Globalisation is bad!

The following is an article on Globalisation. It is enlightening and interesting. I am very thankful for the Jamaat-e-Islami Hind people for sharing this valuable piece of intellectually stimulating article on Globalisation.
Nowadays everybody talks about Globalisation. It is the most discussed subject today in this country. But seldom I came across persons who are well versed in the subject. Those who take stands in the issue do so without any deep study and analysis. There are some who take an extreme stand and reject Globalisation wholly and fully. They brand globalisation as the tool of modern imperialists. They equate it with evil and reject it with vengeance.
There are some who have splashed in the illusions created by the Globlalisation. They are over awed by the glittering world created by the globalisation. They consciously chose to close their eyes and they refuse to see the side effects of globalisation.

Now with the UPA government once again in the centre and with Dr Singh as PM one could expect a rise in the globalisation process in India. They may behave responsibly and sensibly. Or they may not. And the leftists have already left the scene. They are no longer interested in the interests of the Aam Aadmi. Nandhigram and Singur are the worst examples.

Amidst this challenging scenario with nobody there to challenge the evils of Globalisation it is for the common man to do the job. Hence I commence a series of articles on Globalisation with this post. Excerpts from the article (author unknown):

There are two strands to the argument that globalization is undermining nation states. First, it is that it is empowering corporations at the expense of the nation state, and secondly, that the international institutions such as the WTO and World Bank are not democratic.

There is an issue of sheer size. It is noted that many corporations are larger than nation states – more than half the 100 largest economies in the world are corporations. The sales of Ford and General Motors combined are greater than the combined GDP of sub-Saharan Africa while those of the six largest Japanese trading companies are almost as big as all the nations of Latin America combined.

Critics of capitalism say the problem starts with laws of the early 19th century, which meant individual managers, and directors could not be held liable for the actions of the corporation. It is argued that globalisation was not a democrat choice but was pursued by corporations to suit their own ends of maximising profit by playing one nation off against another.

The international organisations, such as the World Trade Organisation, the World Bank and the IMF are make it their mission to open the world to the influence of transnational corporations. The IMF rules make it hard for nations to legislate to stop currency speculators from attacking their economy. The World Bank insists that nations to which it makes structural adjustment loans privatise government enterprises, often handing them to transnationals. The World Trade Organisation’s effort to break down trade barriers is designed to open markets to transnational corporations.

None of these supranational organisations are democratically constituted, and they make their decisions behind closed doors.

Globalization as an Attack on Democracy

THE GLOBALIZATION OF RECENT DECADES WAS NEVER A DEMOCRATIC CHOICE by the peoples of the world--the process has been business driven, by business strategies and tactics, for business ends. Governments have helped, by incremental policy actions, and by larger actions that were often taken in secret, without national debate and discussion of where the entire process was taking the community. In the case of some major actions advancing the globalization process, like passing the North American Free Trade Agreement (NAFTA) or joining the European Monetary Union (EMU), publics have been subjected to massive propaganda campaigns by the interested business-media elites. In the United States, public opinion polls showed the general public against NAFTA even after incessant propaganda, but the mass media supported it, and it was passed. In Europe as well, polls have shown persistent majorities opposed to the introduction of the Euro, but a powerful elite supports it, so that it moves forward.

This undemocratic process, carried out within a democratic facade, is consistent with the distribution of benefits and costs of globalization, and the fact that globalization has been a tool serving elite interests. Globalization has also steadily weakened democracy, partly as a result of unplanned effects, but also because the containment of labor costs and scaling down of the welfare state has required the business minority to establish firm control of the state and remove its capacity to respond to the demands of the majority. The mix of deliberate and unplanned elements in globalization's antidemocratic thrust can be seen in each aspect of the attack process.

ONE OF THE MAIN OBJECTIVES OF TNC MOVEMENT ABROAD HAS BEEN to tap cheaper labor sources. Labor is often cheapest, and least prone to cause employer problems, in authoritarian states that curb unions and enter into virtual joint venture arrangements with foreign capital, as in Suharto's Indonesia and PRI's Mexico. Capital moves to such friendly investment climes in an arbitrage process, shifting resources from the more expensive to the less costly locale, in a process that penalizes and thereby weakens democracy.

The actual shift of capital abroad, and the use of the external option to drive hard bargains at home, has weakened labor. Labor has also been weakened by deliberate government policies of tight money and restrictive budget policies to contain inflation, at the expense of high unemployment. These policies, and the incessant focus on labor market "flexibility" as the solution to the unemployment problem, reflect a corporate and antilabor policy agenda, fully institutionalized. There have even been more open and direct attacks on organized labor--both Reagan and Thatcher engaged in union busting, and the latter was quite explicit in her aim to weaken labor as a political force. Democracy, according to pluralistic theory, is said to rest on the existence of intermediate groups, like labor organizations, that can bargain and work on behalf of an otherwise atomized population. The deliberate weakening of such groups is thus an attack on democracy.

IN THE UNITED STATES, BRITAIN, CANADA, AND OTHER COUNTRIES the business community has also mounted a sustained ideological campaign to make their preferred policies part of common understanding. These campaigns have proceeded in parallel with globalization and have been remarkably similar, reflecting the global flow of ideology and overlapping sources of funding. The favored neoliberal ideology pushes the idea that the market can do it all, that government is a burden and threat, and that deregulation and privatization are inherently good and inevitable. It presses an extreme individualism and the value of "personal responsibility," which is highly advantageous to corporate power, leaving bargaining between large firms and isolated individuals. Collective and community values, the threat of externalities and ecological damage from unconstrained business growth, free market instability--all are shunted aside in this ideological system. This ideological campaign has been highly successful, because vast sums of business money fed to intellectuals and think tanks, and business domination of the mass media, have allowed their views to prevail. Heritage Foundation leader Edwin Feulner has described the strategy of his corporate-funded and globally linked think tank as analogous to Procter & Gamble's in selling soap--saturate the market with messages that overwhelm any that are less well funded.¹⁰ But this is a corruption of democracy; it is a bought market of ideas, not a free market of ideas.

The business community has also mounted a powerful effort to dominate governments--either by capture or by limiting their ability to serve ordinary citizens. Globalization has contributed to this effort, partly by the arbitraging process mentioned earlier, which favors authoritarian rule. Apart from this, by enlarging business profits and weakening labor it has shifted the balance of power further toward business, so that political parties have been even more decisively influenced by business money in elections. In the United States, it is notorious that Mr. Clinton has sought and received enormous sums from business and serves their interests almost exclusively, with only token efforts on behalf of the major nonbusiness constituencies of the Democratic Party. The globalizing corporate media have added their growing strength to the advance of neoliberal ideology and opposition to any vestiges of social democracy, making social democratic policies difficult to implement. The Murdoch effect on British elections, and the current Murdoch-Blair connection illustrates the point.

Another well-known and important antidemocratic force is the power of global financial markets to limit political options. Social democratic policies make for an unfavorable investment climate. Businesses will therefore respond to politicians and acts serving ordinary citizens with threatened or actual exit. Financial market effects on exchange and interest rates can be extremely rapid and damaging to the economy. Spokespersons for the new global economy actually brag about the ability of capital to penalize "unsound" policies, and the fact that money capital now rules.

These business efforts, aided and validated by the IMF and by media support, regularly cause social democrats to retreat to policies acceptable to the rulers. Thus, in country after country social democratic parties have accepted neoliberalism, despite the contrary preferences of great majorities of their voting constituencies. But this means that nominal democracy is no longer able to serve ordinary citizens, making elections meaningless and democracy empty of substance. This helps explain why half or more of eligible U.S. voters no longer participate in national elections.

Not satisfied with this level of political control, the business community has pushed for international agreements, and policy actions by the IMF and World Bank, that further encroach on the ability of democratic polities to act on behalf of their constituencies. These agreements and the demands of the international financial institutions invariably call for precisely the policies desired by the TNC community. The EMU conditions give primacy to budget constraints and inflation control, in accord with the neoliberal and corporate agenda. GATT, the WTO, and the NAFTA agreement also give top priority to corporate investor and intellectual property rights, to which all other considerations must give way. In the early 1980s, the IMF and World Bank took advantage of the Third World debt crisis and used their leverage with numerous distressed Third World borrowers to force their acceptance of Structural Adjustment Programs. These forced the borrowing countries to agree to give first priority to external debt repayment, private as well as government; it compelled them to adapt austerity programs of tight money and budget cutbacks focusing heavily on social expenditures affecting the poor and ordinary citizens; it forced a stress on exports, which help generate foreign exchange to allow debt repayment and that more closely integrate the borrower's economy into the global system; and it stressed privatization, allegedly in the interest of efficiency, but serving both to help balance the budget without tax increases and to provide openings for TNC investment in the troubled economy. The IMF is doing the same in Asia today.

A second characteristic of the new agreements and IMF-World Bank actions is their denial of democratic rights to non-corporate citizens and elected governments. These are subordinated to the rights of corporate investors, the superior class of global citizens with priority over all others and beneficiaries of the New TNC Protectionism. In the NAFTA agreement, governments are denied in advance the right to take on new functions; any not asserted now are left to the private sector and to the superior class of citizens. In these agreements, also, and even more aggressively in the Multilateral Agreement on Investment now under consideration, the global TNCs have no responsibilities and none can be imposed on them. They can fire people, abandon communities, fatally damage the environment, push local companies out of business, and purvey cultural trash at their full discretion. They can or will be able to sue governments, and disagreements are to be settled by unelected panels outside the control of democratic governments.

A third characteristic of the new agreements and IMF-World Bank actions is that they rest not only on neoliberal theory but on a false reading of recent experience and economic history. As noted earlier, globalization so far has been a productivity failure, a social disaster, and a threat to stability. The claim of its proponents that free trade is the route to economic growth is also confuted by longer historic experience: no country, past or present, has taken off into sustained economic growth and moved from economic backwardness to modernity without large-scale government protection and subsidization of infant industries and other modes of insulation from domination by powerful outsiders. This includes Great Britain, the United States, Japan, Germany, South Korea and Taiwan, all highly protectionist in the earlier takeoff phases of their growth process. The governments and institutions bargaining on behalf of the TNCs today, through the IMF, World Bank, WTO and NAFTA, have been able to remove these modes of protection from less developed countries. This threatens them with extensive takeovers from abroad, thoroughgoing integration into foreign economic systems as "branch plant economies," preservation in a state of dependence and underdevelopment, and most particularly, an inability to protect their majorities from the ravages of neoliberal top-down development priorities.

Conclusion

IN SUM, WE ARE IN THE MIDST OF AN ANTI-DEMOCRATIC COUNTERREVOLUTION in which globalization and its imperatives are being used to weaken popular and elected authority in favor of a system of domination by super-citizens, the TNCs. This process sows the seeds of its own destruction, as it serves a small global minority, damages the majority, breeds financial instability, and exacerbates the environmental crisis. Its destructive tendencies are likely to produce an explosion if the process is not contained and democracy is not rehabilitated.

Halting this anti-democratic juggernaut will be difficult, not only because of the power of its beneficiaries, but also because it operates within the framework of nominally democratic structures and musters plausible arguments. But these arguments are self-serving and wrong, and should be vigorously contested. An agenda should be advanced that serves ordinary citizens rather than the TNCs and financial institutions. Negatively, this agenda will include strenuous opposition to all supranational arrangements that take power out of the hands of democratic governments to serve some alleged economic need. Positively, the agenda requires support for the imposition of serious limits and responsibilities on TNCs, including capital controls and other deterrents to financial speculation. Pursuit of this agenda is going to require a combination of understanding and effective organization of the large majority who are the victims of globalization.

To read more click here.

THIS IS NOT CREDIT CRISIS!

Nowadays everybody is talking abour credit crisis and the financial catastrophe facing the world. The situation is alarming, they warn. The future is bleak, they assert. Amidst this gloomy scenario, As a Muslim, what Iam supposed to do? is the question that haunts every responsible Muslim Youth.
Mansoor Durrani is one of them. But he is different. Rather, I would say he is more competent and well versed in the subject. His field of operation is commerce and finance. He is the youngest student to get doctorate in Banking in UK. His academic background is impressive. I have meet him a couple of times. I found him energetic, vibrant and dynamic youth full of passion and insight. I have translated his speech on debt terrorism into Tamil. It was published in Samarasam Tamil Fortnightly and later became a part of the book on "Globalisation and Muslim Youth" by Syed Sadathullah Husseini. It was published by Islamic Foundation Trust, Chennai. Another interesting bit of information about him is that he belongs to Bhopal and one of the grandsons of Moulana Inamur Rahman Khan. Moulana is the legendery Islamic Movement leader and revered as the father figure of Jamaat-e-Islami Hind Madhya pradesh.
He is now working somewhere in the Middle East. He is Head of Project Finance at Saudi Arabia’s largest bank – The National Commercial Bank.
But off and on he shares his thougts and insights. I want to share an article written by him on credit crisis. It is one ot top ten articles in the subject. You would love read it.Its pdf version could be downloaded here! I got the full article from Br. mohd umair siddiqui Jazakallah! Umair bhai!. I am very happy. After a long gap, I got a chance to read the stuff of Mansoor Sahib. I do not know you. I have not met you. I have not seen your face. I don't know how you got my email address. But, you have done me a favour by sending a good article. Once again, Jazakallah!

THIS IS NOT CREDIT CRISIS!

Mansoor Durrani

Past: When Mr Warren Buffet, the richest man in the world, called some financial instruments like the Derivates and Credit Default Swaps (CDS) ‘financial weapons of mass destruction’ over three years back, few of us took notice. The world economy was on the roll. European realty and financial markets were booming. US was ‘winning the war on terror’. And rest of the world was blindly aping this mirage called ‘American Dream’.

Some high level articles on alternate perspectives of the present crisis have recently been published. For a commoner to understand this mess, we need to go back to basics. Derivatives can be described as like putting a mirror in front of another mirror, allowing a physical object to be reflected into infinity. Australian Prime Minister Kevin Rudd has identified ‘comprehensive failure of extreme capitalism’ as a cause of this economic crisis. He attributed greed and fear as the ‘twin evils’ at the root of the financial sector collapse. Interest and speculation based capitalism has been around for a long time, but the seeds of this ‘extreme capitalism’ were sowed by the US when neo-cons made their debut in White House under Ronald Reagan. Their objective was to accelerate the theft of global resources at a much faster pace than they did over the previous seven decades.
This ‘richest nation’ in the world has ‘borrowed’ trillions of dollars from external and internal lenders to fund, among others, research and development of weapons of mass destruction and wars. The Republican Presidential candidate said he would be content to continue the war for 100 years. With what resources? The fact of the matter is that the US is bankrupt. David M. Walker, Comptroller General of the US and head of the Government Accountability Office, in his December 17, 2007, report to the US Congress on the financial statements of the US government noted that

'the federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations as of September 30, 2007.'

The GAO report further pointed out that the accrued liabilities of the federal government 'totaled approximately $53 trillion as of September 30, 2007.' No funds have been set aside against this mind boggling liability. Why? Because there is no intention to repay! Just so the reader understands, $53 trillion is $53,000 billion. Frustrated by speaking to deaf ears, Walker recently resigned as head of the Government Accountability Office. Such a precarious state of US economy is reflected in dollar’s declining value against other currencies.

As of March 17, 2008, one Swiss franc is worth more than $1 dollar. In 1970, the exchange rate was 4.2 Swiss francs to the dollar. In 1970, $1 purchased 360 Japanese yen. Today $1 dollar purchases less than 100 yen.

In 2007 alone US borrowed $739 billion – majority of it to completely destroy Iraq on the pretext of searching weapons of mass destruction which it never found and Afghanistan on the excuse of hunting one single individual who again it failed to find. It
did succeed though in killing hundreds of thousands of their citizens. Other ‘rich’ crusaders that have joined this global bully in its ‘war against terror’ also borrowed heavily in 2007. For instance, Spain borrowed $146 billion, UK $136 billion Australia $56 billion and Italy $47 billion. America’s 2008 borrowing has already crossed one trillion dollar. Although these insane amounts are theoretically ‘borrowed’, lenders will not be able to recover their exposure from this ‘borrower’ for at least two reasons (a) the borrower is not honest as it has not built any reserve to repay and (b) for now, it is militarily too powerful. At least ‘third world’ lenders, except China, will find it hard to retrieve their ‘investments’.

Successive neo-con presidents aggressively ‘de-regulated’ financial markets and left them at the mercy of greedy speculators. Let us take the recent example of surge in oil prices which triggered worldwide inflation and made hundreds of million human beings poorer. US regulatory body Commodity Futures Trading Commission (CFTC) recently reported that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on New York Mercantile Exchange – the world’s biggest commodity exchange. Using swap dealers as middlemen, investment funds have poured into the commodity markets, raising their holdings to $600 billion this year from $13 billion in 2003. During that same period, the price of crude oil rose unabated every year. This reality throws Mr Bush’s argument to the wind that oil price rose due to China’s economic growth and food prices increased because Indians are eating more!
While these speculators called ‘bulls’ or ‘bears’ played havoc in equity and commodity markets by buying without money in their pocket (bulls) and selling what they did not posses (bears), their commercial and investment banking cousins began lending aggressively to buy cars, homes, clothes, TVs, refrigerators and even holidays to those who did not have means to repay. Because of their low ability (which later became no ability) to pay back debt, they were classified as ‘sub-prime’ customers and therefore were charged much higher interest rates. Even after making such reckless and greedy lending decisions, banks were not prepared to take any risk. So they insured these risky loans through CDS. Thus widening the scope of potential destruction and putting even insurers’ money at risk. With slight increase in interest rates, these sub-prime customers began defaulting. This led to large-scale defaults. Banks having big exposure to such customers panicked. They tried to sell collateralized properties to recover their money. But there were no takers. This turned out to be the final nail in the coffin of dangerous game that was being played under this ‘extreme capitalism’.

Present: The 2007 annual report of top British bank Barclay’s shows total customer loans - their core business - at Great Britain Pound (GBP) 345 billion. However, trade portfolio and derivatives together stood at GBP 541 billion. Such a high investment in speculative non-core business is bizarre and inexplicable. Greed and recklessness appear to be the only answer! At the most basic level, interest based financial instruments attract a fixed return on the original amount provided for business or consumption. The capital provider (banks and other financial institutions) under this system care less if the recipient is economically benefiting out of their money. Even if recipients incur losses, they are legally required to pay back more money than they took. Islam views this as gross injustice and even ‘an act of war against Allah and His prophet’. Therefore, the destruction of interest based system was predestined. And this is what is happening.

Plilip Stephens aptly illustrates in the Financial Times of 10th October this year, ‘for more than two centuries, the US and Europe have exercised an effortless economic, political and cultural hegemony. That era is ending.’ Big books and articles are being written on why and how this crises set in. Thousands of jobs are on the block. Depression and suicides are on the rise. Hundreds of billions of tax-payers dollars are being thrown in to save the developers and marketers of financial weapons of mass destruction. These steps by free market champions are leading us to believe that this system privatizes profits and socializes losses. This is in stark contrast to what these ‘rich’ proponents have been preaching to the ‘third world’.
Commentators predict that the sun will shine again. Sure it will; but never with the same brightness. And it shouldn’t. For extreme ‘brightness’ was making life difficult for billions of inhabitants on this planet. This capitalism has created two sections in our societies: super rich and super poor. In this system, a UK based Indian industrialist buys GBP 300 million (SAR 2.4 billion or Indian rupees 2,400 crore) house for his wife while more than 300 million Indians survive on less than half a Pound a day! Moreover, thousands of Asians, Africans and who knows even Americans and Europeans (as media owned by the same greedy business houses may not report) are starving to death. Economic disparity is not confined to industrialists alone. The gap in income inequality is also widening between top executives and the average employee, with the CEOs of the 15 largest companies in the United States, for example, earning 520 times more than the average worker in 2007, up from 360 times more in 2003. Therefore, I refuse to call it an economic or financial crisis. In my view, this is a catastrophe of human values.

Future: There is no ‘financial economy’ in Islam; only real economy. Islam does not permit debt to be traded, discounted or securitized. About Islamic banks, Chris Wright wrote in September 2008 Asiamoney ‘these institutions have come out of the sub-prime credit crunch crises in better shape than many of their conventional counterparts.’ Life is simple. We have made it tough by breaching our commitment with our Creator. When Qur’an declares ‘Allah destroys interest and increases charity’ in verse 276 of chapter 2, it essentially encourages Muslims with surplus capital to share both risk and reward with capital deficient entrepreneurs and businessmen; and at the same time support their ‘sub-prime’ brothers and sisters - both Muslims and non-Muslims - to lead a humane life. Former (business objectives) must be attained through equity based investments like various structures of private equity, venture capital, leasing etc. and later (social objectives) must be achieved by institutionalizing zakah (obligatory annual charity) and encouraging even additional charity. This was the practice of Prophet Muhammad (peace and blessings of Allah be upon him).
Similarly, Islam does not permit its followers to sell something that they do not possess. This is speculation. And enormously risky. Future is unpredictable. We never know we will surely possess what we are selling in advance! Over the last several years, I have expressed deep concern about the availability of even ‘Islamic equity funds’. I do not challenge the concept of equity. It is perfectly Islamic if invested in permitted sectors and I am a strong supporter of this method of investment. My concern is excessive volatility experienced by equity markets. This volatility is not accidental. It is well planned and executed by bulls or bears. Their heavy buying (without money) and heavy selling (without possession of stocks) puts even Islamic equity funds at great risk.

For this reason, on top of whether stock itself is shari’ah-compliant, we need to think whether current rules of stock trading in global capital markets are shari’ah-compliant. Trust me, they are not!

There are no bull and bears in Islamic financial architecture. We have only investors, preferably medium to long term. This is aimed at providing financial and economic stability which results in political and social calm. Obviously neo-cons were not saints. They wanted to capture all the global wealth, if possible without wars. At the same time they wanted to destroy social and political systems of those societies (whom they viewed as mere markets) that did not agree with their values.

I see silver lining – for only those who have no greed and fear – in this catastrophe. Qur’an expects its followers to be free of these two characteristics. Financial system based on justice and fairness (free of interest and speculation) will survive now and thrive in future. But I would like to warn Islamic bankers and scholars who crave for ‘innovation’ and ‘sophistication’ in Islamic finance. While not harmful per se, the present crisis teaches us to avoid uncalled-for ‘innovation’ or ‘sophistication’. The color of money is same. So is its function. And value. Whether money comes in the form of equity, debt, preferred stock, leasing, commercial paper or bond, it serves the same purpose. In other words, 100 dollars of equity will buy the same amount of plant, machinery or land as 100 dollars of commercial paper or complex bonds. In terms of economic value-addition, it will make little difference. Therefore, I always believe in simple structures which are understandable by all. Or at least many. This, together with selfless and fearless life, will help us avert similar crises in future, insha’Allah

Also read : CURRENT FINANCIAL CRISIS AND ISLAMIC ECONOMICS by Dr Najathullah Siddiqui