10 October, 2008

The Crush: What Next.......

Iceland, a country that I have always greatly admired for its economic success, is bankrupt! Unbelievable. Across the Globe, the news is just as bad. What has happened to the World's economy in the last few days is just stunning; and sadly, it is affecting millions of people Worldwide. Many have committed suicide; many, now, are in need of psychiatric advise or treatment; many people's marriages are now on shaky grounds or are breaking up. All because of this financial mess caused by a few greedy people.

'Behind every big fortune there is a crime', so said Balzac, over a century ago. But this has not been a simple crime; this has been the worst crime ever committed to adversely affect so many people. Worldwide. Millions of people believed and trusted in their politicians and in free trade. But a few very greedy, selfish and shortsighted people - took advantage of 'free trade' and deregulation and have now brought millions of people to their knees.

'Man is an animal that makes bargains: no other animal does this - no dog exchanges bones with another', was how Adam Smith put it. He believed that individuals should be allowed to pursue their own private economic interests as much as possible and so long as they do not violate basic principles of justice. In this way, Smith thought, they would do much more to further the public good and public interests. These people who caused this crisis, have not only violated the basic principals of justice, but through their very narrow minded actions, they have managed to cause enormous harm and suffering to the public.

John Keynes, another strong proponent for capitalism put it more bluntly: capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone. Well, this time - the most wickedest of men did the most wickedest of things and have now done the greatest harm to many people.

The West, more so America, has always followed and practiced the theories and ideals of Smith and Keynes. This has managed to create great economic advancement and wealth in Western countries. And with the collapse of the Soviet Union and other communist nations and China openly embracing capitalism - Karl Marx's belief on capitalism that capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks - seemed shallow and stupid. With the present financial turmoil, I am certain, now, many are wondering and thinking about Marx and his thoughts. I am not one of those; nor is my mind on the thoughts of Smith and Keynes. This crisis has got me in to pondering; deeply thinking, on the thoughts of: Abd al-Rahman Ibn Muhammad Ibn Khaldoon al Hadramy.

Before him: Plato, Xenophon and Aristotle, had written in very simple terms - on labor and economics. But it is Ibn Khaldoon, who planted the germinating seeds of classical economics; in - production, supply and cost, and also wrote elaborately on consumption, demand, and utility - the cornerstones of modern economic theory; and he too, outlined dynastic change in terms of transformations in the governing classes and related these to changes in economic conditions, for example, the introduction of new wants and new production, the effects of luxury, trends in taxation, and other features of expansion and contraction. Many believe that, it's Ibn Khaldoon who is the real father and forerunner of modern economics, and not Adam Smith, whose works were published centuries later. What Smith, Keynes, Marx, David Ricardo and others have done, was mainly to expound on the same fundamental theories and ideas that were laid down by Ibn Khaldoon.

What is so attractive and admirable about Ibn Khaldoon's theories is that, they were/are guided by moral and religious principals and he strongly stressed on good, noble and morally guided governance. I fail to understand why Muslim countries have not firmly tried to follow and practice Ibn Khaldoon's ideals and theories. Ideals and theories, if properly applied and implemented, would serve any society, Muslim countries in particular, very well.

Back to the present crisis: what next? That's the question in most people's minds. For those who have lost their savings, homes or wealth due to the turmoil - they should try hard and look forward in a positive way, however hard and desperate the circumstance is. People should learn how to invest wisely. It's good to buy shares, wisely, and using only as little of your savings as possible; treasury bills and bonds are good too, but one doesn't have control over them; it's best to invest in land and property, and keep savings in gold. The best investment is one that you would have direct management and control, on. And no matter what, it's advisable to have no debts at all, or as little as manageable. Come to think of it: the best time to invest in stocks is now when prices are so low; buy shares, and certainly, in a few years they will be more valuable. Or better still: those with enough cash, would do well in buying the lowly priced property, now.

Very fortunately for Yemen, considering the present nature of trade and markets, the country does not have a stock exchange. Otherwise, many too, would now have been reeling under the pressure. Though, in the last few weeks, the country has been losing millions from the falling oil prices, the people of Yemen have to thank God that we don't have, yet, a Yemeni Wall Street.