February 2009
Last year marked the beginning of huge financial quake in the global economy and can be characterized as a year with huge volatility in the price of oil and commodities such as food. Oil peaked above $147 per barrel and was selling below $50 by the end of 2008. Similarly there was a swift increase in the prices of food commodities that resulted into global food crisis and many countries suffered from this. America intentionally increased the prices of such commodities in order to rescue her falling dollar at the expense of worldwide starvation and unprecedented economic upheaval that world has not witnessed since great depression of 1930’s.
In the middle of 2008 the real culprit behind the falling dollar revealed itself, the global credit crunch. The crisis was accompanied by a worldwide slowdown in the economy thus resulting into loss of jobs; decline in home values, increased bankruptcies, frauds and not to forget collapse of major banks. Governments of many countries announced stimulus packages as a desperate bid to increase money supply and instill confidence in the banks to start lending to consumers, industries and local governments. USA alone announced stimulus package on two occasions of $800bn and $700bn. Other countries including UK, France, Germany, China, Australia and UAE announced stimulus packages. The severity of crisis can be judged from the statement of Alan Greenspan, the former head of US Federal Reserve, who said that the current economic situation is ‘Once-in-a-century credit tsunami’.[1] It is important to know that 41 out of 51 States in America are facing huge financial problems and President Obama, in December 2008, announced them relief.[2] However, the situation in California has become so grave that its governor declared a state of financial emergency and warned that there was a huge $28bn gap in the budget and he only had enough funds to last till end of Jan 2009.[3]
The economic solutions which capitalists are presenting through these stimulus packages do not guarantee results. USA and UK announced to ban short selling, guaranteeing of bank accounts, nationalization of private banks and slashing of interest rates, all for no use. Here it should be understood that all the solutions ignore the primary concept of laissez faire and the concept of free market. By doing so capitalists are not only going against the foundations of their ideology but creating a deadly ground for the collapse of their way of life. USA is doing similar mistake what Soviet Union did in 1960’s and what Ottoman’s did after the eruption of what world know as industrial revolution. One must understand that going against the foundations of ideology is a political mistake which leads towards intellectual decline in the masses and ultimately, the collapse of the State. Additionally there is an unanswered question which no one in the West wants to address that how these governments are going to raise extra capital to pay for these solutions? Besides borrowing Dollars from China, Russia and Saudis, printing worthless paper money is the only alternative and such alternative is dragging USA into inflationary crisis.
Even top capitalists do not believe in the solutions which are brought forward. Tom Fitzpatrick, Citigroup’s chief Technical Strategist said, “The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed through into an inflation shock. Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes”.[4]
Someone with enlightened mind can easily comprehend that problem lies in the foundations of capitalist ideology and its foundations are so weak that such crisis are inevitable in to be averted. Even those who were the torchbearer of Capitalism are themselves confused about the ideology they believed in, as Alan Greenspan said in front of US congressional committee on 23rd October 2008 that “I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact ... [I found a] flaw in the model that I perceived is the critical functioning structure that defines how the world works.”[5]
The world has witnessed the collapse of communism and now it is witnessing the collapse of Capitalism. The solution is not in doing patchwork in the capitalist system rather it is in replacing it with a divine world order sent down by the creator of Mankind. The solution is Islam, which has its own economic system, the solution which is only possible by the establishment of Khilafah State in the Muslim World.
[1] Source: Online Fund Strategy Magazine, title ‘those with long view will see return’; Date 1/12/2008
[2] Source: http://news.bbc.co.uk/2/hi/americas/7760249.stm, title California 'faces budget crisis'; Date 2/12/2008
[3] Source: BBC online, title ‘US Recession Began Last Year’; Date 1/12/2008
[4] Source: Telegraph Online, title ‘Citigroup says gold could rise above $2,000 next year as world unravels’; Date 27/11/2008
[5] Source: http://www.dawn.com/2008/12/23/int11.htm
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