Current Crisis of Economy: Need for an Alternative Paradigm
On May 25, 2012 National University of Modern Languages, Islamabad and IPS jointly organized a seminar on “Current Crisis of Economy: Need for an Alternative Paradigm” at the main campus of the university. Senior IPS Associates Fasihuddin, former Chief Economist, Government of Pakistan and Prof. Attiquzzafar were the key note speakers while DG IPS Khalid Rahman chaired the session. Dr. Rasheed Ahmed Khan, Dean, Faculty of Management Sciences, NUML was also present on the occasion who thanked the speakers and wrapped up the session with his end note.
The seminar was primarily organized for the graduate students of the university to orientate them with the causes and manifestations of the current global economic crises that started a few years back and to present an alternative paradigm aimed at not only addressing this ongoing crisis but prevent any unmanageable shocks for global economic system in future.
Acquainting the participants with the gravity of the situation and the critical elements of the current global economic crisis, Fasihuddin said, liberalisation and globalization of nineties, East Asian Financial Crisis on 1997 and the unchecked spread of financial instruments and products with no regulatory mechanism, banking crisis in US caused by corruption and corporate greed, fiscal deficits and debt crisis in Euro Zone were the key factor which caused the current global economic crisis which also consequently impacted on developing economies.
He pointed out the manifestation of the crisis which significantly included the decline in global GDP growth that is 3.3 % in 2012, fall in the world trade that is 3.8% alone in 2012, collapse of financial market, weak growth-employment relationship, high rate of youth unemployment that is twice as high as the general unemployment rate that is 9% in the USA and 20% in Spain, rising inequalities and disparity in income and wealth and disproportionate share of the gains of growth by the rich and powerful.
Fasihuddin was of the view that while the crisis was grave, its early revival did not seem in sight, adding that there seemed no serious effort to address some of the fundamental issues which included income inequality, employment and regulation. He projected that the spillover effects of the crisis would continue on the developing economies.
While suggesting an alternative paradigm to the current financial system, Prof. Attiquzzafar, deliberated on principles and contracts of Islamic system of finance which provided sound basis to avoid such crisis. Delineating specifically, he noted that Islamic financial contracts prohibits riba (interest), Gharar (uncertainty, doubt and risk) and qimar (gambling), maysir (game of chance), sale of debt with debt, and combination of two mutually inconsistent contracts. Besides quoting verses from the Quran and referring the verdict of Federal Shariat Court regarding the prohibition of interest, Prof. Zafar noted that the interest widened the gap between the rich and the poor and created parasites in societies. “It is ironic that while we all try to avoid trivial social evils, we pay much less attention to this serious issue plaguing our society”, he deplored. Prof. Zafar also apprised the audience about the major financial contracts in Islamic banking which included Muajjal/Murabaha and Musawama, Salam, Istisna’a, Musharakah, Mudarabah and Islamic Insurance system known as Takaful.
DG IPS Khalid Rahman, while concluding the session, observed that the interest based economic structure prevalent in the world by and large served only the interests of capitalists and it would increase further the gap between the rich and the poor and cause rift in the societies. He drew the attention of the audience towards the emerging trends among people especially in Muslim societies including Pakistan towards adopting the alternative to the current capitalistic economic system. While realizing the need to have an alternative paradigm, he also pointed out that living beyond means was also one of the major factors among many that caused the crisis and its perpetuation. “All of us have role to play in avoiding such crisis”, he maintained.
