Saturday, November 25, 2006

Scarcity is not so Scarce

(What's Wrong with Capitalism: Part 1)

The Era of Democracy" is the slogan used worldwide by the official media to define the 21st Century CE. With 118 of the world's 193 countries currently implementing some form of democracy (or the trappings thereof), the reporters do have a point. But they only reveal half of the story.

In addition to democracy, other ideas have spread even faster throughout the world until they have just about encompassed the entire planet. We are speaking, of course, about the principles of "capitalism". Almost every country in the world today orders its economic affairs, and in some cases its social affairs, through a capitalist or mixed capitalist system. This has not, however, received the same kind of press attention that "democracy" has enjoyed. One has to wonder why this is so.

The western leadership will say for public consumption that democracy and capitalism are unavoidably linked: when they mention one concept, they automatically mean the other as well. If, they argue, a nation implements a democratic political system, it must attain a stable society, based on the rule of law, which in turn leads to stable free market capitalism. Or vice versa, having a free market economy will lead to a higher standard of living, which over time will lead to a demand for democracy. Thus, many political analysts in North America remain confident that China will "liberalize," just as South Korea and Taiwan have done. This is very similar to the thinking of the old Marxists, who boasted of scientific proof that their system would prevail. But in the real world, these "theories" don't work as well as they claim.

There is a better way to explain why western leaders and their colleagues in the media focus mainly on the "spreading of democracy," yet remain silent about the capitalism part. In truth, over the past 150 years and more, capitalism by itself has earned a terrible reputation. Just saying the word "capitalism" calls up images of "oppression," "colonialism," or "the widening gulf between rich and poor." During the Cold War, when Communism and Socialism were providing serious challenges to the American Way, the word was never used by Washington's propagandists, who preferred to distance themselves from the name by coining more comfortable terms like "the free enterprise system." For a while, it actually worked: eventually, any activist speaking openly about "capitalism" was identified at once as a dangerous pinko subversive.

But such criticism of capitalism remains warranted, as we will see later. It will be clear as well that democracy and capitalism are indeed closely linked: democracy is simply the human mask of capitalism and its devastating effects.

Before we can understand how this is so, we must start by analyzing capitalism's core ideas.

Sets of core ideas are the basis for every government or politico-economic system. Before the system drafts, establishes, and enforces a legal code, it must first identify the problems that the laws are to solve. These problems are defined by a system's core ideas that relate to everything the system does.

In the world as capitalists see it, the fundamental problem is the issue of "scarcity." The core ideas operating here define human beings as suffering unlimited wants, but there are only limited resources in the earth to satisfy them all. Imagine all the world's goods and services as one big pool, with men and women having to drink from this one pool that is not large enough for everybody.

Capitalist economic thinkers tell us that their whole system centers on making laws to ameliorate the "problem." "Free market economies" supposedly attack scarcity by doing everything possible to increase the production of goods and services (i.e., increase the pool). It is believed that if the government successfully adds enough to the pool, then the benefits of doing so would trickle to all the people and take care of them. But does this solution really work?

The best way to know is by looking at capitalism's most important indicator of "how well" a society is doing, its GDP (Gross Domestic Product). A country's GDP is the total market value of all the goods & services it produces within a specified period. In other words, a country's GDP is directly related to the people's well being: if the GDP goes up, then the pool for satisfying wants in that country is bigger-and everyone should be better off.

Let us look at some real data to see if this is actually true. Take India as an example: in 2004, their GDP increased by 8.17% from the previous year, which is exceptionally high. To put this large number in perspective, the US as the world's strongest economy had an increase of only 4.4% that same year. But according to the BBC, India still houses one quarter of the world's poor; and half of all Indian children are still undernourished.

Or look at Brazil. This country is the one of the world's top producers of a variety of products including sugar, orange juice, coffee, soybeans, ethanol, etc. It had an impressive GDP growth of 5.2% in 2004. Yet Brazil is considered amongst the world's poorest countries, with a massive gap between the rich and poor measuring 60.7 % on the Gini index. *

These numbers show clear contradictions. According to Capitalism, countries like India and Brazil supposedly are doing things right; but why then are the majority of the people in these countries still living in hunger and misery?

Of course, the answer goes back to capitalism's core ideas.

Capitalist economies are not designed to take care of all the people: there have to be wealthy winners and wretched losers. The concept of scarcity prevents capitalists' minds from understanding the economic problem as Islam sees it: how to make sure that everybody gets the basic necessities of life, such as sufficient food, shelter and clothing? In addition, capitalists generally deny that the elimination of poverty in itself should be part of government's goals. Instead, their primary focus is taking care of big business by giving it the means to increase production and profits. In return, big business promises somewhat to provide jobs that pay enough to satisfy a few wants; and that's all. No wonder 51 of the world's 100 hundred wealthiest entities are corporations (Institute for Policy Studies, November 2000).

In the classroom where economics is the study of imaginary models, universal scarcity sounds like a valid idea; and it probably exists for some goods and services. But in the real world, scarcity is not the global problem they say it is; and in many cases, capitalism actually creates it. The truth is, the only forces that actually benefit from a capitalist economy are big business, rich countries that control extensive resources overseas, and the top 5 to 10% of the people in poorer lands.

This article was the first part in a series that will cover capitalism, God willing. Our intention is exposing the cancers in this system, one at a time. We will look not only at economic problems aggravated by capitalism, but their social effects as well. Then we will take a look at what Islam's sources have to say.

Remember, we Muslims claim to have an answer for everything from Qur'an and Sunnah; and we claim to be right, while every other system is wrong. If that is true, it's our duty to study and expose the dominant system that casts a shadow over all lands. If we don't, who will?

* Gini index (or coefficient) is a measure of income inequality within a country. A country's Gini rating is between 0 and 100, with 0 indicating perfect equality and 100 indicating absolute inequality. In this example, it would mean that the poorest 20%of Brazil's population receives only 2.2% of all the income that runs through Brazil, while the richest 20% receives over 64% of all the income


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