Conference what Conference, which Conference?

Have just returned from a few days in Beirut, Lebanon. Spoke at the Friday 3rd April Press conference organised by Hizb ut-Tahrir Lebanon to launch the book of the Sudan Global Economic conference (book is now available in Arabic and English).
The book was launched in Beirut and London on the same day:
http://www.hizb.org.uk/hizb/press-centre/press-release/london-&-beirut-press-conferences-addressing-the-global-economic-crisis-fri-3rd-apr.html

Despite a very well organised and well attended event held at the Al-Safir Hotel in al-Rawsha it was disappointing to note a poor attendance from the media. On the day following the world media courting the G20 leaders who have shown more interest in re-election and appearances than actual solutions to the disaster they have presided over (although new Obama is clearly following the same policies of his predecessors). Seldom have so many spent so much time and effort in listening to so little (but more on the G20 later in the week).

Regarding the Hizb ut-Tahrir press conferences the videos are available from the above links. I will post my short presentation tomorrow, but below are the main points made by Taji Mustafa the Media representative of the Hizb in the UK.

Global Economic Crisis – Press Conferences
London & Beirut 03/04/09
Context by Taji Mustafa

Yesterday in London, a few miles away – G20 met to address global economic crisis
• Effect: Global job losses, US, largest job losses, tent cities in US, suicide by financiers. 3rd world impact far greater.

• G20 meeting perpetuates the existing capitalist system

• G20 conclusion in summary: more money for IMF & WB, more borrowing, some change in financial regulation - but little agreed.

• No fundamental change

4 key points re today’s press conference

1. Roots of crisis are inherent to capitalism & the G20 didn’t address these

2. Muslim rulers at G20 were complicit in capitalisms crime rather than offering alternative

(whereas the Hizb ut-Tahrir Sudan Conference put forward specific Islamic solutions to the crisis)

3. How Islam addresses the specific crisis

4. How Islam produces a stable economy

• 1) Roots of crisis are inherent in capitalism and G20 didn’t addresses these

Moreover, not only has the free market ideology failed, but certain fundamental principles of capitalism are central to the cause of this current crisis, yet no one has proposed any change to these fundamentals. These include
• the interest led banking system
• the fiat currency model
• the system of trade in stocks and the derivatives markets
• and the failure to identify that not all ownership should be in private hands.

• The fact that the G20 leaders, western thinkers and academics failed to call for a change in these fundamentals illustrates their belief that this system is fundamentaly sound but that the culture of “greed and light touch regulation is at the route of the problem”. Wednesday – Obama talked of belief in free markets.

Capitalism has worked as designed and this crash was inevitable at some point. Even they acknowledge that the economic cycle is one of boom and bust.

Furthermore, people around the world outside of the west - who were dazzled by the brilliance of capitalism’s light, now see that light fatally diminished. What little faith they had in this western model, which for decades they have tried to emulate, now raises more questions than provides answers.

• Capitalism has failed, and cannot be reformed
• It is not surprising that the G20 have no answers since they all accept the capitalist economic model and fail to aknowledge its inherent flaws.
• The Chinese (former communits want a bigger say and will put up funds), the Saudi’s are merely a cash cow for the IMF & WB.
• Hope and new thinking should have been provided by 3 around the table. People with a different history, ideology and solutions should have put forward an alternative for the world to examine and debate.
• Instead, the 3 Muslim rulers [king Abdallah, Erdogan and Susilo Banbang Yudhyono] were complicit in reinforcing the need for the capitalist system which has brought the world to its knees.
• This is not surprising since they abandoned the implementation of the Islamic Khilafah system and its economic system in their lands. They betray Islam and betray humanity as it grapples for answers.

HT convened the Khartoum conference on Jan 3rd 2009

• We know these rulers do not look to Islam for answers, though Islam has the only economic system that can provide a secure and tranquil system for man unlike the capitalist system
• That is why the ameer of HT, Sheikh Ata Abu Rashta convened a conference earlier this year.
• It gathered some of the best Islamic minds from Saudi, UK, Yemen, Jordan, Lebanon, Turkey, Sudan, Holland, Pakistan and Bangladesh.

They looked at
• 1) the causes and effects of this economic crisis on the different parts of the world
• 2) the solutions from Islam

• Today, we launch a book outlining the analysis and solutions from that conference so that all may study it and Muslims may implement it in the Khilafah state so as to be a beacon for mankind.

How Islam addresses the current global crisis

• From the Sudan conference, we outlined various issues

• What are the measures from Islam to prevent this crisis?

• 1) INTEREST Islam forbids riba (interest). Indeed it is seen as a declaration of war against Allah. So why are we surprised that such a system has led to chaos? Let people go back to dealing and trading with their capital.

• yet.... "Allah permits trade and forbids interest"

• 2) CURRENCY. Need for a stable currency. Islam only allows currency fully backed by Gold or Silver (bi-metallic standard) not fiat (paper based) currencies.
• G20 will seek to find $1.1 trillion, from where? Ultimately it will mean more money printing and more printing of money means more inflation and all the problems that causes.
• 3) GAMBLING Derivatives and stocks are not the direct real world economy, or real contracts over real items. Islam forbids such gambling and all the harm it causes.
• 4) CLEAR DIVISION BETWEEN PUBLIC AND PRIVATE.
• Governments are now taking people’s wealth (through taxes) to bail out banks. This is an injustice

• These are some of the basic issues that the Islamic econ looks at differently and which Muslim countries can immediately apply.

• 4) How Islam produces a stable economy

• Whilst the points above show several points of difference in how Islam addresses the current global crisis, that does not mean Islam is simply reactive.

• So we also outlined the Islamic economic system as a way to guarantee STABILITY and SECURITY free from the boom and bust crisis of capitalism.

The capitalist economic system has raised many questions
1. Can this be the only way to trade, create wealth and see economies grow?
2. Can it be right for business that trade occurs in such an inherently unstable system?
3. Where is the fairness if profits largely remain in private hands and based on massive bets in financial markets, and that consumers and taxpayers have to bail out the accumulated losses of the rich due to their excessively risky transactions?

• The Islamic Khilafah state’s economic system addresses these in a fundamentally different way. The following principles of economy in Islam are presented, not as reactionary points of debate to be part of the patchwork of crisis and flawed response, but as an ideological alternative which has enjoyed many centuries of success for Muslims and non-Muslims alike.

• 1 The Human crisis (The Economic Policy)
The first principle of economy in Islam is to meet the basic needs of ALL the people in society. The economic problem is described as one of distribution, not production. We do not lack resources and wealth in the world, yet the drive for constantly increasing production which has been unequally accumulated has led to massive levels of poverty even in the most developed countries. Islam does not discourage success and throughout history many Muslims and non-Muslims living in the Caliphate were very wealthy. The difference lies in the responsibility of both the state and the individual to ensure that all in society have at the least their basic needs of food, accommodation, clothing, health and education. In a narration from Prophet Muhammad (saw) said that: "The son of Adam has no better right than that he would have a house wherein he may live and a piece of cloth whereby he may hide his nakedness and a piece of bread and some water" (Tirmidhi).

CONTRAST OF VALUES
This forms the basis of the Economic system of Islam, all policies and rules are geared towards achieving such ends. This forms the basis of the Economic system of Islam, all policies and rules are geared towards achieving such ends. Where the extended family unit is unable to, and only when it is unable to, the state will act to ensure that the basic needs are met. The poor and indebted are included in those that are eligible for zakat payments (an enormous pool that the wealthy contribute 2.5% of unused wealth to). This is in contrast to free market Capitalism which is focused towards increasing Gross Domestic Product (GDP) a very misplaced measure of progress. People have rightly asked why there is no bailout of the 100’s of thousands now losing their homes in the US housing crisis, or those losing their jobs in the recession. The urgent governmental response has been to bailout banks and provide liquidity to the banking system. Major banks cannot be allowed to fail but individual failure is widespread and acceptable. Governments cite the need for restraint when re-negotiating public sector and essential service pay rounds that do not even reach the level of inflation, claims that would cost the public purse a few millions. Yet hundreds of billions, indeed trillions of dollars are ploughed into the banking system with undue haste, and little understanding of the assets held on the banks balance sheets. Islamic Shariah dictates that the State provides a backstop to ensure the basic (and only the basic) needs of all are met, and has no responsibility to bailout private companies at the expense of the State and public. Nationalisation of public banks is also against the Shariah which clearly distinguishes between state, public and private ownership.

The financial crisis has made the disparity between concern for big business versus concern for human life very clear,

Islamic law dictates that the sanctity of life takes precedence,

2 Credit or Misery Creation

The making of loans and leniency in demand for repayment are highly encouraged in Islam. Similarly the non-repayment of loans is treated harshly with the Prophet refusing to lead the funeral prayer over such individuals. The most important point to note, however, is that the taking and giving of loans in Islam is without compensation (interest) which means that it is impossible to inflate lending assets beyond what is actually available of real assets in the society.

• Left alone, unused wealth is taxed at 2.5% for zakat. This in addition to the prohibition of hoarding, pushes people to seek ways to invest unused wealth and so makes credit available for others.

• Must stress that having meet ones basic needs, Islam encourages people to live within their means and not to live in the red (on credit) as is the case in the west or Dubai whose credit fuelled property bubble is now bursting.

3 Gambling and the Legal Environment

• There is no doubt that the alcohol and gambling industries are enormous businesses in Western economies, but as the Quranic verse above highlights, they also bring great damage, and Islam prohibits both. Communities reel from the addicted bread winners that waste their family incomes in betting shops. Hospitals are full on any given evening with the results of the abuse of alcohol. Families and lives are regularly destroyed by the influence of these two great vices. That gambling has now become so pervasive in western society can be seen in the extent to which it dominates the financial markets. Rather than being a market for the efficient provision of capital between competing business, industry and investors it is now dominated by banks, investment funds, hedge funds and related groups that are seeking to deliver enhanced “investment” returns via increasingly complex “bets” and via leveraging (borrowings).

• When the scale of the gambling becomes so overwhelming that the losses of participants can bring down the whole system, then it is clear that this is a problem that is out of control. The Islamic Shariah recognised these dangers and established prohibition regardless of scale. It is simply too dangerous to contemplate. Islam sets out clear rules for investment and transactions. Chief amongst these is the equirement that assets are owned and in possession before they are sold. The Prophet (peace be on him) forbade any kind of transaction which could lead to a quarrel or litigation due to some uncertainty “The Prohibition of al-Gharar (Transactions Involving Uncertainty)” or which involved an unspecific quantity to be exchanged or delivered. This includes the sort of transaction in which there is no guarantee that the seller can deliver the goods for which he receives payment.

• So short selling and many other transactions in the stock markets of Cairo, London, Karachi and Jeddah are forbidden.

4 A market free from manipulation

• The most important aspect of trade is that participants feel confident in the market, its rules, regulations and consistency of application of the rules. Where governments intervene whether via tariffs, taxation, direct intervention (eg the US Exchange Stabilisation Fund) or change of regulation, participants are frustrated and lose confidence in the system. The Shariah rules in this regard are explicit. The Prophet said: “If people are left alone, Allah will give them provision from one another”

• This establishes a basic principle in the field of commerce: that the market, its prices, and sales, should be left free to respond to internal economic forces and natural competition without manipulation.
• So the notion of market manipulation or State interference in markets is absolutely prohibited in the Islamic state.

5 Corporate accountability

The opportunity to invest wealth, aggregate labour and expertise, and form companies in an efficient manner is fundamental to any society. While western societies have congregated around the joint stock company which is freely traded on stock markets, Islam has set out specific rules for the formation and function of companies which have some distinct differences. We have mudarabah, mufawadah and other company structures.

• When there is little or no actual monetary and legal accountability for the actions of a bank then we can expect the type of excesses that have become common.

• Islamic corporate law ensures that the owners of the company are not shielded behind limited liability, they are fully accountable for the performance of their contracts and any monetary impact for all the transactions they enter into.

• In such a situation, Muslims still need to abide by the Islamic principles that apply to them as individuals and as a community

6 Inflation versus Gold and silver

Quranic injunction has made it clear via many references that the Islamic society operate a bi-metallic currency standard of gold and silver. Whilst the Shariah did not forbid the ownership of other (non gold or silver) currencies, the Islamic state cannot and will not operate any other currency standard, and the fiat based systems where currencies are not backed by any assets at all is completely shunned. Islam made all the rules linked to currency, linked to gold and silver in their capacity as a medium of exchange for all goods and services and as currency for exchange, both as coins and as ore.

WHY GOLD AND SILVER
Gold and silver are both ideal to act as mediums of exchange because they have intrinsic value (including jewellery and industrial use) are widely available, cannot be dominated (monopolised) and there is a regular, yet growing supply of them to meet the needs of growing economies. The annual increase in gold supply for example is 2%.

If you flood financial markets with money you create inflation. This is because there is more money chasing around the same number of goods, which devalues money and means you have to exchange more money for the same goods over a period of time.