A forward i have recived from nahda.org.
Indeed very intresting......
The wave of financial scandals unearthed in Corporate America is a sign
of structural flaws within Capitalism itself and the value system of
Liberal democracies. Reform of a system by definition, can only work if
the foundations are sound, when the foundations are themselves
questionable is it not time to examine the alternatives?
Capitalism's jittery track record
Following the collapse of the Soviet Union and the tearing down of the
Iron Curtain of Communism, many heralded the triumph of the Capitalist
way of life. Francis Fukuyama went so far as to claim that history, as
we knew it had ended, with the final ascendancy of Liberal democracies
and its associated values. "(But) the century that began full of
self-confidence in the ultimate triumph of Western liberal democracy
seems at its close to be returning full circle to where it started: not
to an "end of ideology" or a convergence between capitalism and
socialism, as earlier predicted, but to an unabashed victory of economic
and political liberalism." Yet 13 years on from these bold assertions
we have witnessed a decade in which the application of Capitalism has
inflicted serious damage.
The Capitalist experiment in the former Soviet Union failed abjectly in
the 1990s and was found wanting in its restructuring of the economies of
the former eastern bloc. Conditions at times were said to be worse than
those endured during the worst years of Communism. However, this failure
has been hidden behind the belief that Mafia styled oligarchs ruined the
system accompanied by a culture of bureaucratic rigidity and weak
judicial systems.
Aswe witnessed the collapse of the Tiger economies of the Far East in
1997, misery was inflicted upon the lives of millions in Thailand,
Malaysia and Indonesia. Whilst the initial successes of the Tiger
economies were attributed to liberal values and the Capitalist economic
system, its failure was excused away by references to the culture of
nepotism, corruption and cronyism in these lands.
Closer to home, as the late 1990s Dot Com stock bubble burst, the crisis
was explained away as being attributable to industry specific factors
while the fundamental tenets of the Capitalist economy remained valid.
In recent months the world has witnessed a wave of accounting scandals
engulfing Corporate America. Scandals such as the $3.8billion gaping
hole in WorldCom's accounts which incidentally has now led to the
biggest corporate bankruptcy in history. Other examples include Rank
Xerox overstating its profits by $1.4billion over 5 years, Merck the
giant pharmaceutical company overstating its revenues and its costs-by
some $14billion over 3 years, not to mention the collapse of the Energy
giant Enron. Most of the explanations for the crisis have lacked a
larger conceptual framework and seem to focus on the peripheral issues.
An attitude which produces statements such as the oft-repeated one, that
the crisis is the result of a few rotten apples.
'Value-less' Capitalism to blame?
But how many more crises must occur and scandals unearthed, before
someone discusses the most pertinent question; is not Capitalism itself
the cause of these problems? Is not the system and its participants
geared to produce the scenarios we have witnessed over the last few
months? Is it a case of a few rotten apples or is the whole Apple Cart
itself corrupt? In which case, the discussion about reform is a
misnomer. Endless reform cannot fix an inherently corrupt system.
The whole philosophy that underpins Western Capitalism is geared towards
the concept of self-fulfilment and material benefit. As long as everyone
is looking after his or her own interests the society will be sound.
Values, ethics, and morals become irrelevant as each individual has his
or her own conception of what this is. This concept underpinned Adam
Smith's term the 'invisible hand', where people by seeking their own
self-interest would ensure that the society itself will become
prosperous.
When the major participants bring this outlook of life to the economy
can anyone expect a scenario other than that which is currently being
witnessed? In profiling the major players; the boardroom directors,
auditors, shareholders, stock analysts, supposedly hawkish regulators
and the altruistic politicians who are charged with resolving these
crises, each instance points towards institutionalised corruption and
malpractice that is inspired by the very values that are held to be
sacrosanct.
* The directors are statutorily charged with delivering an increasing
level of shareholder value through generating a higher share price and
dividend growth. The drives for exponential growth, higher stock prices
and market capitalisation have meant that age-old values that should
underpin business; accountability, responsibility, ethics and a moral
code fall by the way side. The fictional Wall Street character Gordon
Gekko best summarised their outlook when he famously stated that 'greed
is good'. Gekko's oft - repeated mantra can be traced back to the
philosophy of famed liberal thinkers such as Friedrich Von Hayek who
argued that "To be controlled in our economic pursuits means to
be.controlled in everything." Or to the liberal values of Robert Nozick
who stated that "there is no justified sacrifice of some of us for
others." The corporate culture and the ensuing malaise are no doubt the
products of the value system (or lack of it) that Liberal secular
beliefs inspire and which are the very bedrock of corporate capitalism.
It is little wonder that people identify a 'Corporation' as being an
ingenious device for obtaining individual profit without individual
responsibility.
* Auditors who were meant to be casting a watchful eye on behalf of
shareholders and the public, ended up collaborating with directors in
their fraudulent activities. This is because the Big 5 audit giants are
themselves huge corporations whose bottom line is also their most
important concern. The lure of consultancy dollars is incentive enough
for them to sign off accounts as 'true and fair' when in reality the
financial reporting of their clients were far from accurate.
* The shareholders themselves are driven with an insatiable appetite for
higher and higher returns on their investments. Entranced by increased
gains on the surging stock market they are more or less willing to turn
a blind eye as companies lie to them, as long as their wealth keeps
increasing. In this regard they are egged on by the mushrooming media
channels that cheer the market on, creating an atmosphere where anything
but exponential growth is seen as a sign of corporate timidity and
weakness.
* Stock analysts who are meant to provide an objective assessment to the
public on the corporate health of those companies they are reporting
on, are more interested in their own financial wealth. The analysts
working for investment banks were either promoting companies who were
large fee paying clients of their banks or they were personally
receiving perks from the very same companies they were recommending to
the public. One case in the UK highlights this practice where shares in
many companies were bought before promoting them as good investments in
newspaper columns.
* The regulators are selected from the same backgrounds that are now
under scrutiny. Witness the background of the Chairman of the main
regulator in the USA, the Securities and Exchange Commission (SEC)
Harvey Pitt. He made his career as a lawyer representing the accounting
industry, lobbying hard against tightening of any rules that harmed the
profession. As a result Pitt has had to excuse himself from many of the
SEC decisions this year due to conflict of interests, with at least 10
of his former clients currently under SEC investigation. Two other
appointees to the 5 man SEC also come from accountancy firms. Imbued in
the corporate values that inspired the American Industrialist Cornelius
Vanderbilt to remark "The public be damned", can we expect regulators of
the same ilk to be acting in the public's best interest when their
backgrounds and future appointments lie with the same companies they
seek currently to regulate?
Special condemnation can be made for the politicians charged with
finding solutions to these problems. This is because the hold, which
corporations have over the political systems in western democracies can
only produce scenarios where rights and wrongs come associated with the
size of a company's political donation. The billions that are poured
into the political process corrupt the system that should be based on a
social contract that should protect the right of all, especially those
who are the most vulnerable. Where the politician's role requires
individuals to be selfless in serving the public they put their own
selfish interests first rather than those of their constituents.
President Bush's questionable business background with Harken Energy and
Vice president Dick Cheney's role as Chief Executive of Halliburton
should come as no surprise.
The capitalist system therefore, like the communist system before it,
has proved devastating for mankind. It joins the failed systems of the
past such as empires, dynasties, monarchies feudalism and fascism in its
complete inability to solve mankind's affairs. As the Quran states in
its third chapter
'Many were the ways of life that have passed away before you, travel
through the earth and see what was the end of those who rejected the
truth' (3:137)
Examining the Options
When those at the helm of capitalism produce scenarios where governments
can debauch currencies, wherein companies can invent figures, where
corporate directors deceive shareholders, and auditors collude in the
fraud - can reform really work? The world renowned British publication
'The Economist' thinks it can, it advocates more disclosure, more
empowerment for non-executive directors and seeks greater shareholder
scrutiny. But these solutions have been tried before after previous
scandals such as Maxwell, BCCI and Barings Bank. Indeed many of the
solutions the Economist is advocating are already in place as a result
of the Cadbury and Hampel Corporate Governance reports which were
produced after the aforementioned scandals. Independent audit committees
with non-executive director involvement are already in place yet this
did not stop Enron or WorldCom from collapsing. Greater disclosure will
add nothing to the transparency of financial results, as US accounting
rules are and remain the most prescriptive in the world already.
Consequently when an attitude of corruption pervades a system, when the
integrity of the major participants of an economy is compromised, when
hundreds of millions see their retirement savings wiped out, the time
should come for those men and women of responsibility, the
intellectuals, the academics and like - minded individuals, to look for
serious alternatives. The least that should be demanded is a discussion
on the very basis of capitalism and the viability of alternate models
rather than on the suggestion of further tired and discredited reform
packages.
Islam produces a harmony in society wherein investors and businessmen
can pursue the goal of higher profits yet maintain ethics,
accountability and equity so that equilibrium in society is not
predisposed towards materialism. The Shariah law sets the benchmark of
values that an economy's participants must aspire and adhere to and does
not leave this to subjective interpretations. The axiom around which
actions are based is accountability to the Shariah Law. Hence
individuals, corporations and the state must seek legitimacy for their
actions by reference to an arbitrating criterion that is not subject to
persuasion or sway by powerful elements within society. As a result,
those that can lobby the most or make the most persuasive case
financially do not influence law making. Shariah law institutionalises
the roles, rights and responsibilities of the players within the economy
producing a situation that protects the rights of the individual
investor, the worker and the wider society at large. Also the
institutionalised separation of state and business within an Islamic
State (as opposed to a capitalist system) ensures that those who do
engage in corruption are then severely punished for their acts.
An invitation to Intellectual discourse with Hizb ut-Tahrir
Hizb ut-Tahrir, the Islamic political Party has been engaged for almost
50 years in the work of establishing the Islamic Political system. At
the heart of our work is the presentation of Islam as a system of life
for the whole of humanity, a system that was implemented for over
fourteen centuries over Muslims and Non-Muslims alike. Within this
context we invite a debate upon what we see as the fundamental failures
of not just American capitalism but all forms of capitalism (European,
East Asian) and in our view the only viable alternative ideology; Islam.
In particular a discourse on Islam's views pertaining to the basis of a
true economic system, company structures, a sound monetary standard,
ethics in business, labour laws and trade policy.
We view the Islamic system as a challenge to Francis Fukuyama's
statement from the End of History; "The triumph of the West, of the
Western idea, is evident first of all in the total exhaustion of viable
systematic alternatives to Western liberalism."
Hizb ut-Tahrir, Britain
25 Jumada al-U'la 1423 Hijri,
5th August 2002
www.mindspring.eu.com
