/experts derisorily consider "ancient", "stodgy", "impractical" on the emergence of ISLAMIC banking, financing and economics, which relate to the intrinsic elements of the REAL ECONOMY.

Being "ancient" are therefore considered by those Western wizards/experts to be unsuitable, inapplicable, irrelevant in this modern, sophisticated, dynamic world of free for all laissez-faire CAPITALISM.

Creating monetary confidence is totally different from the utility of actual, real production of real goods and services in the real economy as shown on Picture 1 (M1, M2 is REAL MONEY, G/S is REAL GOODS and REAL SERVICES produced in the REAL ECONOMY).

When widespread panic is reigning, the drowning US/European leaders and experts are frentically looking for every saviour straw.

Having closed one eye to their financial-banking goings on shenanigans, they have now decided to introduce a New Economic-financial-banking Order to "discipline" their own free-for-all activities! They decided to impose tough, stricter regulations, supervision and oversight.

This wide spread panic has prompted a former Austrian Chancellor to argue that the free-for-all capitalism should be quickly replaced with a financial-economic system that equitably takes care of the socio-economic needs of people in order to prevent such exploitation and greed now wrecking financial/economic havocs worldwide.

He argued that "profitability" of a business is relegated to a mere necessity to enable to serve society rather than a luxury vehicle for serving greed of CEO's and those related individuals at the expense of innocent investors and society.

What the ex Austrian Chancellor and Western leaders and experts are now desperately expounding for a quick change from free-for-all capitalism to socio-economic equitable responsibility order is infact very much akin, parallel to what ISLAM has been since more than 1429 years ago ordained by Allah and taught by Allah's Messenger, the Prophet Muhammad (peace and blessings of Allah be upon him) to adopt and practice.

It is basically the practice of socio-economic equitable justice, such as, banking system without RIBA (interest/usury), non-mopolistic enterprises, non hording of goods, payment of Zakat and Fitrah and strict ethical standard.

This convergence of Western leaders' desperation to replace their rampant Capitalism with a new Order is surprisingly similar with the "ancient" Islamic financial, banking and economic system and practice.

Their desperate desire to impose stricter control on financial and banking practices and their management, and to have oversight on Wall Street is again coincidentally very similar to the Guide Line imposed by the INTERNATIONAL ASSOCIATION OF ISLAMIC BANKS (1990) and the Guide Line imposed by a typical Syariah Advisory Board of an Islamic bank mentioned further below.

The INTERNATIONAL ASSOCIATION OF ISLAMIC BANKS GUIDE LINE:

"The Islamic banking system involves a social implication which is necessarily connected with the Islamic order itself, and represents a special characteristic that distinguishes Islamic banks from other banks based on other philosophies.

In exercising all its banking or developmental activities, the Islamic bank takes into prime consideration the social implications that may be brought by any decision or action taken by the bank."

Profitability-despite its importance and priority-is not therefore the sole criterion or the prime element in evaluating the performance of Islamic banks, since they have to match both the material and the social objectives that would serve the interests of the community as a whole and help achieve their role in the sphere of social mutual guarantee.

Social goals are understood to form an inseparable element of the Islamic banking system that cannot be dispensed with or neglected (IAIB, 1990).

This Islamic socio-religious-financial-economic principle and practice can be reflected in the following symbol as has been described earlier on Picture 1.

It shows that the creation of real money (M1) and real wealth is through actual, real production of real goods and services (G/S), which in turn creates real prices for those goods and services and real financial rewards for factors of production, such as rentals, salaries and wages (M2), which in turn creates more goods and services (G2/S2).

This cycle goes on in the form of growing real economic growth, rather them transmuting into inflating virtual monetary bubbles as represented on Picture 2.

Infact this M-->M-->M--> is the "Mother" of monetary inflation.

And this is the reason why Islamic banking/economics wants the usage of Gold Dinar (and Silver Dirham), that every payment has to be backed by the real value of gold (and/or silver), not just by endless creation of printed money.

This Guide Line of the International Association of Islamic Banks has another practical filter in the form of a lithmus test mandated by a typical Syariah Advisory Board of an Islamic bank/financial institution, as summarised below:

(i) Do the terms of the transaction comply with the Syariah Law?

(ii) What are the objectives for which money is being acquired?

(iii) Is this the best investment to the borrower?

(iv) As a banker, is this a transaction in which the banker, as an individual, would be prepared to invest his own money?

(v) Would that benefit the borrower, individuals, the society and humanity?

(vi) Would it lead to the establishment of a just, honourable, sustainable society, or result in exploitation, moral degeneration; social tensions and inequities?

Yang Dimuliakan Pehin Orang Kaya Lela Raja Dato Seri Laila Jasa Haji Awang Abdul Rahman bin Haji Abdul Karim was formerly Permanent Secretary of the Ministry of Finance and the Ministry of Defence. He was the First Managing Director of BIA (1983-1992), First Chairman of Taib (1991-1993), Chairman of IBB (1986-1993), and reappointed Chairman of Islamic Bank of Brunei (IBB) on 1998-2001, First MD of Islamic Investment Fund of Badan Tanmiah, Baitulmaal (1995-2001). The views expressed by Pehin Dato Rahman Karim are his own and do not necessarily reflect those of The Brunei Times.

The Brunei Times