Riyadh, Asharq Al-Awsat – “There are still only two kinds of capitalism. There’s authoritarian capitalism, as in China and Singapore, and there’s democratic capitalism, as in the US and Europe. If there’s anyone out there who has a better idea, I’m sure the world would love to hear about it.”
This is an excerpt of an address by the former American Labor Secretary Robert Reich who called for the reform and evolution of the capitalist system. It is as if Reich is presenting the choice between authoritarianism and democracy as a solution to the financial crisis that has swept the world today, which is a product of the capitalist system in the first place. Since its conception, the capitalist system has created nothing but credit crises, panic, financial collapses and recession.
Democratic capitalism, Mr. Reich, has transformed the ordinary American into a consumer machine. Since the 1980s, American consumption has exceeded its production, which was compensated for by an increase in American borrowing. In 1974, the household debt in America stood at US $680 billion whilst today, the figure has ballooned to US $14 trillion; over the past seven years alone, borrowing has trebled. “The average household has 13 credit cards, and 40 percent of these carry a balance, up from 6 percent in 1970,” according to Newsweek’s distinguished columnist, Fareed Zakaria.
What has capitalism accomplished, Mr. Reich, apart from creating a financial system that has moved away from the real economy, in the words of Stephen Roach, Chairman of Morgan Stanley Asia?
The value of the real economy has reached $48 trillion, while the value of the financial economy stands at $148 trillion. Yes, Mr. Reich, there is a better financial system that is flawless and which, since its conception, has been free of conflict of interest between parties in complete contrast to the capitalist system. The system is balanced between spending and saving, where neither dominates over the other; savings are not promoted to the point that it hampers production, while excessive consumption is curtailed to prevent the build up of debt, allowing for a balance to be struck between the interests of the individual and the interests of society as a whole, exercising economic freedom so that neither dominates over the other.
This system is concerned with spreading wealth that will benefit all members of society by entering a real production process, as it is a system that prohibits dealing in interest and gambling on the financial market. It is a system that will give the poor a share in the wealth through a unique system of social solidarity that achieves social security for society as a whole. It is a system that prohibits profiting from the sales of non-tangible products and selling what one does not own, otherwise known as ‘short selling’ which, Mr Reich, is one of the first things that the Western capitalist system did to stop markets from collapsing during this crisis. It is a system that prohibits short-selling, debt trading, and the trading of derivatives because this leads to growth based on non-tangible assets, which in turn harms the physical products, and this is what causes crises and disasters in the event that anything should happen to paper assets. This is what is happening today as a result of the lack of physical assets.
Mr. Reich, the system that I have described is the Islamic economic system, a system that can be applied anywhere at any time for any one regardless of religion, sex or language because ultimately it is a global system. Do not pay attention to its name, Mr. Reich, you can name it whatever you want, but study this system carefully.
I do not blame you for not finding a better solution than the one that I propose but I blame those who have a fruitful system in the palms of their hand and await a miracle from above and then fail to apply it in their lives and fail to present it to the world as a complete financial system that can be applied in accordance with the prerequisites of today, not as an abstract theory.