Jumaat, 11 Disember 2009

The importance of worldview in solving economic crisis

The fallen Oracle

by Wan Ahmad Fayhsal Wan Ahmad Kamal

At the end of 2008, Alan Greenspan, the former chairman of Federal Reserve was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Fed had been long and lauded, and Congress wanted to know what had gone wrong.

Greenspan who once dubbed as “The Oracle” and at one time so revered by financial markets that a single utterance might prompt – to borrow a Greenspan phrase – an outbreak of "irrational exuberance”. Despite his high stature in the past, he was brought down to the earth by the Congress during the hearing regarding the failure of American financial system which many have identified the causes were rooted during his tenure as the Chairman of the Fed.

During the hearing there happen to be an interesting exchange between a panel named Henry Waxman and Greenspan which highlight the “real depth” of the problem:

Waxman: The question I have for you is, you had an ideology, you had a belief that free, competitive -- and this is your statement -- “I do have an ideology. My judgment is that free, competitive markets are by far the unrivalled way to organize economies. We have tried regulation, none meaningfully worked.” That was your quote. You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying the price. Do you feel that your ideology pushed you to make decisions that you wish you had not made?

Greenspan: Well, remember, though, what an ideology is. It’s a conceptual framework with the way people deal with reality. Everyone has one. You have to --to exist, you need an ideology. The question is, whether it is accurate or not. What I am saying to you is, yes, I found the flaw, I don’t know how significant or permanent it is, but I have been very distressed by that fact. 
Waxman: You found a flaw? 
Greenspan: I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

Waxman: In other words, you found that your view of the world, your ideology, was not right, it was not working. 
Greenspan: Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

The exchange between Waxman and Greenspan was far deeper than an economic issue. It was a question of truth and reality that best fit into a philosophical discussion that could be extended to various facets of human life be it about economics, success, happiness, development and other key terms that define our purpose of existence in this life.

The financial fiasco that broke off in Wall Street and seeped through the Main Street while in the same time engulfing the world financial system can no longer be analyzed in its mere “external” form. The real problem that has beset the Wall Street could be identified much to certain quarters of so-called “financial experts” who embraced certain negative values and turn them into “virtues” in the world where they dream to create heaven in the earth with dollar and cents. Worse off, their utopian dream which being built on the foundation of greed and deceit was created in the expense of others, notably the honest working class people who have worked tremendously hard to earn an honest living which at the end their savings being sucked into this financial abyss due to failure of banking system as succinctly being portrayed by the downfall of Lehman Brothers, Merril Lynch and not to forget a country in the name of Iceland.

Human being is a unique creature by itself. The ability to speak and reasoning gives him an ability to create wonders as well terrible things too. His action, be it visible one like walking and invisible one like thinking are strongly being influenced by his weltanschauung or worldview. In the case of Greenspan and many of corporate raiders, due to their flaw in reasoning or far worse in their utmost believe on the “theology of market” that has churned out, - in the words of Austrian economist Thorstein Veblen - a “conspicuous consumption” that turned to out to be the environment for economic growth which yield this economic crisis. As being testified by Greenspan earlier, it is all boiled down to the correctness of the worldview of the people that runs the system.

Modern society built its economic foundation on the basis of limited vision of reality and truth which rest comfortably on mere physical realities. The sense of sacredness also has long gone in the era where empiricism in scientific knowledge is the order of the day where the role of the Divine has been neglected into mere ritual outlook.

In Islamic knowledge tradition, this has never been the case. According to Syed Muhammad Naquib Al-Attas, a renowned Islamic metaphysician and thinker, a worldview is a metaphysical survey of both visible and invisible world. Al-Attas elaborated:

“From the perspective of Islam, a ‘worldview’ is not merely the mind’s view of the physical world and of man’s historical, social, political and cultural involvement in it as reflected, for example, in the current Arabic expression of the idea formulated in the phrase nazrat al-islam li al-kawn. The worldview of Islam is not based upon philosophical speculation formulated mainly from observation of the data of sensible experience, of what is visible to the eye;nor is it restricted to kawn, which is the world of sensible experience, the world of created things. There is no dichotomy between sacred and profane, the worldview of Islam encompasses both al-dunya and al-akhirah.

Reality is not what is often ‘defined’ in modern Arabic dictionaries as waqi’iyyah whose use, particularly in its grammartical form waqi’iy is now in vogue. Reality is haqiqah, which significantly is now seldom used due to the preoccupation with waqi’iyyah which only points to factual occurrences. A factual occurrence is only one aspect in many of haqiqah, whose ambit encompasses all of reality.

What is meant by ‘worldview’, according to the perspective of Islam is then the vision of reality and truth that appears before our mind’s eye revealing what existence is all about; for it is the world of existence in its totality that Islam is projecting. Thus by ‘worldview’ we must mean ru’yat al-islam li al-wujud.”

The Islamic vision of reality and truth, which is a metaphysical survey of the visible as well as the invisible worlds including the perspective of life as a whole, is not a worldview that is formed merely by the gathering together of various cultural objects, values and phenomena into artificial coherence. What al-Attas meant by artificial coherence, is a coherence that is not natural in the sense we mean as fitrah. Such coherence projected as a worldview must necessarily subject to change with the change of circumstances.

These fundamental elements act as integrating principles that place all our systems of meaning and stands of live and values in coherent order as a unified system forming the worldview; and the supreme principle of true reality that is articulated by these fundamental elements is focus on knowledge of the nature of God as revealed in the Qur’an.

In relation to the current economic crisis, we can see clearly how conjecture has been elevated to the level of knowledge. Greenspan which at first believe firmly on the absolute efficiency of free market ideology (at least before the financial fiasco) that predominates economic thought in the West particularly in post-World War 2 era is also a strong proponent of Objectivism, a philosophical system developed by Russian-American philosopher and novelist, Ayn Rand (1905-1982).

Objectivism holds that reality exists independent of consciousness; that individual persons are in direct contact with this reality through sensory perception; that human beings can gain objective knowledge from perception through the process of concept formation and inductive and deductive logic; that the proper moral purpose of one's life is the pursuit of one's own happiness or rational self-interest; that the only social system consistent with this morality is full respect for individual rights, embodied in pure laissez faire capitalism; and that the role of art in human life is to transform man's widest metaphysical ideas, by selective reproduction of reality, into a physical form—a work of art—that he can comprehend and to which he can respond emotionally. This philosophy which underpins Greenspan's worldview throughout his career as the chairman of Fed, has exacerbated the already distorted view of economic knowledge that rest firmly on the dogma of absolute efficiency of free market in governing the economy.

Now, Greenspan himself has admitted the fallacy of his economic worldview that laid a fertile ground for the perpetuation of the current economic crisis which has been dubbed by many economists as worse than infamous Great Depression in the 30s. Still, there are many lessons to be learnt from this crisis. What more important is how we can re-construct our worldview that could yield a better economic knowledge system that could translate into a better policies and governance?

Maybe the upcoming seminar organized by Young Group of Intellectuals (HAKIM) and National Union of Malaysian Muslim Students (PKPIM) on the “Worldview of Islam” (which will be in Bahasa Melayu) and special lecture of the year by our renowned Islamic thinker Syed Muhammad Naquib Al-Attas entitled “Reviving the Worldview of Islam: Internal and External Challenges” (which will be in English) could provide some serious answers and solutions to current challenges that we are facing today. The event will be held on the 13th of December from 9am till 11pm at Institut Integriti Malaysia, near Jalan Duta. It is a one day event that packs with knowledge and wisdom that could thrust our effort to revive back the superstructure that has stood the test of time in solving civilizational crisis which is the Worldview of Islam. Hope to see all of you there!

The writer is a research fellow in the newly established Assembly of Young Intellectuals (HAKIM). He finds time to blog at Rausyanfikir.com covering various issues of humanity.

3 ulasan:

Awanama berkata...

Not-Adam Smith says:

Find me a internationally acclaimed Muslim scholar who has either translated or written a Commentary on Adam Smith's "Wealth of Nations" the percussor of Modern Capitalism.

Or for that matter any reputable contemporary Muslim Scholar who is writing or has written anything worthy on Muamalah as the answer to Modern Liberal Capitalism.

The nearest we can get is Umar Ibrahim Vadillo on Shariah Currency ie. Islamic Dinar & Dirham and Muamalah.

He claims that Muamalah is the fundamental basis of the "Practice of the Ahl al Madinah" ...

For those who subscribed to the notion of divine inspirations accrued to the Prophet Muhammad and Righteous Companions & Tabi'n, say, for the 100 years or so of the al Madinah Period; then, the "practice of the ahl madinah" in trade, commerce, contracts are to be taken as examplary conduct.

That, Islamization of the Banking and Financial systems based on RIBA and " fiat money" as their substratum are NOT to be taken as the authentic and true practices of the Prophet and his Righteous Companions during the al Madinah period.

Therefore, with due respect to contemporary Muslim scholars, particular the Fiqh-centricists , none have really understood the philosophical, cultural and even religious underpinnings, the underlying principles and elements of the modern liberal capitalism that the contemporarry Muslim scholars are trying to "ISLAMIZE".

What they have done is simply to make the Shariah or rather the FIQH to comply with Modern Liberal Capitalism as found in Banking and Finance, what more modern economics.

It is muamalah .. they whole rigmoral and "shebang" ..

so, the verses of the Quran which say that God and His Messenger will wage war against those who practice Riba .... yes indeed the Muslims are practising riba based "islamic banking and financial instruments".

Rausyanfikir berkata...


Malakian berkata...

Yes, Umar Vadillo is among the few Islamic scholars who has done and in depth analysis and critique of modern capitalism economic system. His book 'The End of economics : an Islamic critique of economics' I think is one of the best book that explained the fraudulent system of today banking system.

If we understand the core and the basis of modern monetary system which is based on fiat money which has to be accepted by legal tender, we will finally understand such 'Islamization of modern monetary system' is a haphazard attempt to revolutionize the contemporary banking system which is based of Riba and gharar.

Another outstanding Islamic scholar who has elucidated the usurious nature in modern monetary system is Shaykh Imran Nazar Hosein with his book 'Prohibition of Riba in the Qur'an and Sunnah.'

Watching the video documentary Money as Debt I and Money as Debt II: Promises Unleashed is a good start to understand the basis of monetary and banking system.

Wan, teruskan menulis krtik terhadap sistem kewangan kapitalis. Konsep riba sangat luas dan kesan riba terhadap masyarakat adalah memusnahkan dan menghancurkan masyarakat.