Monday, February 2, 2009

Why has the Muslim world failed to develop?

The level of societal development matters. Common set of social values shared by neighboring countries promotes peace and collaboration. European countries united after prolonged bloody wars.

On the other hand, when traditional society challenges modern democracy...

In November 2008, published Adnan Khan's 'Why has the Muslim world failed to develop?'. Here is the article:

The Muslim world with its vast resources continues to generate much interest among economists, thinkers and policy makers. The Muslim world since the end of the Uthmani Khilafah has had its borders drawn and redrawn after various powers interfered in the running of its affairs. The Muslim world includes the Arabian Peninsula, Turkey, North Africa, Pakistan, Bangladesh and the south eastern countries of Malaysia and Indonesia.

Development economics is a branch of economics, which deals with how simple forms of organization can transfer to complex forms of organization and production. Development is seen as the ability to increase production without any consideration applied to its distribution. Economists do make a distinction between growth and development - growth is seen as more of the same goods and services whilst development is the structural and technological infrastructure behind the production. In terms of GDP, the measurement used to calculate the value of total production of goods and services, the Muslim world is second only to China with growth rates of 7% in some countries. These are growth rates most European countries would be proud of. However reading between the figures reveals many problems.

If we define development as the building of the necessary infrastructure to fulfill the basic needs of the people such as food, clothing, shelter, security and education, here the Muslim worlds comes in at the bottom of the list. Wealth in the Muslim world suffers from huge misdistribution.

The Middle East for example relies heavily upon oil revenue's therefore it is affected greatly by changes in oil prices. Very little oil revenue actually trickles down to the population but rather ends up in US bank accounts. Prince Alwaleed Bin Talal Alsaud of the Saudi monarchy is valued at over $20 billion with half of his wealth invested in the US.

In the Arab world one in five Arabs still live on less than $2 a day. And, over the past 20 years, growth in income per head, at an annual rate of 0.5%, was lower than anywhere else in the world except sub-Saharan Africa.

In Pakistan 40% of land is in the hands of 23 families.

Government investment in infrastructure and public services is minimal considering the large population of the Muslim world.

The Muslim world's elections are at best a farce, with autocratic kings and presidents only rescinding their authority when they die.

Half of the Muslim world is treated as lesser legal and economic beings, and more than half the young, burdened by joblessness and un-Islamic economic policies want to get out of their country as soon as they can.

The role of the IMF and World Bank in countries such as Pakistan, Turkey, Indonesia, Bangladesh and Egypt has directly aided some of the underlying economic problems. The general solution provided by such institutions is the engaging of trade to climb out of poverty and for development. In reality there are a number of obstacles placed by the developed nations that ensure developing nations will never reach a level where they can compete. What this actually means is that Western goods should be imported rather than allow imports from poorer countries. The theory is that only via trade will nations pull themselves out of poverty. Whilst encouraging the third world to lower their market barriers such as tariffs and quotas on various goods, the Western nations do not do the same for their markets. Western economies have not been developed by such subscribed policy, as outlined by Dr Ha Joon Chang in his book "Kicking away the ladder." The continued failure of the World trade organization clearly shows the unwillingness by Europe and the US to lower its trade barriers whilst at the same time lobbying India and China to remove their barriers.

This situation in the Muslim world stems from the colonial era and is summed up best by David Fromkin, Professor and expert on Economic History at the University of Chicago: "Massive amounts of the wealth of the old Ottoman Empire were now claimed by the victors. But one must remember that the Islamic empire had tried for centuries to conquer Christian Europe and the power brokers deciding the fate of those defeated people were naturally determined that these countries should never be able to organize and threaten Western interests again. With centuries of mercantilist experience, Britain and France created small, unstable states whose rulers needed their support to stay in power. The development and trade of these states were controlled and they were meant never again to be a threat to the West. These external powers then made contracts with their puppets to buy Arab resources cheaply, making the feudal elite enormously wealthy while leaving most citizens in poverty."

The absence of any organized way of generating wealth and allocating wealth has created a situation where everyone in the Muslim world needs to fend for themselves and attempt to make the best out of a chaotic situation. This just compounds the problem further as many resort to bribery, stealing and fraud to make ends meet. This shows that the people in the Muslim world are not inherently corrupt or born to steal, rather as can be seen with the Gulf States many Muslims when given the opportunities are hard working and can be relied upon.

The question that really needs to be answered is where we begin to develop the Muslim world. The Muslim world fails in applying a set of consistent polices and this has resulted in such nations being unable to unify the populace on the direction of the economy. Many policies by the rulers are time specific or usually motivated by the political climate of the time. The unfortunate result of this is that a whole host of contradictory policies are applied within the Muslim world and hence the nation doesn't move in the same direction. Although Pakistan has the worlds largest untapped coal reserves it imports over 2 million tonnes of coal a year to meet its energy needs. Across the Muslim world there exist manufacturing companies and mining companies. However the contract to mine the Muslims world's precious resources always go to foreign companies.

The development of the Soviet Union is a good example of how consistent polices lead to development. Socialism emerged as a very powerful force across Europe and many were attracted to it after witnessing the wide disparities in wealth distribution in Capitalist nations. The Communists after gaining power due to the failures of the Tzar set about implementing a five year plan starting in 1928, in order to build a heavy industrial base.

The five year plan was a list of economic goals that was designed to strengthen the USSR's economy between 1928 and 1932, making the nation both militarily and industrially self-sufficient. The five year plan was to harness all economic activity to the systematic development of heavy industry, thereby transforming the Soviet Union from a primitive agrarian country into a leading industrial and military power. Carrying the plan out, the Stalin government poured resources into the production of coal, iron, steel, railway equipment, and machine tools. Whole new cities, such as Magnitogorsk in the Urals, were built with enthusiastic participation of young workers and intellectuals. This ambitious plan fostered a sense of mission and helped mobilize support for the regime. The Soviet Union played a direct role in the defeat of Hitler in World War 2 - which launched the Soviet Union to superpower status.

Islam is the only common denominator between everyone in the Muslim world. Islam has a glorious history in the region and propelled the Muslims from the deserts of Arabia to the far reaches of the earth. Therefore this would be the place to begin deriving economic policies for the Muslim world. These policies would be accepted by all Muslims as they are from Islam and would actually bring confidence in the Islamic rules once people see they can work.

Practically this means that Islam should be applied in the Muslim world and Islam's polices on trade, ownership, companies, public finance, investment, currency and poverty elimination would need to all be applied. The derivation of such polices from the same foundations would ensure no contradictions occur as they are all coming from the same basis. All foreign policies from Socialism, the Capitalist free markets, Nasserism, Kemalism and any other ‘ism' should be removed as these have proven to be failures.

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