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Articles & News
Islamic
Money against the Euro and Dollar
On January 1, 1999, Europe celebrated its momentous event of a
single currency for its eleven participating members that have
qualified to join the European Monetary Union according to its
Convergence Criteria. Following this, it is likely that Britain,
Sweden, Denmark and Greece that have either opted out or were
not qualified according to the Convergence Criteria at this
time, will join by the year 2002. By the year 2002 a single
currency called the Euro will become the commercial medium of
market exchange in Europe for the participating countries.
By establishing a single currency for the exchange of goods and
services domestically and internationally, the Euro will become
a determining factor of a unified monetary policy, fiscal
policy, exchange rates, interest rates, and thereby, also of
productivity and technological consequences of these economic
changes in the participating countries. Internationally, global
capital markets and investment outsources will see the rise of
two competing currency mediums, the U.S. Dollar and the Euro.
Countries around the world will be holding their foreign
reserves and transacting their tradables in terms of these two
currencies. International currencies will thus become
convertible in terms of two competing units.
At such a juncture, the Muslim mind must recount as to what
position the Muslim World holds in the midst of the global
division of capital markets between these two competing
super-currencies? What would be the state of her own resource
valuation in the global scene? Do the Muslims have an agenda for
change? If they do have an Agenda for change, what are the
constructs of that Muslim future?
Until the end of World War II the Western Hemisphere has been
engaged in the most heinous kinds of wars and civil strife
within itself. Yet through the Bretton Woods Institutions
established in 1944, followed by a number of economic and
monetary unions between the members of the Western Hemisphere,
these same warring nations could rise to a social contract that
eliminated wars and political dissensions between them. It was
indeed a civil accord enacted within the institution of
democracy that did the work for the Western Hemisphere.
The Muslim World -- with its teeming millions, vast resources,
and above all with the greatest miracle, the Qur'an, along with
the guidance of the Prophet Muhammad, Sunnah, the great Islamic
legacy of Shura (consultation, discourse and interactions),
Ijtihad (epistemological inquiry) and Ijma (consensus), all of
which are premised on the exercise of deep Islamic knowledge,
tolerance and discourse -- could not realize its unity. What are
then the structural issues according to which Europe could unite
and the Muslims could not?
It will be too shallow an answer to this question to
differentiate the Western World in respect to its democracy and
the Muslim world as being bereft of democracy. Democracy is a
political philosophy that flourishes on the principles of
conflict guiding markets in the form of competition and
capitalism that thrives on the power of corporations and the
acquisitive passion for wealth. Politically, democracy thrives
on the back of institutions that muster power and hegemony by
majority rule. Any moral value of doing things and of directing
economic resources is subsumed within market consequentialism.
There is no other premise from which democracy derives its rules
of conduct than the collective power of individuals let loose in
a world of competing behaviour. Such is the nature of
individualism that aggregates itself from the level of
individuals to institutions, to governments and to the global
capitalist order. On such an utilitarian world view thrives the
Western meaning of democracy.
Now take away from democracy the ultimate supremacy of the
individual, the powerful lobby groups and thus of governments so
formed. We will find that democracy and capitalism weaken into
dysfunctional states. With this weakening comes about the
collapse of the entire economic, social and political edifice on
which democracy, capitalism and western institutionalism
confiscate on others to survive.
Thus the imitation of Western democracy is as self-defeating as
is the present days' Muslim political vacuity in the absence of
a well-defined Muslim social contract. On the other hand, the
divide between Islam and the West is based on two polar world
views that cannot cross lines for a permanent convergence. Any
cross-fertilization between the two can only be in terms of
mechanical methods that we can share. It can never be in terms
of the core methodology of understanding and conducting life in
comprehensive ways. When Muslim forgot this subtle difference
for a long time now they became blind to the many trappings of
Western ways of thinking while being unable to understand this
inimical culture, and thereby, being unable to adapt to it. When
rulers and demagogues in the Muslim World imitate the Western
designs and prevail over their citizenry, they try to lock
nations into expensive bottlenecks of development, costly
technological change, unequal distribution of power, deprivation
of freedom and rights to the masses. Western lobbying is
perpetuated through this machinery of autocratic governance as
also by the Muslim World's lethargy and subservience to the
costly technology, de-equalizing market processes and the
concomitant governance of the West genre. To live a day in such
inhuman bondage is yet another moment of increased slavery of
the Muslim mind, body and soul to Western masters.
The European Monetary Union on which is premised the Euro was
greatly financed by Petro-dollars that were held as assets by
the wealthy Muslim rulers in EMU. By the same token, when the
capital surplus Arab countries bought assets in the
International Monetary Fund, they in turn tightened the grips of
the IMF over these assets by securing Arab capital in Western
capital markets instead of in the Muslim Countries.
Consequently, the double whamy fell on the Muslim World. On the
one hand, the absence of any expectations for good financial
support could not generate the investment climate in the Muslim
World. On the other hand, there was never enough liquidity
available to support investments in the Muslim World. Finally,
when global capitalism in its oppressive attire of global
governance over markets and institutions arose from the West,
investment capital entered Muslim countries as speculative
short-term capital. These were riddled and driven by interest
rate instability and proved to be unsustainable both in terms of
projects and in capital markets.
Thus the alienation of the Muslim World from its own fundamental
roots of understanding and doing things and its enslavement to
the alien culture drifted the Muslim World from its solidarity,
which could otherwise have seen the rise of parallels like the
Euro and the Dollar in terms of the Islamic Money, Islamic
Currency, Integrated Islamic Capital Markets and a Globally
Interlinked Islamic Common Market. Herein, would be solved the
present days problems of economic instability, currency run-off,
investment needs, political subservience, inequity and poverty,
all of which plague the Muslim World today. Along with this
reconstruction would arise the political stability and
organization for the spread and practice of Islamic
Transformation. Thus would arise the Muslim march toward the
Ummah as the Islamic globalization process.
The Islamic globalization process of Ummah as the goal of the
Muslim World would look at markets in ways contrary to the
capitalist greed and human deprivation now being unleashed upon
the Muslim World. The irony is abhorring that in the face of
exorbitant wealth possessed by a few, wealth that lies in the
hands of and are controlled by Western masters, there continues
to be abject deprivation and impoverishment among the majority
of Muslim populations.
Islamic Money would be based on the 100 per cent reserve
requirement linking monetary valuation with real sectoral
activities and not with speculation or promissory notes. The
productive yield arising from such a real monetary mobilization
would solve the problem of low productivity among factors of
production. The participatory enterprises in the midst of these
transformations and real monetary linkages would remove the
relevance of interest rates. Such a system would replace
interest transactions with resource mobilization into
participatory enterprises. Consequently, economic efficiency,
distributive equity, ownership, property rights and empowerment
would increase across participatory enterprises. Poverty would
be eradicated and alleviated through the force of such
participatory entrepreneurial activity and by the direct
linkages between money and real sectoral activity.
This freedom of participatory decision-making and ownership of
assets would mean the rise of the Islamic Social Contract based
on the process of Shura (discourse and interaction) which is
organized and realized by the understanding and application of
the Precept of Unity of Allah (Tawhid) in all walks of life and
thought. Such a focus will turn away the Muslim global order
from the anthropocentric character of conflict, competition and
individualism that grounds democracy as a political philosophy
in the West. The reversal will instead be towards ethical
governance of markets and exchange under the enlightened process
of learning by doing by discourse, complementarity and
integration as created by Islam.
The Islamic Common Market and the Islamic Capital Market would
be a global integration of various regional Islamic blocs on the
basis of the coordinating mechanism of the Islamic Social
Contract in terms of the money-real sectoral linkages,
inter-communal trade and institutional guidance of these across
the Muslim World. The effect of this interrelated monetary and
real sectoral activity would be the formation of the Islamic
currency revolving around the financial and economic instruments
that establish the money-real sectoral linkage. Thereby, an
increase of spending in the Islamically recommended good things
of life would create the environment of abundance in
life-fulfilling goods. This in turn would generate income and
wealth from real returns.
The abolition of speculation and its replacement by long-term
Islamic investments in diverse Islamic opportunities,
complementary possibilities and technological outlets, in
government and consumer spending across the populous Muslim
World, will bring about the much needed stability in markets for
financial instruments and real goods and services. Hence a
productivity linked stable exchange rate will emerge from such a
stable market order. The enhancing effects of stable exchange
rates and prices will revert to further resource mobilization,
wealth, growth, development and social well-being.
Zakat will arise from the growing wealth of such a dynamic
social economy and would be increasingly chanelled into
productive outlets for ameliorating the poor and guaranteeing
them human resources and basic needs. Institutions for
mobilizing Zakat as an international resource will create
microenterprises and human resource development for poverty
alleviation. The great institutions of social well-being based
on the mobilization of Zakat into human development for
achieving security, dignity and productive transformation of the
recipients, while always allocating a part of it in current
consumption, for the destitute, the sick and the old, would
generate industry and enterprises around such uses of the Zakat
Fund. Gross unemployment and income disparity will thus be
eliminated. With social security thus returning to the Muslim
nations, social malaise will also decline. Much will be saved
for directing into the higher pursuits of life.
With such momentous changes in the Muslim World towards the
Ummah, the Dollar and the Euro will prove to be weak currencies
before the Islamic Money and Islamic Currency, for they will
continue to be engulfed in instability caused by interest rate
movements. These will permanently disturb their currency values.
The Dollar and Euro will thus continue to be simply monetary
units governed by uncertain interest rate and exchange rate
mechanisms. Monetary policy will remain independent of real
sectoral activities. Price movements will thus be affected by
the uncertainties ensuing from the monetary sector. Such an
adverse effect of the monetary sector on the real sector will
cause instability in both the real and the financial sectors.
Such instabilities will remain as the great predicament of the
Euro and Dollar. The contrary is true of a competing monetary
system and its currency that can deliver a 100 per cent reserve
requirement while interconnecting money with real sector
activities. Here then lies the ultimate financial architecture
by means of Islamic Money, Islamic Currency, Islamic Capital
Market and Islamic Common Market .These mark the worldly model
of the Ummah. In it the lure for wealth is strategically
replaced by the goals of production and distribution of wealth
through the money-real sector linkages. This abolishes interest
rates from economic transactions and premises human well-being
on resource mobilization into Islamic possibilities.
Let Muslim around the world, nationally, sub-nationally and
collectively take up serious work in this direction of Islamic
Transformation toward the Ummah in the new millennium.
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