“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” ~ Henry Ford
Actually, this article could’ve been called “The traditional banking system; a critical essay”, but I’m not sure it would’ve interested a lot of people. So, despite the title, I’m not giving you advice on where to invest or which bank to choose. Nor am I giving you little tricks about how to become a rich, successful person. No, absolutely not.
I am just asking a question; why, and how do resourceless countries become outrageously rich while countries full of natural resources remain extremely poor? Why does a country like Burkina Faso, the number one cotton producer in the world, fail to feed its own population when it has the capability of feeding not only its people, but also Africa as a whole? After reading a few articles and watching some documentaries regarding this question, it become clear that the entire system is made to let rich become richer and poor stay poor or become even poorer. And this is not only on an individual basis, but also on a national and international level.
How to impoverish a country; STEP 1: The power of the World Bank and the International Monetary Fund
Almost all the countries contribute to the World Bank and to the International Monetary Fund whether by giving them money (taken from national taxes), or by borrowing from them (on interest of course). Those institutions are not as neutral and international as it may seem. Most of the time, countries like USA are the ones exerting influence on the tactics and actions of these organizations. Simply to help their own economy and companies grow.To make a long story short, the governments have what is called “economic hit-man”. Their role is simple: identify a country, which have resources wanted by some of their corporations (like oil, cotton, etc.), then try to influence the president, king, or whatever leader to take a loan from the World Bank. This loan will be presented as absolutely necessary for their development, and completely in favor of the country. If those arguments do not work, they will try to corrupt whoever is the head of the government, and make them take a huge loan on the back of the local population.
How to impoverish a country; STEP 2: The reimbursement of the public debt
After succeeding in influencing and/or corrupting the leader’s country, the economic hit-man will speak up for the country and let them get a huge loan from international institutions. His job is then over, and problems begin for the borrowing country. They will have to reimburse not only the loan in itself, but the interests that goes with it. Having a system of “increasing” interests, the country will have to reimburse more and more money, with the very few that they have. It will have to cut off on social services, like medical service or education, in order to pay off their loan. At one point, the loan becomes so huge it is impossible to repay. The solution is “simple”, if repayment in money is not possible, they will have to sell their resources and national companies at a very cheap price. This is exactly the point where the “behind the scene” countries want to arrive. They will have access to resources for almost nothing, and have a control on the borrowing country’s economy. Neo-liberalism flirts with neo-colonialism.
How to impoverish a country; STEP 3: Final phase
Arriving in this situation, it is almost impossible neither to go back nor to get out of it. The only solution is to ‘start over’ with the national economy without any foreign influence by nationalizing some of the private companies and by ending the “agreement” made between the country and the World Bank. If this is not the case, the country will become poorer, obliged to repay their debt by cutting off from social services and by making already poor people pay, letting only a small part of the population getting extremely rich, and the so called developed countries can sleep and dream without any worry. “Behind every great fortune there is a crime.” said Balzac in the 19th century. Still true nowadays.
This is what more or less happens when the economic hit-man succeed in their job. What if they don’t? If the leader refuses in following the advice of the economic hit-man, a “jackal” is sent. His job will be whether to prepare a takeover or to send someone to kill the leader of the country. If this is done properly, a new chief of government will be put at the head of the State, making sure he will follow the status quo. If however the jackal cannot finish its job a third and last move is organized; the sending of military. For any reason, it can be a good or a bad one, war will be declared on the country and troops will be sent. Any impression of déjà-vu? That’s what I thought.
What about an ethical banking system? Islamic banking gives us strong principles of justice to apply into economy. Without getting to deep into the subject, lets just present in two points the main pillars of the Islamic banking. First of all, interest is absolutely forbidden. If someone borrows a certain amount of money, he will have to repay the exact same amount, nothing more and nothing less. And secondly, the Islamic banking has a principle of sharing the risk. It means that when an individual wants to start a project, he will ask his bank to invest, and not to loan money. The bank becomes a partner, capable of gaining money but also of loosing it. Usual banks do not invest in projects; they just lend money and want it all back, without much care of the success or failure of it.
What we have seen in Europe is a big rise in the study of Islamic banking. Is this a proof of change that will occur in the financial system? Time will tell.