By Syed Rashid Husain
19/05/08 "Arab News" -- -- Oil prices continue to rise and rise, with no end in sight. Virtually all other commodities seem to be following to be the same suit. Some now say a new economic system is emerging from the ashes of the old and now crumbling financial structure. Failing to meet even the basic needs of the common man, the current economic system is facing its worst crisis and appears in doldrums. It has miserably failed the underprivileged of this world.
Markets appear divorced from the fundamentals. F. William Engdahl strongly says in a recent write up that the oil markets (and other markets too) today are controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60 percent of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price.
And the end-result is growing deprivation to a large number of people across geographical boundaries!
In the 90’s, with the war in Afghanistan taking its toll, the Soviet empire virtually melted before our eyes under its own weight. The number of deprived, form Moscow to Siberia and Grozny started to grow and grow rapidly. And as the number of have-nots in then USSR rose, the system could not cope with the pressures, and failed to provide even the basic needs to the common man in the streets. And within years the mighty and the powerful USSR was assigned into the annals of history.
Analysts today point to the Afghan war as one of the major causes for the disintegration of the USSR. Many then rejoiced over the demise of the USSR, claiming the capitalist system has won the war — finally. Many in the West, including the Regan Administration claimed supremacy of the capitalist system over the Marxist ideals. The victory of the West was described in terms of ideologies.
Current developments also point to a new emerging reality. The capitalist economy now seem to be failing its underprivileged, the have-nots of the world. With the number of people below the poverty line growing rapidly all over the globe, the common man on the streets today appear more and more desperate today.
In sharp contrast to this grim reality, it is only a few, the haves of the world, controlling the capital, benefiting from the current scenario. The vast majority is now being deprived of two square meals a day too. The old Malthusian theory, which has been lying dormant in the shelves for quite sometime, seem to be back and people have started to look at it closely once again. And this is happening in this 21st century, when the world claims to have taken tremendous strides in the fields of science and technology. What a growth indeed!
The people to benefit out of this imbroglio are the money vendors, the rich of the world. Real estate and property boom has been the engine of growth all around. Conservative economists do not accept investments in real estate as really contributing toward the growth of the economy. Terming it as stagnant investment, these conservative economists continue to claim, growth in the real estate sector does not contribute significantly to the over all GDP of an economy. And secondly it is only the fortunate few who could benefit out of this boom — and at the cost of poor many.
Unable to come up to the expectations of the vast majority of the common man, many seem asking the question today, is the capitalist economy also passing through its last phases? The situation is grim for a vast majority. Global food prices, based on United Nations records, rose 35 percent in the year to the end of January, markedly accelerating an upturn that began, gently at first, in 2002.
Since then, prices have risen 65 percent. In 2007 alone, according to the UN Food and Agriculture Organization’s world food index, dairy prices rose nearly 80 percent and grain 42 percent. The World Bank estimates that 33 countries around the world face potential political and social unrest because of the acute hike in food and energy prices.
And this has resulted in disastrous social consequences for the billions below the poverty line in the impoverished, underdeveloped world. The scenario is so bleak for the common man on street that the world is witnessing food riots virtually all across the globe. People of the world are hungry in this era of growth and emancipation!
Where are we being led? We are living in a different world with a new era seeming to dawn upon us. In the 21st century, when the world was supposed to be at the click of a mouse, the number of hungry population, those who can’t afford proper food three times a day has increased. It seems, the age of scarcity, of shortages, of rising prices, of food riots, of ration cards, is finally upon us, all around the globe.
What is happening, that with the weakening of the ruling currency of the world, the US dollar, the moneyed class of the world — sans frontiers in this age of freedom and liberty- is moving their capital into commodities — from oil to gold and grains.
This paper transaction, at times termed as speculation, is taking place even without the physical transfer of the goods and is making a mockery of the conservative economic models. And this is contributing to the current imbroglio. Unfortunately only the moneyed class has the capacity to participate and benefit from this entire game — at the cost of the poor.
Religious scholars tell that Prophet Muhammad (peace be upon him) did not permit transactions in which physical transaction of the goods under question did not take place. And in the current situation, rarely is the physical transaction taking place.
This paper circulation is contributing to this rise of virtually all commodities — oil included. If it continues the same way, it may not be too wrong to point out that like the Marxist ideals, the current era of capitalism may also not last long. It may already be in its final throes, some hence deduce.
If a system cannot meet the basic idea of having some sort of equity within the society, where the have-nots could not have at least three meals a day, then it is bound to fizzle out, proponents of the theory underline.
The war in Afghanistan turned out to be the Achilles heel of the Russian empire and who knows the two concurrent wars, in Iraq and in Afghanistan, is leading the US-led capitalist economic system toward the same fate? Only time has the answer to this trillion dollar question.