Towards a Tranquil Safe World under the Shade of the Economic System of Islam Hizb ut Tahrir 2009 - 1430 Hijri Contents Introduction 3 Opening address 4 Capitalism is inherently flawed and prone to crises 8 The present economic crisis: causes and effects 21 The impact of the global financial crisis on 27 Bangladesh and Pakistan The impact of the global financial crisis on the Arab 38 countries The economic, social and ideological impact of the 45 credit crisis in Europe The effects of the financial crisis in the West 52 The failure of the current solutions to the financial 57 crisis Only the Islamic economic system under the 69 Khilafah state can provide crisis-free economic justice 2 Introduction All Praise is to Allah (subhanahu wa ta’ala) who bestowed on is the blessing of Islam and peace and blessings upon the Messenger of Allah (sallallahu alaihi wa sallam) and His family, companions and all those who followed him. On the 7th of Muharram 1430 Hijri, corresponding to the 3rd of January 2009, Hizb ut-Tahrir held a global economic conference in Khartoum, Sudan. It was attended by an audience of over six thousand men and women who answered the call of the party to attend the conference. Thinkers, scientists, politicians and economists from around the world attended the conference. The widely publicised conference took place against the backdrop of the current economic crisis that has illustrated the astounding failure of the capitalist system to create a secure and just life, free from crises. The conference began in the morning with the recitation of the Glorious Book of Allah (subhanahu wa ta’ala), an address about Israel's onslaught on Gaza and a call to the armies to move to rescue the dignity of the Muslims of Palestine. The opening address was a poignant message from the global leader of Hizb ut-Tahrir, Alim Ata ibn Khalil Abu Rashta. The talks that followed examined the origins of the economic crisis, the inherent weaknesses of the capitalist system, the failure of the capitalist solutions and the global impact of the crisis in Pakistan, Bangladesh, Turkey, Sudan, Indonesia, the Arab countries and the western world. The conference ended with the final presentation that detailed the principles of the economic system in Islam and demonstrated how this system would succeed where both Capitalism and Communism had failed. The conference was widely reported in the print and broadcast media, especially in Sudan. It was widely covered on both satellite television and radio and was reported in over a dozen newspapers. We have presented in this book, the papers that were presented at the conference, in order to instil confidence in the Ummah in the economic system of Islam which will be applied under the Khilafah state, whose return is imminent. Finally, we ask Allah (subhanahu wa ta’ala) to enable all of those who participated and contributed to this conference to see with their own eyes the return of the Islamic Khilafah which will apply the Islamic economic system and spread safety, security and justice throughout the world. 3 Opening Address ﺑﺴﻢ ﺍﷲ ﺍﻟﺮﲪﻦ ﺍﻟﺮﺣﻴﻢ ﺍﳊﻤﺪ ﷲ، ﻭﺍﻟﺼﻼﺓ ﻭﺍﻟﺴﻼﻡ ﻋﻠﻰ ﺭﺳﻮﻝ ﺍﷲ، ﻭﻋﻠﻰ ﺁﻟﻪ ﻭﺻﺤﺒﻪ ﻭﻣﻦ ﻭﺍﻻﻩ، ﻭﺑﻌﺪ.. Distinguished Audience, ﺍﻟﺴﻼﻡ ﻋﻠﻴﻜﻢ ﻭﺭﲪﺔ ﺍﷲ ﻭﺑﺮﻛﺎﺗﻪ You have been witnessing the global financial crisis; the flames of which started in the United States of America and engulfed other countries by the arm of Capitalism and the splinters of globalisation such that no country could be immune to the scorching effects of its flames - however small or far-away it may be. Similarly, you have been witnessing the various 'solution' packages to overcome the crisis being prepared around the world. These solution packages are being drawn up by individual countries as well as alliances and unions in their conferences and summits such as the European Union, the Group of 20 in Washington, and the Lima Summit and the Qatar Summit, etc. But these packages have not resulted in solving the crisis; rather these solutions have at best only provided a short-term and momentary respite, lasting only days or even a few hours before the crisis returns to haunt them again. Distinguished Audience, A keen observer who examines the rulers and the economists of these countries will find that in terms of these solutions, there have been two approaches to solve the crisis: The first is the one which has been based upon the shutting of eyes to the very principles of the corrupt capitalist system that caused this crisis in the first place. This category has 'worked out solutions' based on the outward symptoms and not examined the real inner causes behind these symptoms. They have concluded that the financial institutions have lost liquidity; therefore they decided to pump billions and billions to provide these financial institutions with liquidity. They felt that the investments and financial markets are stagnant and frozen; therefore they decided to reduce interest rates on loans in order to encourage lending and thereby stir up the markets. They saw that shares, bonds and financial instruments have lost most of their value and crossed the red-light; so they decided that the state should intervene and buy the fallen shares and bonds. Thus in their attempts to treat the problem, they focused on the outward and apparent symptoms and closed their eyes to the real basis of the corrupt and failed capitalist system, which was left as it was. They forgot or ignored that the system itself was responsible for the crisis and therefore all their solutions were merely cosmetic, and provided a temporary drug fix to overcome the effects of the crisis for some moments before the crisis re-emerged even stronger and destructive than before. Their examples are that of the man who observes a deep crack in the walls of his house and rushes to fetch some cement mixture and paint to fill and cover the crack and presumes that he has solved the problem and retires to bed for some rest! Moments later the crack re-emerges, not strange or surprising at all, because the man only treated the crack and not the actual deeper cause that caused the crack in the first place, which was weakness in the foundation. Thus, this category was the one that merely covered the crack and ignored its real cause. 4 As for the other category, the basic principles of the corrupt and failed capitalist system were not totally ignored and solutions for the crisis were sought, however, they restricted their thought and searched for solutions within the two systems and did not look beyond to the third option. They looked at the communist system, which already had failed and disintegrated, and Capitalism which is shaking but not dead yet. They view Capitalism with all its fault lines and shortcomings as better than socialist Communism. Hence for a solution, they approached the critics of Capitalism's failures and asked them: "What is the alternative then?" while fully knowing that there is no alternative and that socialist Communism should not be accepted as the solution and they and their economists do not look beyond these two systems: The failed and disintegrated Communism and rapidly cracking Capitalism on the verge of collapse whose head has not hit the ground yet! Strangely, this group either neglected or is unaware of an economic system which has stood the test of time over centuries and lasted longer than any other system can boast; has proved safe and provided security, and led people to enjoy economically prosperous and secure lives free from the scaring worries and uncertainties of crises for thirteen centuries, during which time one had to hunt for a destitute person to feed from the bait ul-maal of the Muslims! And yet one could not find the destitute. As opposed to this, there are millions of poor and needy people even in the wealthiest of nations. This is the direct result of economic systems of either Capitalism or Communism, which have resulted in such human hardships and misery. Indeed, it is strange that this group ignores the fair and equitable economic system of Islam which for centuries provided safe and secure economic prosperity to people without misery and exploitation. This group presumes that there are only two alternative economic systems, Capitalism or Communism and all their efforts and searches are restricted to these two systems alone: either the state sector owns everything or the individuals that constitute the private sector owns everything; there is no third option for them. Either the state owns agriculture, industry and trade, whereby it becomes socialist communist ownership or the companies and individuals own agriculture, industry and trade, whereby it becomes private ownership and free markets and the state would not interfere in the financial markets! If only this group could look at these economic sectors it would find that they are very different to each other. Owning a deep mine of minerals or petrol is not the same as owning a house or a piece of land; neither is owning petro-chemical plants or various energy generating units or a weapons manufacturing facility the same as owning a cotton weaving factory or a sweet meat confectionery; and neither is owning a railway network similar to car ownership. If this group examines the economic system of Islam, it would find that wealth and properties are grouped into three distinct categories: The First: These are public properties whose revenues are disbursed among the Ummah after deductions for incurred costs; these include mines - whether of solid minerals or liquids like petrol or gases, etc.