Governments around the world welcomed in the second decade of the 21st century hoping the economic events of the noughties could be placed in history, the talk of economy recovery could finally materialise. The global economic crisis has become symbolic of the first decade of the 21st century. Talk of the imminent demise of Capitalism has given way to the worlds leading economies coming out of recession and possibly the end of the global economic crisis. Many of the headlines over the Christmas period brushed aside the collapse of Dubai’s economic miracle, as many of the worlds leading economies were reporting the growth of their economies for the first time after over a year.
However Capitalism never disappoints, positive news is usually followed by another set of facts which prove the underlying fundamentals are anything but stable. Greece the cradle of Western civilisation hit the headlines when investors questioned if Greece will ever be able to pay off the £259 billion in government debt it currently owes. The euro has been battered over the past month as some even started to fear the break-up of the Eurozone.
PIGS is the acronym the financial markets coined to describe the troubled and heavily-indebted countries of Europe: Portugal, Ireland, Greece and Spain. Some analysts use PIIGS to include Italy – Europe’s longstanding biggest debtor. The debt crisis these nations face means the global financial crisis is anything but over, there is however a number of issues that need to be understood to gain a clear picture of this latest episode in disaster Capitalism:
1. Greece is the latest sick man of Europe. It is now officially on the long list of European states that are considered the sick men of Europe. European attempts at defending themselves against a deep recession, has now created a new crisis of unsustainable and un-serviceable sovereign debt. Much of this can be attributed to stimulus packages passed by European governments in order to blunt the effects of the economic crisis, especially in preventing massive layoffs. Europe’s heavyweights spent massively on stimulation packages – Germany enacted about 81 billion euros whilst France around 26 billion euros. At the same time total EU stimulus spending amounted to 280 billion euros. General government debt levels have skyrocketed across the Eurozone, but especially in the PIIGS countries. However Greece like many of the world’s premier economies was living beyond its means well before the economic crisis began. This was a crises waiting to happen.
2. At the centre of the crisis is the fractional reserve banking system where a small amount of physical money in notes and coins can be used to create debts many folds over. The Greek debt crisis raises some every pertinent question’s which all Capitalist nations will face at some point. Greece has debts of 300 billion euros, with an economy of only 240 billion euros and a government budget of only 91 billion euros. Greece has to finance debts of 53 billion euros in 2010. Greece currently is only surviving with the help of the ECB’s liquidity provisions – bailouts. However across the Capitalist world the situation is far worse, Britain’s economy produces just over a trillion pounds a year, but Britain’s sovereign debt is over £9 trillion with a government budget of only £800 billion.
3. The Euro was hailed as the replacement to the dollar. However the financial crisis has brought a damning fact to the surface, whilst countries such as France and Germany will be able to service their debts, nearly all of the other eurozone nations have pitiful financial situations where they have spent well beyond their means and now when it has come to repay this debt the feasibility of meeting the regular monthly repayments is looking impossible. The issue the Euro has faced from its inception is the fact that all the euro zone nations have very divergent economies and hence the strength of the euro is in the strength of the Euro zone economies and only as strong as the weakest link.
4. With the dollar in a weak position due to the position of the US economy and the euro taking massive speculative hits this may very well be the beginning of the end of Western Capitalism. The rise of China has already led to many monumental shifts which has been shifting global economic power from West to East. China overtook Germany as the world’s largest exporter in December 2009, China possesses the world’s largest currency reserves by far and it will soon provide the majority of consumer goods for the world’s largest importer, America. If China was to develop its political will, it will be in a very strong position to challenge the US and shift the global balance of power.
5. The response to this sovereign debt crisis reveals that any union be it economic, monetary etc will always lack coherence without political unification. This episode has shown that the EU in reality is a glorified customs union. The European Union has today expanded well beyond its original founder states. Consensus on how far enlargement should go and how deep integration should be continues to plague the union. Member states are reluctant to relinquish their sovereignty to bureaucrats in Brussels or leave key decision making to the two nations that dominate the EU – Germany and France. A union based upon a confederation makes the EU a mere customs union – so whilst from an economic perspective the EU acts as one block, political sovereignty means the union will always remain disjointed. The Lisbon treaty was in fact an attempt to overcome such differences. Various summit’s in February 2010 by EU member states to deal with the Greek crisis and its wider implications led to no concrete decisions on Greece. Currently very little specifics on how Europe intends to tackle the Greek crises have not even been agreed. This is fundamentally due to the political differences that exist within the union.
6. Fundamentally a union of states into a larger union is a weak method of amalgamation. It lacks the characteristics found in full unification where a people become one nation. A union as a method of binding peoples and nations is always prone to political differences as it continues to recognise the sovereignty of constituent nations, leaving itself open to differences and penetration from the outside. Amalgamating such nations would be virtually impossible as they would be too different. Whilst the Lisbon treaty was meant to stream line decision making, the EU has stalled on such a key issue due to political differences. All European states have differing identities and this continued obstacle means the powerful nations within the EU are will continue to pull the union in a direction different to the other member states.
7. The Islamic way of ruling is to establish equality between the subjects in all the regions of the State. Islam grants non-Muslims who hold citizenship, the full rights and duties that Muslims have. They enjoy the same fairness as Muslims and are subject to the same accountability as them. Furthermore, every single citizen, regardless of his or her creed, enjoys rights that even a Muslim living abroad who holds no citizenship does not enjoy. Islamconsiders every single region of the Khilafah as an indivisible part of the State and its citizens enjoy the same rights as those in the central region. In this way over a generation different peoples will become a homogenous entity and this gives it strength, makes the nation move in one direction – which leads to progress.The Messenger صلى الله عليه وسلم established Islam in Madina and he ruled over a people where the Ummah was a minority. Treaties were signed with the surrounding Jewish tribes and the rights between the Muslims and non-Muslims were clearly defined in the Ash-Shifah document, which was in effect a constitution. When the Messenger صلى الله عليه وسلم passed away the whole Arabian Peninsula was under Islamic authority and the Sahabah then expanded the Islamic lands to North Africa, the Sub-continent and Central Asia. By ensuring no region had separate legislative, political and economic rules, this created a sense of unity and resulted in the conquered to fully embrace Islam, make it their own and then carry the call to the surrounding lands. Muhammed bin Qasim embraced Islam when under Umar (ra) Iraq came under Islam, Muhammed bin Qasim then carried this call to the subcontinent. In a similar manner it was under Mu’awiyah that the Berbers of Egypt embraced Islam, the Berber turned Muslim Tariq bin Ziyad then took Islam to Spain.
Conclusions
The EU will inevitably be disjointed as the major powers such as France and Britain view Europe from the perspective of achieving their own national interests. The Khilafah offers a unified approach to global affairs through the Islamic method of a unitary state, with one ruler, one foreign policy, one economy, one adoption globally and the absence of customs and tariffs domestically. A nation or people wishing to join the Khilafah are welcomed, they would come under the authority of the Khaleefah who would have to provide their security in return for their loyalty. They become subjects of the state like any other citizen irrespective of their beliefs. Islam has clearly designated the Khilafah as the method of unifying the Ummah, anything else is destined to fail, a deviation from Islam and will turn the global Ummah into another EU – disjointed and unable to progress.