Parvez Ahmed

Unfolding Dubai's Debt Crisis

noreply@blogger.com (Parvez Ahmed) — Sun, 06 Dec 2009 20:00:00 +0000

Interview by IslamOnline.net. Dec 2, 2009

Unfolding Dubai's Debt Crisis
By Amr Taha, Staff Writer-IslamOnline.net

On November 25, 2009, the Dubai Government asked Dubai World, a government-backed conglomerate, to agree to delay its repayments until May 2010.

With the number is so much unconfirmed, Dubai reportedly owes the world more than $60billion of external debts.

Dubai's economy that has been built on real estate and luxury tourism industries has caused the bubble, fueled by oil boom and unregulated markets soaked in speculation, to burst.

Al-Nakheel, a subsidiary of Dubai World, is due to pay its $3.5 billion Shariah-compliant bonds (Sukuk) in December 14, triggering many to ask with suspicion about possible scenarios if the company defaults on its payments.

IslamOnline.net's Politics in Depth interviewed Dr. Parvez Ahmed, associate professor of finance, Coggin College of Business of the University of North Florida, and a US Fulbright scholar to shed light on the consequences of the crisis, the misuse of Islamic finance, and the way out.

IslamOnline.net (IOL): How far the debt crisis will affect Dubai in the short and long terms?

Dr. Ahmed: With $60 billion debts, Dubai could consider defaulting. The debt is a sovereign [one], borrowed by [Dubai].

There have been other countries that defaulted because of debt. In the case of Dubai, $60 billion is a large amount of money, but not that large compared to other nations who defaulted.

A decade ago, Argentina had defaulted on $ 141 billion. Moreover, the external debt of the United States is $15 trillion. Yet, the United States is not at any danger of default.

There is a concern and a silver lining of the debt crisis in Dubai.

The silver lining is that the situation is not as grave as some commentators said.
Economists will look at the ratio of the debt to the GDP when evaluating the debt crisis of any country.

The United Arab Emirates' debt is relatively smaller than those of the United States, the United Kingdom, and many Western nations.

In Dubai, the debt at a special ratio to the GDP is 37 percent. In the United States, it is 75 percent. The ratio of debt to the GDP in the United Kingdom is 375 percent. In Ireland, it is alarmingly at 960 percent.

Therefore, the United Arab Emirates, in the long run has the capacity to service that debt.

However, in the short run, the danger comes from two sources.

Firstly, if Abu Dhabi will pay off Dubai's debts, Dubai will default and Abu Dhabi will rescue it.

Then, this creates economics of moral hazard; it is created when an economic action has been taken to help defaulting entities, causing systemic problems to the economy.
Will this lead other countries to default on their debts, hoping other countries could help?

In the United States, [economics of moral hazard posed the question] whether it encourages other banks to take risky positions, even wrong, hoping that somebody will [bear the brunt of the risk and help them]?

It creates an unfair situation when banks and financial institutions benefit from their successful risks while they do not have the responsibility for unsuccessful ones.

In the short run, bail out may be beneficial, but in the long run it will create moral hazards. In this way, one could expect what would happen if Ireland defaults.

The second source is that many Western powers, like the United States, the United Kingdom, are facing problems at home, like huge public deficits.

The United States is embroiled in two wars in Afghanistan and Iraq, and it suffers a lot of debt; it is $15 trillion.

In terms of external debt per person, every person owes $930 of debts in the United Arab Emirates while in the United States, every citizen owes $2000 in debt. In Egypt, it is $1000.

IOL: How far has Dubai's debt crisis affected Islamic economy, especially with concerns that Sukuk creditors may not be protected?

Dr. Ahmed: The default of sukuk (Islamic financial certificate or bonds) will deal a severe blow to the development of Islamic finance.

In the middle of 2008, when the world economic crisis hit the world, Islamic products were not affected as other conventional ones.

Therefore, many people, experts, and economists look at the Islamic finance as the solution.

Yet, I found that this assumption is too hasty.

The current situation of Islamic finance is not that different from the conventional one. It is different in form, not function.

When one strips away externalities, the core of Islamic finance is not that different from[those of the] conventional finance, thus subjeted to the same kind of problems facing conventional banks.

In the eyes of the laws, Islamic finance is not very different in terms of the process of default.

Sukuk bonds are subjected to the same standards of default. The difference between Islamic banks and conventional ones is a matter of semantics.

What happened in Dubai put the chill on the transaction of sukuk bonds.
It will affect the Islamic finance industry. Although the Islamic finance has many good sides, it is similar to conventional ones.

This encourages researchers, experts, economists, and businesspersons to find out a more holistic approach of Islamic finance.

It is wrong to focus on one aspect of Shari`ah while neglecting its other aspects. [Many tend] to focus only on issues like riba (interest), with less attention on issues of transparency, fighting corruption, social equality, and the like.

In Dubai, there are many questions about how the money flow — and where it was spent. Much of the investments in Dubai while spectacular appear to be very wasteful.

When people live beyond their means and in an extravagant manner, they really do not due justice to Shari'ah.

The goal of Shari`ah and Islam is to promote justice and equity, not to a small group of people, but to the majority of them.

Many are obsessed with riba, but not sustainable development, equitable development, social equality, transparency, and other issues, whichgives a negative image of Shari'ah.

IOL: What are the options for Dubai to repay its debts?

Dr. Ahmed: The available options are not very good. Default will happen, affecting properties prices.

Dubai's economy is [based] on luxury tourism and real estate. The default will hit economic activities.

This is a great time for big financial centers to develop a much more holistic and sustainable financial market globally.

Many notable Noble Prize laureates, like Stiglitz, called for the restructuring of the world economy.

If the basic problems are not properly addressed, we will see more defaults, and we already saw Iceland defaulting.

IOL: So, in your opinion, what is the way out?

Dr. Ahmed: I think we need fundamental changes.

Firstly, we should understand that the basics of the free capital system are not wrong. At the same time, there has to be much more emphasis on transparency — on how companies are investing their wealth.

Governments will have to take a much more educative role. Agencies (governmental or quasi-governmental) have to take on the responsibility of educating investors.

The Securities and Exchange commissions in the United States usually has that mandate. We need to give these agencies more power, not only in terms of law enforcement, but also the role of educating about markets.

More people are investing in markets and cannot afford big losses. At the same time, if not educated, they could face more problems. Therefore, the government should take the role of educating people about economy, its dangers, and the benefits of investments.

We need robust regulations and governmental actions in regulating the markets.
Secondly, we need anti-corruption measures. There is a fair amount of greed and corruption, especially in the developing economies.

Corruption can be in many forms, like concentration of wealth at the expense of the poor, which could potentially lead to social unrest.

Islamic finance can play a role, if it adds to its portfolio the dimension of fighting corruption, transparency, sustainable development, and social equality.

Amr Taha is a staff writer for the Politics in Depth section of IslamOnline.net. A graduate of the American University in Cairo, he holds a BA in political science with a specialization in international law and international relations. Contact him at politics.indepth [at] iolteam [dot] com

Stop the Looting

noreply@blogger.com (Parvez Ahmed) — Sun, 06 Dec 2009 19:47:00 +0000

An abridged version appears in Islamic Horizons, Nov/Dec 2009 Issue.

There is virtually no major organized opposition to legalized gambling, except from Focus on the Family and similar evangelical Christian groups. Given Islam’s prohibition of gambling, Muslims should work with other concerned organizations to educate people about the ills of gambling and advocate more transparency in lotteries (such as better disclosure of the winning odds). For example, if players knew that the odds of winning the Mega Millions jackpot are 1 in 135 million, would they so willingly part with their hard-earned money? To help publicize such facts, Muslims should support the National Problem Gambling Awareness Week (www.npgaw.org), the National Council on Problem Gambling (www.ncpgambling.org), and HelpGuide.org - Gambling Addiction (http://helpguide.org/mental/gambling_addiction.htm).

Other religions oppose gambling as well. Dianne M. Berlin (vice chair, National Coalition against Legalized Gambling [www.ncalg.org]; coordinator, CasinoFreePA [www.casinofreepa.org]; and founder CasinoFree LanCo), told “Islamic Horizons” that “gambling is a form of theft” And that although the words “gamble” or “gambling” are not used, two of the Ten Commandments address gambling: not to covet other people’s possessions (Exodus 20:17) and not to steal (Exodus 20:15).

Rabbi Jill Jacobs (director, outreach and education, Jewish Council on Urban Affairs [JCUA]) and Noah Leavitt (director, advocacy and policy, JCUA) state that Jewish law virtually condemns gambling. One Talmudic opinion, found in a discussion in “Tractate Sanhedrin,” categorizes gamblers as thieves and thus disqualifies them from giving legal testimony. Maimonides, one of Judaism’s most important medieval authorities, defines gambling as stealing even if both parties agree to the rules of the game, for the winner “takes another's money for free” (“Forward Forum,” 21 Jan. 2005). Rabbi Ovadia Yosef, former Sephardic chief rabbi of Israel, extends this prohibition to state-run lotteries.

The essential problem, according to these thinkers, lies in gambling’s violation of the basic principle of rabbinic commercial law -- the terms of sale must be clear to both the buyer and the seller. In addition, locating casinos or advertisements for them in low-income neighborhoods violates the Biblical precept Ilifnei iver lo titen michshol: "(Do not place a stumbling block before the blind), generally interpreted as a prohibition on tempting a person to do something that she or he knows to be wrong.”

The Qur’anic word for gambling is maysir (2:119 and 5:90); the term often used in Islamic law to denote it is qimar. According to Abu Hurayrah, Prophet Muhammad prohibited gambling (“Sahih al-Bukhari,” no. 4579). In his commentary on 2:219, Abdullah ibn Abbas says “Al-maysir is al-qimar,” and that pre-Islamic Arabs would bet their wives wife and wealth (“Tafsir ibn Jarir,” 2:358). Ibn Abidin states: “Gambling is from the word qamar, ‘that which increases at times and decreases at other times.’ It is called al-qimar due to the possibility that each gambler may lose his wealth to his counterpart, and it is also possible that one may gain from the wealth of the other.”

Protestants have issued explicit prohibitions against gambling, and the United Methodist Church’s “Book of Resolutions” states: “Gambling is a menace to society, deadly to the best interests of moral, social, economic, and spiritual life, and destructive of good government. As an act of faith and concern, Christians should abstain from gambling and should strive to minister to those victimized by the practice.” Judaism takes a “dim view of gambling,” even describing the winner as a moral “loser” (Eliezer Danzinger, “What is the Jewish view on gambling?” www.chabad.org ). Hindu scriptures also prohibit gambling (e.g., Rig-Veda 10:34:13 and Manu Smriti 7:50).

In contrast, the “New Catholic Encyclopedia” describes gambling as “though a luxury (it) is not considered sinful except when the indulgence in it is inconsistent with duty.” The Catechism of the Catholic Church states: “Games of chance (card games, etc.) or wagers are not in themselves contrary to justice. They become morally unacceptable when they deprive someone of what is necessary to provide for his needs and those of others. The passion for gambling risks becoming an enslavement. Unfair wagers and cheating at games constitute grave matter, unless the damage inflicted is so slight that the one who suffers it cannot reasonably consider it significant” (William N. Thompson, “Gambling in America: An Encyclopedia of History, Issues, and Society,” [ABC-CLIO, Inc.: 2001], 317-24).

Even though lotteries are illegal in many (though not all) Muslim-majority countries, variant forms of gambling are commonly found. Legalized and state sponsored gambling traditions date back to colonialism. For example, in 1567 Queen Elisabeth established the first state lotteries; Egypt’s first casino, Casino Opera, opened in 1926; and the French opened casinos in Lebanon. They remain open today, although in many instances restricted to foreigners. After the 1971 Indo-Pak war, Prime Minister Zulfikar Ali Bhutto built a plush casino in Karachi because he thought tourism would expose Pakistanis to “more modern Islamic and non-Islamic views,” (Linda K. Richter, “The Politics of Tourism in Asia” [University of Hawaii Press: 1989]). A military coup toppled him, however, before it was opened.

Wagering upon such inhumane games like quail or cock fights remains common in many Muslim societies. The spending of some Muslim royalty in famous casinos is quite legendary. And many Muslims in North America not only purchase but also sell lottery tickets in through their convenience stores.

The mission of Prophet Muhammad was to be a “mercy to humanity (and other creations.” In this context, Muslims should find common cause with others in opposing the scourge of gambling and increasing normalization of gambling like attitudes in finance and investments.

Lootery!

noreply@blogger.com (Parvez Ahmed) — Sun, 06 Dec 2009 19:38:00 +0000

An abridged version appears in Islamic Horizons, Nov/Dec 2009 Issue.

What lies behind the beaming lottery winners and oversized checks is misery, says Ellen Goodstein (Bankrate.com).

Television commercials and media stories depict winning the lottery as an American dream. But having piles of cash does not necessarily bring happiness, as pointed out by Ellen Goodstein, who cites the following examples: Evelyn Adams, a two-time winner of the New Jersey lottery (1985 and 1986) to the tune of $5.4 million, was reduced to living in a trailer. William "Bud" Post, winner of the $16.2 million Pennsylvania lottery (1988) ended up living on Social Security and food stamps. Suzanne Mullins, who won $4.2 million in the Virginia lottery (1993) is now deeply in debt to a company that lent her money using the winnings as collateral. Willie Hurt of Lansing, MI, won $3.1 million (1989) and within two years was broke and charged with murder, wasting his fortune on a divorce and crack cocaine. Charles Riddle of Belleville, MI, won $1 million (1975); afterward he got divorced, faced several lawsuits, and was indicted for selling cocaine. Eight years after winning $18 million in 1993, Missourian Janite Lee filed for bankruptcy.

The list of broken dreams abides. Most lottery winners learn that sudden money can cause as many problems as it solves. For many, it can cause a disaster because part of the problem is that they buy into the hype. Craig Wallace, an executive of a company that buys lottery annuity payments in exchange for lump sums, told Goodstein: "These people [winners] believe they are millionaires. They buy into the hype, but most of these people will go to their graves without ever becoming a millionaire.” Going broke is a common malady, particularly with smaller-amount winners.

Lottery marketers manipulate the situation to sell more tickets. Each winner is photographed with a 3’x5’ standup “check” and the caption “newest millionaire." In fact, a $1 million purse is really a promise to be paid $50,000 a year before taxes. Lottery winners, however, mistakenly believe that they are indeed “millionaires” and are likely to go on spending sprees. Scott Hankins, Mark Hoekstra, and Paige Marta Skiba (“The Ticket to Easy Street? The Financial Consequences of Winning the Lottery,” working paper, 2008) found that large-lottery winners fare no better with their finances than anyone else. The windfall may temporarily reduce their financial hardships; however, it increases their long-run likelihood of bankruptcy, perhaps induced by living beyond their means. Lottery buyers usually have a higher propensity to “gamble” or “speculate” in other areas of their lives, such as making greater investments in risk-laden investments and stocks.

Lotteries are legal -- and popular -- in all states but Alabama, Alaska, Hawai’i, Mississippi, Nevada, Utah, and Wyoming, and in nearly one hundred countries (including several Muslim majority countries). According to the North American Association of State and Provincial Lotteries (NASPL), American lottery sales in 2008 topped $60 billion, an amount larger than the gross domestic product of nearly 120 countries.

Lotteries are universally regarded as a vice, and most religions view them as sinful. Unlike smoking (which the government actively discourages) and drinking (which the government regulates), neither the state nor the federal government take any meaningful action to reduce gambling. This is perhaps due to an inherent conflict of interest. In 2008, states raked in $18 billion in revenue. For instance, the Iowa Lottery Authority announced on 30 Jul. 2009 that since 1985, when it began operations, it has disbursed more than $2.4 billion in prizes and raised nearly $1.2 billion for state programs. Besides the revenue stream, lotteries are legalized in the name of individual rights. At issue is not the constitutionality of legalized gambling, but the questionable ethics of state governments sponsoring, encouraging, and exploiting its citizens’ vices, to raise revenue.

Although governments also raise revenue from other “sin” activities like the consumption of alcohol, pornography or tobacco, lotteries are perhaps the only vice that governments “manufacture” and encourage, states Richard Whitaker (“State Lotteries and Agency Costs Hidden Costs to Nonparticipants,” American Journal of Economics and Sociology 66, no. 3 [2007]: 533-44). Far from discouraging gambling, some states faced with large budget deficits actually seek to make more forms of gambling available, reports Dunstan McNichol (“U.S. States Push More Gambling to Help Replace Declining Taxes Share,” Bloomberg, 20 Jul. 2009). And yet 2007 lottery sales combined amount to a meager 1.1 percent of state budgets, says the Tax Foundation (www.taxfoundation.org). Do states really have to depend upon this revenue source, given the other negative social consequences of gambling?

Conor Dougherty of the “Wall Street Journal” (10 Aug. 2009) remarks that the present economic downturn has caused casino, slot machine, and lottery revenues to fall for the first time in many of the states that have grown to depend upon gambling as a crucial source of income. In 2008, according to the American Gaming Association, an industry trade group, revenue contributed by commercial casinos to state and local governments was only 5.7 billion, down 2.2 percent. In many states, the decline continues. Eight of the twelve states that allow commercial casinos saw their take of gambling revenue fall in the fiscal year ending June 2009 compared with the same period a year ago, according to data from states and the Nelson A. Rockefeller Institute of Government at the State University of New York at Albany. In a sampling of twenty state lotteries, among them California and Illinois, fourteen had year-over-year drops in revenue for the fiscal year ending in June, according to Rockefeller Institute. The National Conference of State Legislatures reports that lawmakers in at least fourteen states have considered expanding gambling as an alternative to raising property or income taxes. Fired up by lobbyists’ contributions and the assumed voting day advantage politicians are eager to enhance gambling operations. For instance, in his 10 Aug. 2009 op-ed in “The Morning Call,” Tom Knox, Pennsylvania Democratic gubernatorial candidate, asserting his state’s needs for jobs, wrote: “Though most solutions will require a long-term strategy, there is one thing that can be done now to create an immediate demand for thousands of new jobs -- the legalization of table games. The simple act of legalizing table games at each licensed casino will create, literally overnight, the demand for thousands of new employees….Estimates presented to the Legislature predict that table games will create 10,100 new direct employment positions statewide.”

Assuming a tax rate of 12 percent, he claimed that legalizing table games would produce $120-$160 million in recurring revenue. In addition, the currently proposed table game licensing fee of $10 million would produce an additional $120 million, which he said was more than half of the state's entire annual budget for all community colleges. He stressed that the “job creation benefit of table gaming is extremely cost-effective when compared to attempts by the state to create jobs,” citing a 2001 program to create 900 jobs that had cost the state $900,000 and, sixteen months later, the company closed and fourteen jobs were actually lost. In 2002, another $12 million state grant awarded with the expectation of 6,000 new jobs resulted in only 2,000 new jobs. By comparison, he declared that “the legalization of table games would provide substantial job creation without the expenditure of a single dollar of taxpayer money.”

Costs and Benefits of Lotteries

The NASPL, which represents fifty-one North American lottery organizations, argues that lottery profits fund education, healthcare, capital construction, and other good causes. With 1-in-2 American adults reportedly sometimes buying a lottery ticket and 1-in-3 being weekly players, lotteries may have replaced baseball as the national pastime (see “The 1989 Gallup Poll: Public Opinion,” SR Books [28 Jun. 1990], 138). Undoubtedly the players perceive some benefit, which may explain their popularity. Like other games of chance, lotteries thrill participants with risk-taking and the anticipation of an unlikely victory. However, the harm outweighs the good (see Qur’an 2:219).

Lotteries prey upon the most vulnerable, for those with smaller amounts of disposable income spend a greater proportion of their earnings on them, say Charles T. Clotfelter, Julie A. Edell, and Marian Moore (“State lotteries at the turn of the century: Report to the national gambling impact study commission,” working paper, Duke University, 1999). Donald I. Price and E. Shawn Novak found that minorities are more likely to purchase lottery tickets (“The tax incidence of three Texas lottery games: Regressivity, race, and education; National Tax Journal 52, 1999, 741-51). During economic downturns, people increase their spending on lotteries and other risky ventures, even when they cannot really afford to do so, says John L. Mikesell (“State lottery sales and economic activity,” National Tax Journal 47, 1994, 165-71).

People living within fifty miles of a casino have a high probability of becoming pathological or problem gamblers; a casino located within ten miles is associated with a 90 percent increase in becoming a problem gambler, states John W. Welte, William F. Wieczorek, Grace M. Barnes, and Joseph H. Hoffman (“The Relationship of Ecological and Geographic Factors to Gambling Behavior and Pathology,” Journal of Gambling Studies 20, 4, winter 2004, 405-23). According to the U.S. General Accounting Office (GAO), compulsive gamblers are also prone to higher rates of divorce. Nearly 1-in-3 respondents had tried to kill themselves. No other addictive population reaches this figure, report R. Keith Schwer, William N. Thompson, and Daryl Nakamuro (“Beyond the Limits of Recreation: Social Costs of Gambling in Southern Nevada,” 2003 working paper). Gamblers also have a hard time kicking the habit: “Of the 80 participants followed for 12 months, 92 percent experienced relapse” (D. Hodgins and N. el-Guebaly, “Retrospective and Prospective Reports of Precipitants to Relapse in Pathological Gambling,” Journal of Consulting & Clinical Psychology 72, no. 1, 2004, 72-80).

Internet gambling has brought the vice right into homes and within easy reach of young impulsive and vulnerable addicts. Alarmingly, electronic gambling is even more addictive -- the “crack cocaine” of the industry, says the National Coalition against Legalized Gambling’s “Facts about Gambling” (NCALG, www.ncalg.org). According to the GAO’s Dec. 2002 report: “Since the mid-1990s, Internet gambling operators have established approximately 1,800 e-gaming websites in locations outside the United States, and global revenues from Internet gaming in 2003 are projected to be $5.0 billion dollars.” Internet gambling is approximately 4.3 percent of the total $116 billion in business-to-consumer global e-commerce. This growth comes despite the fact that law enforcement officers believe that such gambling can be “a significant vehicle for laundering criminal proceeds.” For instance, on 10 Aug. 2009 the FBI indicted Douglas Rennick, 34, for bank fraud and other offenses stemming from his role in processing more than $350 million for Internet gambling companies [during 2007-09] and operating accounts under false names, relates “The American Chronicle.”

Social Implications

Besides the inherent injustice in any form of gambling, lotteries can have social costs. In his 1995 study, Howard J. Shaffer of the Harvard Medical School’s Division on Addictions wrote: “Gambling is an addictive behavior, make no mistake about it ... Gambling has all the properties of a psychoactive substance, and again, the reason is that it changes the neurochemistry of the brain.” NCALG’s Carl Bechtold noted: “Gambling causes excitement, often leading the participant to forget about outside problems and the stresses of everyday life. Electronic gambling devices in particular offer a seemingly non-competitive diversion from reality. Gambling establishments usually serve and often encourage the use of alcoholic beverages, which further loosens players’ inhibitions. The games themselves are made to satisfy the demands of excitement; and the ensuing ‘loss of control’ is part of the ‘enjoyable’ experience of gambling” (“Tide of gambling yields backwash of addiction,” NCALG White Paper).

Even when not addictive, the ubiquitous promotion of lotteries equate success with luck rather than work, thus undermining a fundamental societal norm, say William A. Glaston and David Wasserman, whose study found that lotteries lead to an increase in crime ("Gambling away Our Moral Capital," Public Interest 123 [1996]: 58-71; see also John Mikesell and Maureen A. Pirog-Good, "State Lotteries and Crime: The Regressive Revenue Producer Is Linked with a Crime Rate Higher by 3%," American Journal of Economics and Sociology 49, [1990]: 7-19), while Ranjana Madhusudhan found that state lotteries contribute to increases in the overall number of gambling addicts ("Betting on Casino Revenues: Lessons from State Experiences," National Tax Journal 49 [1996]: 401-12). In the first eighteen hours of operation on opening day at Pittsburgh’s $780 million Rivers Casino, gamblers wagered an incredible 14 million dollars (Pittsburgh Post-Gazette, 10 Aug. 2009).

Lotteries are also a form of regressive tax, providing states with revenue from non-tax sources. Such revenue is less accountable to public scrutiny, and non-lottery players are willing to view it favorably because it shifts the tax burden to gamblers. Empirical studies, however, suggest that “the [lottery-generated] tax benefit is largely diminished by the above normal spending increases,” writes Richard Whitaker (“State Lotteries and Agency Costs: Hidden Costs to Nonparticipants,” American Journal of Economics and Sociology 66, no. 3 [2007]: 542). Moreover, the poor often bear a disproportionate share of this indirect taxation, although it must be noted that lotteries, unlike taxes, are optional. Nonetheless, given that people have known cognitive biases, lotteries can easily become addictive, in part because players fail to properly asses risk and are lured by cheap tickets and mesmerized by large payoffs, relates Alok Kumar (“Who Gambles in the Stock Market?” Journal of Finance 64, no. 4 [2009]: 1889-1933).

Lotteries and other forms of gambling are increasingly popular despite social concerns and religious prohibitions. Such indulgence is profoundly irrational, for the cost of a lottery ticket exceeds its fair value. Lotteries add very little to a state’s overall revenue. But to be fair, there are some exceptions, as in some states (mostly states in the U.S. northeast) lotteries account for 6 to 8 percent of state revenue. This meager benefit is offset, however, by damages to the society’s moral fabric. Lotteries and other forms of gambling encourage a “get-rich-quick” mentality that induces other forms of risky social behavior. Gambling discourages hard work, encourages greed and materialism, and leads to compulsive gamblers who are more prone to divorce and suicide. Muslim Americans should work with other faith groups to draw attention to the problems associated with gambling, particularly compulsive gambling, that have destroyed countless lives and caused untold misery. A March 2003 NCALG survey found that there are about 2 million compulsive and 6 million problem gamblers in America alone.

Las Vegas casino mogul Steve Wynn (formerly Weinberg) told Charlie Rose on CBS’ “60 Minutes” (12 Apr. 2009) that the only way to win in a casino is to own one, "unless you're very lucky," adding that he has never known a gambler who comes to a casino, wins big, and actually walks away. In gambling, there is only one winner, the house (the gambling establishment), and it ain’t yours.

Making Sense of the Senseless

noreply@blogger.com (Parvez Ahmed) — Fri, 13 Nov 2009 08:37:00 +0000

Published in Huffington Post. November 13, 2009

The news that one of US Army's very own has shot to death 13 fellow soldiers and wounded 30 others is just as shocking and puzzling as the many random shootings that preceded this. Do we know why the killers at Columbine gunned down their fellow classmates? Do we understand why a shooter at Virginia Tech perpetrated the deadliest peacetime shooting incident by a single gunman in US history? There is a lot of chatter about Maj Nidal Malik. Hasan's motive but they offer little if any clarity to a murky situation.

Could the fact that Maj. Nidal Malik Hasan was allegedly harassed because of his Islamic faith be a motive? Could Hasan's desire to avoid deployment to Iraq or Afghanistan be a reason? Could Hasan's view that the war on terror is merely a euphemism for a war on Islam explain this carnage? No reason can justify the unjustifiable. Hasan was not the first minority to face discrimination.

Moreover, how will killing innocent people stop discrimination? If anything, it will lead to more profiling and more discrimination against Arabs and Muslims. Some Muslims serving in the U.S. military may at times feel conflicted about being deployed to a war zone to fight members of their faith. However, how do such conflicted feelings make one angry enough to pull the trigger repeatedly and indiscriminately killing people? Many people find the tactical aspects of the war on terror troubling and are outspoken critics of it. But no critic of the war of on terror advocates killing innocent people as a way to affect it. Of all people, Maj. Hasan, a person trained by the US military ought to have known better. An Associated Press report suggests that the US military had known about Maj. Hasan's anti-American rants and his many angry outbursts. Why did the military not help Maj. Hasan deal with his inner demons? Why was Hasan not booted out of the service he so ungratefully and desperately wanted to leave (despite owing his education to the US military)?

In the absence of concrete answers, the media is left to speculate. The mainstream US media has acted with great responsibility and professionalism by avoiding excessively sensationalizing the news and taking the time to point out that American Muslims, individually and collectively have unequivocally condemned this senseless killing. However, the usual suspects, like right-wing commentators, Michelle Malkin and Debbie Schulssel, have not missed the opportunity to goad Islam and Muslims. On the Fox & Friends, host Brian Kilmeade asked Geraldo Rivera, "Do you think it's time for the military to have special debriefings of Muslim Army civilian officers, anybody enlisted?" Kilmeade further suggested that "it's time for the military to have special debriefings" of U.S. soldiers who are Muslims.

The tragedy at Fort Hood has evoked fear and anger among many in the American Muslim community. History suggests that their fear of a backlash is no figment of their imagination. Some Muslim leaders have urged American Muslims to pray and take protective measures. While prayer is always good and there is no fault in being careful, the action most urgently needed from the American Muslim community is not to withdraw from public life but rather to reach out and explain to their fellow Americans that the actions of Maj. Hasan are not representative of their faith or feelings about America. Muslims in America do face the problems of discrimination and many feel dismayed about America's policy towards hotspots like Iraq, Afghanistan, Iran or Palestine. But these issues cannot be solved by acts of terror or random violence. Terrorism in the name of Islam has only brought more misery to Muslims at home and abroad. Terrorism is morally bankrupt and strategically unsuccessful.

Most Americans have never met a Muslim and thus it is not surprising that they share a negative perception of Islam. For many their only knowledge of Islam and Muslims is shaped via the media where the news regarding Islam and Muslims is overwhelmingly negative. When a headline grabbing tragedy like Fort Hood unfolds, it is not surprising that many Americans demonstrate fear of and anger towards Muslims. Such fear and anger are not unprecedented. After September 11, 2001 American Muslims faced a similar situation. They responded not by retreating to the comforts of their prayer sanctuaries but rather by reaching out to fellow Americans. Those actions helped. However, the number of open houses and outreach efforts has dwindled in recent years. While the leadership of the American Muslim community has continued their interactions with leaders of the various faith based communities, but interactions at the grassroots levels, where it matters most, are few and far between. This vacuum has and will continue to get exploited by the Islamophobes. American Muslim organizations have been good at fire-fighting, rushing to douse the flames of hate after they have erupted. But they have not shown a propensity to be proactive and persistent with their efforts of ensuring more meaningful and sustained interactions between ordinary Muslims and people of other faiths (or non-faith).

American Muslims are also angry as to why they have to stand up and explain themselves every time a member of their faith does something bad. Their anger will not solve a problem that is real. Some Muslims are indeed committing acts of senseless violence invoking the name of Islam. Groups like al-Qaeda and its leaders like Osama bin Laden have a history of conflating political rhetoric with religious imagery. Take for example Osama bin Laden's August 23, 1996 statement, where he evokes powerful religious imagery while speaking about a political problem, "The people of Islam suffered from aggression, iniquity and injustice. . . . the latest and the greatest of these aggressions, incurred by the Muslims since the death of the Prophet . . . . in the occupation of the two Holy Places. Clearly after Belief (Iman) there is no more important duty than pushing the American enemy from the holy land." Such language does catalyze the popular perception that the faith of Islam motivates some Muslims to attack America and Americans.

However, linking Islam to terrorism because of bin Laden's rhetoric is an oversimplification of a complex problem. Far from the rage and fury of the extremists, Islam actually provides a theology for peace and guidelines for living peacefully in a world with diverse people and nations. Indeed peace and justice are the foundational elements of Islam. The Qur'an preaches pluralism, "O men! Behold, We have created you all out of a male and a female, and have made you into nations and tribes, so that you might come to know one another. Verily, the noblest of you in the sight of God is the one who is most deeply conscious of Him. Behold, God is all-knowing, all-aware." (49:13)

The Qur'an also emphasizes the sanctity of life saying, "do not take any human being's life (the life) which God has declared to be sacred--otherwise than in (the pursuit of) justice: this has He enjoined upon you so that you might use your reason,"(6:151). In addition, the Qur'an states, "that if anyone slays a human being--unless it be [in punishment] for murder or for spreading corruption on earth--it shall be as though he had slain all mankind; whereas, if anyone saves a life, it shall be as though he had saved the lives of all mankind," (5:32). Taken together, Islamic jurisprudence advocates the preservation of life, honor, and the dignity of all human life as a supreme endeavor.

Furthermore, Islam forbids suicide. In the Islamic ethos, the beginning (i.e., the birth) and the end (i.e., the death) of life in this world (Muslims believe in an afterlife) is the will of God. God gives life and death to an individual according to His own absolute knowledge and wisdom. Suicide implies a lack of trust in God and a lack of faith in His benevolence, mercy, love, wisdom, and knowledge. The Prophet Muhammad said, "A man was inflicted with wounds and he committed suicide, and so God said: My servant has caused death on himself hurriedly, so I forbid Paradise for him."

Any group or individual committing an act of terror in the name of Islam, deserve unequivocal condemnation. More Americans expect to hear this repeatedly and directly from American Muslims. Even when repetition is tiresome, Muslims must remain persistent in dissociating their faith from the criminal actions of a few. At the same time those who insist on linking every bad action by a Muslim to their faith must realize that their actions only inflame passions and alienate Muslims, whose support is necessary to defeat those who kill in the name of Islam.

Answers about terrorism cannot be boiled down to sound bites and slogans. Terrorism is a complex phenomenon that requires thoughtful analysis and discussion. Almost eight years after the declaration of a war on terror, terrorism remains a threat and by many indicators a bigger problem today than before September 11, 2001. Only thoughtful discussions can lead to sensible polices. Name calling and finger pointing will leave us grappling to explain tragedies like Fort Hood. Muslims have as much a stake in this issue as any other community. The victims of terrorism are majority Muslims. Rather than treating Islam as the problem, it is more constructive to view it as a solution towards achieving peace and justice.

India’s Invisible Minority

noreply@blogger.com (Parvez Ahmed) — Sat, 24 Oct 2009 05:26:00 +0000

This article is based on a lecture given at the Press Club in Kolkata (Calcutta), India on September 24, 2009. The lecture was sponsored by the American Center in Calcutta, India.

First Published by AltMuslim. October 23, 2009

This year due to a coincidence of the lunar calendar, Eid-ul-Fitr and Durga Puja, two major religious festivals of India, were celebrated within a week of each other in late September. After twenty-two years, I was able to witness both in my birth city of Kolkata (Calcutta, India). One common thread between the Pujas and Eids is the propensity amongst the faithful to shop for new clothes and gifts with the same fervor and joy as Christmas shoppers in my adopted homeland of United States. The area colloquially called New Market is the nexus of this buying spree in Kolkata. I had a few things to shop for my family and quite naturally gravitated towards where all Kolkata roads seemed to meet.

Fighting the heat and humidity of a late September afternoon and amidst the crushing crowds, I could not help but notice that the overwhelming majority of the signs strewn across the myriad of shops were Puja greetings, well-wishing those celebrating Durgautsov. Conspicuous in their absence were well wishes to the Muslim community on the occasion of their Eid. Muslims who make up over twenty percent of the population in Kolkata, have become its invisible minority, increasingly squeezed out of the public square in Kolkata and beyond.

In 1947, after India’s bloody and tragic partition, many Muslims, particularly the elites, migrated to Pakistan leaving behind a political and social vacuum. Those who chose to remain Indian outnumbered those who opted for Pakistan. Yet Indian Muslims have been stigmatized as India’s fifth column. The subsequent rise of the Hindu political identity marked by the Hinduvta movement, the lack of creative ideas in the Muslim community towards self-empowerment, the post-independence educational curriculum depicting Muslims as outsiders, Islamophobia, and violence in the name of Islam; all have contributed to marginalize India’s Muslims.

Writing a book review in The Hindu, A.G. Noorani commented, “It (the Muslim problem) must be treated urgently and seriously as one of the national problems. Discrimination against Muslims has been a blot on India's record as a democracy. That blot must be erased with determination and speed by all Indians who cherish the Great Indian Ideal.” Thus, the idea behind empowering Muslims in India should not be viewed as either appeasement to a voting block or solely an altruistic program to uplift one of India’s most downtrodden socio-religious communities.

Persistent religious discrimination and recurring communal violence have marred India’s ideals and values. It has diminished India’s narrative of a secular state where multi-ethnic and multi-religious communities can safely and freely reside. The erosion of the constitutionally protected fundamental rights has been especially disillusioning for India’s Muslim youth. The repeated failure of governments, both local and national, to take appropriate measures to protect the rights of minority citizens has prompted the U.S. Commission on International Religious Freedom to put India on its 2009 Watch List.

Despite the obvious need to correct the problem, religious fanatics and fundamentalists have espoused the notion that Muslim empowerment is a zero-sum game. In particular the Hinduvta movement has cultivated a mistaken notion that any gain to the Muslim community is a loss for the Hindus. But in today’s globalized society, power resides not so much in unilateralism (shown to be glaringly ineffective by George W. Bush) but rather in effective mutuality and sharing between all who have a stake in a nation’s future. Thus, the issue of Muslim empowerment should be as much a Hindu concern as it is a Muslim aspiration.

Empowering Muslims in India requires a three pronged effort with all of the parts working together in a holistic manner to convert today’s challenge into tomorrow’s opportunities. The first prong undoubtedly lies on the shoulders of India’s Muslim community. Instead of succumbing to the political rhetoric being espoused by self-appointed leaders, Muslims must leave aside their cynicism and engage in the Indian political, social and cultural life with vigor and positivity. The Civil Rights movement in America can serve as an inspirational model. Integration will be more effective if Indian Muslims harmonize their Islamic identity with their Indian one.

Such integrative steps can happen only if India’s state, local and central governments come forward with bold new proposals to correct the glaring deficiencies pointed out by the Sachar Committee Report. Although much of the grievances in the report were well known to Muslims, the Sachar Report is an eye opener to those who assumed away the Muslim problem or blamed it on some foreign conspiracy. The Sachar Report is poignant in its pathos that the disempowerment of India’s Muslims is an Indian problem created by decades of neglect and abuse, which hangs as an albatross on India’s otherwise vibrant democracy. Quite ironically, states like West Bengal and Kerala that boasted the most liberal governments were just as culpable in their lack of attention to Muslim empowerment as regions that hosted more religiocentric governments, like Gujarat. I was shocked to learn that in my birth state of West Bengal, Muslim representation in state public sector undertakings is exactly zero percent!

Other statistics are equally grim - less than 4 percent Muslims graduate from school; 1 in 25 undergraduate students and 1 in 50 post graduate students in premier university and colleges are Muslims; although Muslims are nearly 14 percent of India’s population their share in government employment is 4.9 percent; in India’s security agencies, Muslim representation is 3.2 percent; only 2.1 percent of Muslim farmers own tractors; just 1 percent own hand pumps for irrigation; if Muslims do outnumber majority Hindus in anywhere, it is predictably as a proportion of the prison population (much like Blacks in America).

It will be a mistake to leave the task of Muslim empowerment to the goodwill of governments alone. As India transforms itself into a market economy, it is the private sector that will play a bigger role in both the economic and social transformation of India. India’s big-business community can, if they choose to, play a positive role in empowering India’s Muslim minority. One mechanism for creating an Indian corporate workforce that is reflective of India’s socio-religious communities is through the voluntary adoption of the UN Global Compact. Launched in the year 2000 the Global Compact is an effort by the United Nations to usher-in a more sustainable, just and inclusive global economy.

To achieve this goal, the Global Compact outlined ten principles broadly classified in the areas of human rights, labor, the environment and anti-corruption. If the business community takes the necessary steps to apply these principles, it will inevitably lead to not only preserving the profit margins for the businesses but to a general well being of the society. By ending all overt and covert discriminations in labor practices, businesses can assist in empowering India’s minorities. By adhering to higher environmental standards businesses can also help the poor (including but not limited to Muslims) who are usually the disproportionate victims of environmental degradation.

The issue of Muslim empowerment is not so much about the Muslim community as it is about India’s future. A more educated Muslim community will constitute a more enlightened Indian work force leading to better business opportunity and a more sustainable growth for India’s economy. The next step in India’s economic evolution will likely not come on the backs of call centers and outsourcing. Rather it will come as result of higher paying service oriented jobs that require a large educated work force. An empowered Muslim community will also mean fewer security headaches and lesser social tension.

The Sachar commission recommends that 15 percent of all government funds be allocated to Muslim welfare and development. While this may work in the short run, in the long run Muslims need equal opportunities not quotas or handouts. This can come about via the establishment of “Equal Opportunities Commission” much like the Equal Employment Opportunity Commission in the United States. Such a commission, armed with judicial powers, can greatly aid in empowering India’s Muslim much like the EEOC continues to do for America’s minority communities. These suggestions, among the many made by the Sachar report, are not difficult to implement provided governments and citizens alike make a commitment to change their mindset that for too long has regarded the issue of Muslim empowerment as a zero-sum game relegating them to become India’s invisible minority.

Bangladesh's future rests on development of ethical financial markets

noreply@blogger.com (Parvez Ahmed) — Thu, 08 Oct 2009 04:03:00 +0000

The Financial Express, October 7, 2009

A recent Bangladesh Bank (BB) policy paper asserts that moving into the future, Bangladesh will have to rely heavily on capital markets to raise the necessary money to fund capital expansion projects. Capital expansion projects need a lot of money and relying solely on banks to raise that money is inefficient. In Bangladesh, financing via debt market is generally small and stock markets are in their infancy, albeit growing rapidly. Stock market capitalisation has grown at an average annual rate of 77 per cent from 2003 to 2008.

Despite such positive signs, Bangladesh has an Achilles' heel as it has been consistently cited by Transparency International (TI) as one of the countries with the highest levels of corruption. Transparency International, a civil society organisation, cites the economic cost of corruption as, "Corruption leads to the depletion of national wealth. It is often responsible for the funneling of scarce public resources to uneconomic high-profile projects, such as dams, power plants, pipelines and refineries, at the expense of less spectacular but fundamental infrastructure projects such as schools, hospitals and roads, or the supply of power and water to rural areas. Furthermore, it hinders the development of fair market structures and distorts competition, thereby deterring investment." The benefits from the development of the financial markets can easily be undone by the general pervasiveness and permissiveness of corruption.

The centrality of ethics in economic development is easily discerned from the fact that the three largest economies of the world US, Japan and Germany all rank among the top 20 (least corrupt) in the Corruption Perception Index. In developed countries like the US, business school curriculums and professional organisations are accelerating the integration of ethics. The hope is that effectively integrating ethics and social responsibility into pedagogy will allow the grooming of professionals who will avoid the ethical pitfalls that have become the hallmark of the many financial scandals in the recent past. Bangladesh should not wait to address the issue of ethics after some scandal rocks its markets. Rather a proactive strategy can avoid major scandals allowing Bangladesh to sustain its economic development.

The solution lies in a pursuing a two-pronged strategy. First, ethics has to be integrated in the business curriculum so that tomorrow's business leaders graduate armed with the motivation and knowledge about why ethics matter. The second strategy requires major businesses to voluntarily adopt the principles of the UN Global Compact.

Popular text books in finance and business state that the goal of the financial manger is, "to maximise the current value per share of the existing stock," fostering a notion that shareholder wealth maximisation is devoid of any moral concern. Such ambiguity leaves students unsure about the role of ethics in business. At worst, practitioners may treat ethics and shareholder wealth maximisation as a zero-sum game, more of one leading to less of the other. Effective integration of ethics will come about if students are convinced that shareholder wealth maximisation is indeed consistent with the pursuit of ethics and social responsibility.

Ethics need not be exclusively policed using paternalistic mechanisms. Rather, the marketplace can moderate the urge to be self-centered. This is possible so long as media and civic society accept their responsibility of naming and shaming ethical violators. Take for example the well publicised controversy regarding American talk show host Don Imus. On the April 4, 2007, he said referred to the players in the women's basketball team at Rutgers University as "nappy-headed hoes," a description deemed offensive to the teams' Black players. This was not the first time Imus had used derogatory language to insult minorities. A few days later, facing a surge of protests, Imus' show was cancelled and later he was fired from his position by CBS, although Imus had not violated any law.

Was CBS' action consistent with shareholder wealth maximisation? NGOs made appeals to advertisers withdraw their support of Imus' show. Customers threatened advertisers with economic sanctions. By firing Imus, CBS acted as a conduit for the ethical beliefs of the stakeholders. CBS did not need to become expert on the US. Constitution nor did it need to conduct a shareholder referendum to determine their moral beliefs. CBS made an ethical decision but within the framework of what is called the marketplace of morality.

In Bangladesh, purveyors of Islamic finance are assuming prominence. Islamic universities are competing side-by-side with established secular institutions. Scholars dating back to Adam Smith and Max Weber have argued that religion plays a fundamental role in shaping economics. The development of a stronger ethical foundation for Bangladesh's financial markets can be aided by understanding the consistency between normative Islam and modern theories of virtue ethics.

The comparable word for ethics in Islam is 'akhlaq' or 'khuluq'. The issue of "internal good" is best captured in the two Islamic concepts of 'taqwa' (piety) and 'ihsan' (excellence). Having 'taqwa' allows a person to be aware of God's omnipresence and attributes, serving to remind believers of their responsibility towards God. 'Ihsan' pertains to obtaining perfection or excellence in worship, morals, manners, attitudes and social interactions.

The idea of "moral judgment" is best exemplified by two Islamic concepts of justice (adl) and trusteeship (khilafa). In pursuing wealth maximisation, people should not lie or cheat; they must uphold promises and fulfill contracts. Usurious dealings are prohibited. Excessive speculation is shunned. In the Islamic hermeneutics, the rich are not the real owners of their wealth; they are only the trustees. Thus, justice requires that the rich spend their wealth in accordance with the terms of the trust, one of the most important of which is fulfilling the needs of the poor. Islam views human beings as God's vicegerent or trustee (khalifa) on earth, implying that there is no conflict between the morality and the pursuit of economic success. Given the right motivation and means, all economic activity can assume the character of worship.

The second leg in the effective integration of ethics in finance rests with businesses voluntarily adopting the UN Global Compact. On July 26, 2000 the United Nations launched an innovative public-private partnership (PPP), calling it the UN Global Compact. The idea was to foster "social responsibility," amongst corporations. It was a call to the business community that their goal in managing businesses should not be exclusively focused on profit margins but in addition take steps to realise a more sustainable, just and inclusive global economy.

To achieve this goal, the Global Compact outlined ten principles broadly classified in the areas of human rights, labour, environment and anti-corruption. The Global Compact requires participating businesses to annually report their progress on the ten principles. If the business community takes the necessary steps to apply these principles, it will inevitably lead to not only preserving their profit margins but to a general well-being of the society. In particular, principle 10 of the Global Compact asks businesses to strive against corruption in all its forms, including extortion and bribery. Only 25 Bangladeshi companies have signed on to the UN Global Compact. Unfortunately, over half of them are classified as "non-communicating", having failed to comply with the reporting requirements. Eight Bangladeshi small and medium enterprises (SME) have signed on the UN Global Compact but only three have complied with all the reporting requirements. More businesses need to voluntarily adopt the UN Global Compact and this will come about only if civic society uses the marketplace of morality to demand business practices adhere to standards, which can ensure a more sustainable globalization.

Adam Smith defines "internal good" as "the man who acts according to the rules of perfect prudence, of strict justice, and of proper benevolence." Attaining "internal good" is necessary not just for altruistic reasons but also for profit making purposes. Providing profit by harming society perverts the purpose of business. An effective marketplace of morality, Dobson asserts will make financial markets truly ethical. He goes on to say, "Dishonesty and deceit would be anathema, because honesty and integrity are themselves internal goods. A truly ethical individual, pursuing internal goods, would never sacrifice honesty for material gain, but only too readily sacrifice material gain for honesty."

More Americans Empathize with Muslims

noreply@blogger.com (Parvez Ahmed) — Sat, 12 Sep 2009 17:19:00 +0000

Huffington Post, Sep 11, 2009
Also on AltMuslim

The latest survey from the Pew Research Center for People and the Press shows an unmistakable trend of Americans slowly but surely beginning to appreciate the challenges and aspirations of its fellow Muslim citizenry. Perhaps this trend is a result of nearly half of Americans saying that they personally know someone who is a Muslim. The fact that so many Americans profess knowing a Muslim is surprising given the fact that American Muslims makeup fewer than 2 percent of the overall U.S. population. The latest Pew poll shows the percentage of Americans who view Islam to be a violent religion is at its lowest level in recent years although not lower than the 25 percent mark recorded in the first Pew poll on this subject shortly after the terrorist attacks on 9-11. The biggest change in attitude came among surprisingly conservative Republicans, a 13 point decrease in the view that Islam is violent.

Coinciding with this positive trend are the findings that show more Americans, nearly 6 in 10, saying that Muslims are subject, “to a lot of discrimination.” While the empathy factor for Muslims have increased, knowledge about Islam and Muslims remain pitifully low. Two-thirds of people who are not Muslims find Islam to be “very different or somewhat different” from their faiths. The Pew report states that, “slim majorities of the public are able to correctly answer questions about the name Muslims use to refer to God (53%) and the name of Islam’s sacred text (52%).” Only four-in-ten correctly answered both “Allah” and “the Quran.” Those who know a Muslim are least likely to see Islam as encouraging of violence and most likely to express favorable views of Muslims.

The change in attitude towards Islam and Muslims are undoubtedly the result of more American Muslims than ever before taking the time to and making the effort to reach out to their neighbors and colleagues trying to explain away the misunderstandings about their faith. In recent days and months, major American leaders have also taken extraordinary steps in reminding fellow Americans about the valuable contributions being made by American Muslims. “I saw….a photo essay …of a mother in Arlington Cemetery, and she had her head on the headstone of her son's grave….you could see the writing on the headstone. And it gave his awards -- Purple Heart, Bronze Star -- showed that he died in Iraq….. He was 20 years old. And then, at the very top of the headstone …. it had crescent and a star of the Islamic faith. And his name was Kareem Rashad Sultan Khan, and he was an American. ….. He was 14 years old at the time of 9/11, and he waited until he can go serve his country, and he gave his life,” observed General Colin Powell, former Chairman of the Joint Chiefs of Staff and former Secretary of State in while being interviewed on Meet the Press.

More recently President Barack Obama speaking at a Ramadan iftar noted, “And like the broader American citizenry, the American Muslim community is one of extraordinary dynamism and diversity -- with families that stretch back generations and more recent immigrants; with Muslims of countless races and ethnicities, and with roots in every corner of the world. Indeed, the contribution of Muslims to the United States are too long to catalog because Muslims are so interwoven into the fabric of our communities and our country. American Muslims are successful in business and entertainment; in the arts and athletics; in science and in medicine. Above all, they are successful parents, good neighbors, and active citizens.” Perhaps the President stated the obvious but if more American opinion leaders find the courage to do just that then the trend towards a more positive view Islam and Muslims will undoubtedly accelerate. And America will be better for that.

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, recently noted that U.S. military is bungling its outreach to the Muslim world and squandering good will by failing to live up to its promises. Adm. Mullen’s views are backed by data that shows opinions about America and America’s intentions remain alarmingly poor in much of the Muslim world. To change the hearts and mind, American rhetoric will have to be backed by American action. Adm. Mullen went on to say, “Our messages lack credibility because we haven’t invested enough in building trust and relationships, and we haven’t always delivered on promises.” One reason we have failed to build trust relationships with the Muslim world, is because so few Americans understand Islam and Muslims.

American Muslims will have to increase their efforts to reach out to their neighbors and colleagues. Americans of other faiths will have to reciprocate. Undoubtedly understanding is a two-way street. Muslims must also increase their efforts to understand the faiths of other people. Given today’s global political tensions, economic unease, and ecological concerns, the need for identifying our common ground and working together for the common good is urgent.

Understanding the Current Economic and Financial Crisis

noreply@blogger.com (Parvez Ahmed) — Sun, 16 Aug 2009 02:38:00 +0000

Islam Online. Aug 5, 2009

Easy credit and risky derivatives are the apparent factors that triggered this once-in-a-generation global financial crisis.

However, the fact is that responsible and reputable institutions, that are otherwise risk-averse, engaged in extremely risky trades without adequate protective measures, which points to something more fundamental being amiss.

Despite mounting evidence to the contrary, major financial institutions and regulators mistakenly clinged to the dogma that human beings are "rational" and make financial decisions purely motivated by economic incentives.

This assumption has been challenged for quite a while, but has grown louder since the start of the crisis. Influential voices in the field of economics, including Nobel laureates, are seeking fundamental changes in public policy.

The quest to better understand human nature is as old as human civilization. Religious texts and non-religious philosophies have pondered over this matter quite extensively.

Islam is no exception; it can be posited that Islam does provide a more holistic look into human reality by exploring not just observable facts about human nature, but also the eternal mysteries of soul and heart.

The Crisis

The current global financial and economic crisis, while not unprecedented, is certainly the most severe since the Great Depression of the 1930s.

On October 23, 2008 testifying before the House Committee on Government Oversight and Reform, former chairman of the US Federal Reserve, Alan Greenspan called this crisis a "once-in-a-century credit tsunami," that resulted from the collapse of the US housing sector.

The impact of this crisis on the developed world is quite well documented. The US unemployment rate is expected to reach 10 percent and the projected GDP growth for 2009 is at an anemic 0.1 to 0.2 percent (Most economists agree that the ideal growth for US GDP is between 2-3 percent per a year).

Somewhat lost in the maelstrom is the impact of this crisis on the 1.4 billion people who live in extreme poverty, mostly in the developing world.

A global economic crisis is turning poverty into a catastrophe. The administrator of the UN Development Program, Kemal Dervis, warned that the, "current global economic conditions threaten the gains that have been made to reduce poverty, and advance development for large numbers of people."

The number of people who are chronically hungry could increase by 130 million in 2009, reaching three-quarter of a billion people now.

A crisis evokes a quest for not just solutions, but a renewed interest in examining the very fundamentals of the current system.

Economics Noble Laureate Joseph Stiglitz recently said that the current financial crisis requires a global response based on the principles of social justice and solidarity.

Rejecting "trickle-down" theories that dominated finance and economics since the 1980s (championed by Ronald Regan in the United States and Margaret Thatcher in United Kingdom), Stiglitz questioned the fundamentals of the current system, saying: "what is good for Wall Street is not necessarily good for all."

The Dogma

We have arrived, in part, to a dogmatic belief in free markets – primarily the notion that the "invisible hand" of the market is adequate to keep markets properly functioning.

The regulators of the economy (the Fed and the Treasury in the United States) placed an inordinate emphasis on laissez-faire (hands-off or let do) ideology, thus favoring systems that prefer "efficiency" without regarding the equally important societal concern of "fairness".

Moreover, regulators and many economists were unwilling to budge from the assumption that investors are "rational", (technically the marginal investor is assumed to be rational) disregarding an emerging body of literature in finance and economics that posited investor behavior to be driven by psychological or cognitive factors, such as fear and greed.

If people were purely rational then we would not see massive expenditures on lottery or gambling, where the cost of a lottery ticket always exceeds the expected pay-off from winning the lottery. For example, if the winning jackpot was $1,000,000 and 1,000,000 tickets were sold, then the probability of winning the jackpot is 1 in 1,000,000.

The expected payoff from this gamble is computed by multiplying the winning jackpot with the probability of a win; this equals $1.

If the cost of this lottery ticket exceeds $1 then the ticket is overpriced. Even without knowing any expectation theory, it is easy to understand that if this were not the case, Las Vegas will go out of business! In gambling, the house always wins and for every winner there are a million losers.

Thus, the Qur’anic injunction (5:93-94) against gambling is not just a matter of religious spirit, but also a matter of common sense[1].

A More Realistic Look at Economic Decision Making

Since Kahneman and Tversky's ground-breaking work 30 years ago, a new area of research called Behavioral Finance or Behavioral Economics explains why people often fail to rationally respond to economic choices[2]. The example on gambling is illustrative of such failures[3].

Value or price of an asset (financial or otherwise) is not always efficient — not reflecting the asset's true, fair value.

Thus, irrational human beings contribute toward irrational markets. The British economist John Maynard Keynes in his 1936 classic "The General Theory of Employment, Interest and Money" wrote that contrary to being rational, human beings are far more likely to make decisions under the impulse of what he described as the "animal spirits".

In our time, economists Robert Shiller and George Akerlof in their book, "Animal Spirits ”, identify five "animal forces" that drive economic choices:

Confidence: Rather than making investment decisions based on objective facts, such as cash flows, investors are more likely to use "gut feelings" to make asset pricing decisions. Confidence is also contagion, like any virus. This leads to severe boom and bust cycles.

Fairness: People in general want to be fair and they want others to live with fairness. Thus, the ideas of fairness influencing wage-setting and the labor market explain "sticky" wages and persistent involuntary unemployment.

Corruption: Each major financial crisis of the past century has been preceded by anti-social behavior. The 1991 recession was preceded by the savings and loan crisis. The lead-up to the 2001 recession, with an outbreak of corporate corruption cases like Enron and WorldCom.

The current recession was preceded by sub-prime mortgages issued to people who logically could never have the means to repay them, and their securitization in packages that even the rating agencies that gave them AAA ratings could not understand.

Even watch-dog agencies, like the US Federal Reserve, had no understanding of types of risk that AIG was exposed to and how that risk could take down the US economy[4].

Money illusion: Refers to the tendency to think of asset value in nominal rather than real terms. People often take the numerical or face value of an asset as its true value, ignoring the impact that inflation had in reducing the purchasing power or real value of the asset.

Since accounting is based on nominal value and not real value "money illusion" clouds economic decision making.

Stories: Human lives are built around story telling. Without a narrative, life will be just one event after another, seemingly unrelated and random.

Stories give life purpose allowing the development of confidence in nations or institutions. Sometimes the "stories" are urban legends.

Take for example the myth that property prices or housing prices will always rise, because there is only so much land available.

This is not true. Yet, people believed this urban legend which led to the housing bubble in the United States. Stories can propagate myths, which in turn leads to bubbles. Eventually the bubble has to burst causing untold misery.
This "behavioral" deconstruction of human reality is not new to Islam's foundational texts. It is common knowledge that human beings have both an angelic and devilish side to them.

God says in the Holy Qur'an [We have indeed created man in the best shape, then we reduced him (to be) the lowest of the low, except those who believe and do righteous deeds: for they shall have a reward unfailing.] (95:46).

The presence of "animal spirits" in human beings is well illustrated in the many stories of human failings in the Quran.

However, the same human being is also capable of extraordinary compassion and understanding. Prophet Muhammad, peace be upon him, said, "God created Adam in His form".

This suggests that human beings have unlimited capacity for development and the pursuit of perfection. With proper nurturing, appropriate environment, and enforceable reward-punishment structure, human beings can gain reasonable control over their "animal spirits".

Thus, it is important to understand human nature in order to better explain why economic systems undergo severe boom and bust cycles, and what can be done to create a more stable and sustainable economic and financial system.

Footnote:

[1] [O you who believe, truly intoxicants and gambling and divination by arrows are an abomination of Satan; avoid them in order that you may be successful. Assuredly Satan desires to sow enmity and hatred among you by means of intoxicants and gambling, and to hinder you from the remembrance of Allah and from prayer. Will you not then desist?] (Al-Ma'idah: 93-94)

[2] Kahneman, Daniel, and Amos Tversky (1979) "Prospect Theory: An Analysis of Decision under Risk", Econometrica, V. 47 No. 2, 263-292.

[3] Over half the US population has at one time or another bought a lottery ticket. The average expenditure on lottery exceeds that of spending on books or movie tickets.

[4] "Fool's Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe," By Gillian Tett. Little Brown.

Fulbright scholar promotes equality

noreply@blogger.com (Parvez Ahmed) — Mon, 29 Jun 2009 20:32:00 +0000

FLORIDA TIMES UNION, June 29, 2009

UNF teacher will study Bangladesh culture for "common problems."
By Josh Salman

Parvez Ahmed understands the importance of culture.

The assistant (associate) finance professor at University of North Florida has worked hard to bridge the gap between the general population and Muslim community in Northeast Florida. He practices equality and preaches the same to his students.

So when Ahmed was awarded the coveted Fulbright Grant, he fulfilled a lifelong dream. He could take the same principles he strives to teach at UNF and apply them to students in South Asia.

Ahmed will be leaving in August to spend the fall semester teaching finance and doing research at the Independent University of Bangladesh in Dhaka, the nation's capital.

"[Teaching] is our way of affecting the hearts and minds of people we are visiting," Ahmed said. "I'm hoping to apply what I learn there to the classroom here and create exchanges."

While in Bangladesh, Ahmed will study the region's economy and financial sector. He will explore the nation's villages and the study the people.

He will venture into the bordering country of India, and see the effects an economic powerhouse can have on a smaller nation.

And he will break down market development in the third-largest Muslim country in the world.

"Most people associate Bangladesh with natural disasters," Ahmed said. "But there's a lot more to it than that."

Ahmed grew up in an Indian town near the university he will be visiting. He hopes this advantage will allow him to develop a deeper social relationship with the native residents.

"This allows us to better understand what's going on in these countries," Ahmed said. "The common problems requiring common solutions."

Ahmed is one of 1,100 faculty nationally awarded the Fulbright grant. He has been at UNF since 2002 and has received the Outstanding Researcher Award three times from Coggin College as well as the Outstanding Teacher Award.

Ahmed has also served on the OneJax board of directors for more than three years, where he's worked to suppress the public's post-Sept. 11 anxiety toward Muslims.

"Being selfish, I can't believe he's going to be gone," said Bobbie O'Connor, executive director of OneJax. "But he's really deserving of the award and has such a strong commitment to the community."

Ahmed plans to use his experience as a motivational tool and generate interest from his students in foreign culture and economics.

He is also planning a study-abroad trip to Egypt for finance students this March. And whether in America or across seas, Ahmed's students said there's no professor they would rather learn balance sheets and market indexes from.

"His lectures are so thought-provoking," UNF graduate student James Fugard said after one of Ahmed's classes. "His courses are definitely a challenge, but you come out learning a lot."

Amanda Mullins said she takes Ahmed's courses every opportunity she has. "He makes sure you know your stuff and can apply it in the real world," Mullins said. "His style definitely make concepts easy to understand."

Can Iran be Precursor to Major Changes in the Muslim World?

noreply@blogger.com (Parvez Ahmed) — Wed, 24 Jun 2009 15:55:00 +0000

Published in Huffington Post.

In Cairo, a U.S. President owned up to a well known fact that in 1953 the United States played a role in overthrowing Mohammad Mosaddeq, the then democratically elected leader of Iran. Over half a century later, following the botched 2009 Presidential elections in Iran, it is no longer America denying Iranians the right to be represented by popular choice. It is no longer America playing puppeteer. Ironically, the ones pulling the strings are those who have most vociferously decried America’s ungodly interference in their region.

It is hard to prognosticate how events will unfold in Iran. Will there be any spillover effects in the rest of the Muslim world? Although, change has not yet fully blossomed, the atmosphere is pregnant with expectations. The battle for the future of Iran is emblematic of the broader struggle across many Muslim majority societies. At the core lies two questions, will democracy finally gain a firm foothold and what role will religion play in their political future?

In Iran, both sides have claimed religious justification for their actions. Ayatollah Khameni invoked his religious authority to issue a Nixonian edict that, if the Ayatollah says that the re-election of Mahmoud Ahmedinejad is legitimate, then it must be so and it is Islamic. The opposition candidate Mir Hussein Moussavi also invoked Islam’s call for justice echoing the Quranic sentiment, “Stand firmly for justice as witnesses to God, even if it is against yourself.” (4:135).

However, literal reading of religious texts alone cannot provide all the necessary answers in this struggle for legitimacy and fairness. The issue of state-governance is not discussed in great details in Islam’s revealed text - The Quran. In verses 42:38 and 3:159, the Quran provides only basic principles, in that governance should be based on "mutual consultation," or “shura.” How this “shura” is to be conducted is left wide open for interpretation. Scholars of Islam contend that “shura” contains three essential elements - equal rights for all citizens, majority rule for public policy and the promotion of justice and human dignity. The degree to which a government is “Islamic” and “democratic” will depend on how well they rank on these three elements of “shura.”

The unfolding saga in Iran has not drawn much criticism from other countries in the region, for understandable reasons. In the struggle of ordinary Iranians, the other authoritarian regimes in the region, foresee an existential challenge to their own authority. If Iran “falls” to democracy, then can others be far behind? Too much support for Mousavi, and his success, is likely to give rise to similar popular movements across the region, which not only threatens the ruling elites but also makes America uncomfortable with the prospect of dealing with unknown actors who may emerge out of this quest for democratization. Too little support will result in the unsustainable continuation of the status quo. This is the dilemma facing President Obama.

Today’s Iran highlights the combustible mix of religion and politics. Muslims do not doubt the veracity of the Quran being the word of God. However, the interpretation of the divine words is entirely human and thus, its translation into practical law is open to multitudes of understandings. Using the power of the state to resolve such differences only creates discord, undermining both the state of faith and faith in the state. Historically, many Muslim jurists opted to stay out of government in order to retain their independence and credibility, thus making an argument favoring the separation of mosque and state.

Although majority of Muslims in countries like Egypt, Pakistan or Jordan today favor the introduction of Shariah, they do so because the current secular laws have failed to deliver justice to the people. Their hope is that Shariah will require, in the words of Noah Fledman (author of The Fall and Rise of the Islamic State), “all human beings — and all human governments — are subject to justice under the law.” Muslims are yearning for justice that they have been denied for so long, often due to outside interference but increasingly due to internal failures of Muslim majority states.

The onus for change is not only on those most affected, but also on Muslims living under democracies. In particular, Muslims in America and Europe can play a more assertive role in prodding Muslim majority nations to build civil societies whose governments are truly representative, whose judiciaries are respectful of the rights of all people and whose legislature fosters positive development of the material and the spirit. A success story in Iran can very well augur a sea change across the Muslim world. An unanswered question is how to support the struggle of the ordinary Iranians without appearing to interfere in the internal affairs of a sovereign nation? It is a delicate balancing act requiring patient diplomacy by governments and peaceful civic engagement by ordinary citizens.

Professor Receives Fulbright Award to Lecture in Bangladesh

noreply@blogger.com (Parvez Ahmed) — Fri, 22 May 2009 04:56:00 +0000

Media Relations & Events
Press Release For: May 06, 2009

Dr. Parvez Ahmed, associate professor of finance in the Coggin College of Business at the University of North Florida, has been awarded a Fulbright Scholar grant to lecture and conduct research at the Independent University of Bangladesh in Dhaka during the fall 2009 academic year.

Ahmed, who speaks and writes fluent Bangla, is one of approximately 1,100 U.S. faculty and professionals who will travel abroad through the Fulbright U.S. Scholar Program, which is America’s flagship international educational exchange program. Recipients of Fulbright awards are selected on the basis of academic or professional achievement as well as demonstrated leadership potential in their fields.

The Arlington resident will teach and conduct research in finance, with his research being focused in the areas of financial asset pricing and market efficiency in Bangladesh. Additionally, Ahmed wants to perform empirical studies on the stock market in Bangladesh as well as study the state of private investing. He may also study the private-public partnership in economic development that is being conducted by Non-Governmental Organizations.

“The Coggin College is thrilled that Dr. Ahmed has earned the Fulbright Award,” said Dr. John McAllister, dean of the Coggin College of Business at UNF. “His achievement is an explicit acknowledgement of his insights and academic record and an implicit endorsement of the excellence of the Coggin College and UNF.”

Ahmed has been at UNF since 2002 and has received the Outstanding Researcher award three times from Coggin College as well as the Outstanding Teacher award. He is the author of “Mutual Funds—Fifty Years of Research Findings” and has had his research on market efficiency and asset pricing published in numerous top finance journals.

Prior to coming to the University, he was the assistant professor of finance at Pennsylvania State University and the University of North Carolina at Charlotte. He also served as a visiting professor of finance in the Executive MBA Program at Instituto Superior de Economia y Administracion de Empresas in El Salvador.

Ahmed has developed study abroad programs both for UNF and Pennsylvania State and is in the process of developing a study abroad program to Egypt. He earned his doctorate in finance from the University of Texas and his master’s degree in business administration from Temple University. He received his bachelor’s degree in mechanical engineering from Aligarh Muslim University in India.

Since its establishment in 1946 under legislation introduced by the late Senator J. William Fulbright of Arkansas, the Fulbright Program has provided approximately 286,000 people with the opportunity to observe each other’s political, economic, educational and cultural institutions, to exchange ideas and to embark on joint ventures of importance to the general welfare of the world’s inhabitants.

With more than 3,800 students, the Coggin College’s mission is to educate and develop business professionals through rigorous, relevant accredited degree programs offered by faculty devoted to student learning and engaged in scholarly activities.

Since 1976, the Coggin College of Business has been accredited by AACSB—only one in five business schools are awarded the accreditation, which honors the best business schools in the world. The AACSB is the world leader in accreditation for business education.

Contact: Joanna Norris, Assistant Director
Department of Media Relations and Events
(904) 620-2102

-UNF-

Muslims Disproportionate Victims of Flawed Terrorist Watch List

noreply@blogger.com (Parvez Ahmed) — Sat, 09 May 2009 02:45:00 +0000

The Huffington Post, May 8, 2009

The Justice Department has now found that the FBI’s terrorist watch list is flawed. Not only does the list consist of a mind-boggling 1.1 million names of 400,000 people, the Justice Department has also found that the FBI was “sometimes dangerously slow to add suspects to the nation's terrorist watch list, and even slower to remove those cleared of suspicion.” As many as 24,000 people have been incorrectly kept on that list.

I have firsthand experience with the inefficacy of this list. Every time I travel overseas, I am subjected to extensive searches and wasteful questioning. This is a waste of scarce government resources. Let me illustrate a typical encounter at the border.

About a year and a half ago, my wife and I (both U.S. citizens) were returning home after my Hajj or pilgrimage to Mecca. Upon landing at New York’s JFK airport, we were met by two DHS officers who stood at the end of the jet way scanning the passport of every passenger who stepped off that airplane. Along with several other returning pilgrims, we were escorted into a special room where I found over two dozen other people awaiting questioning. When my turn came, the officer asked me to explain why I was being stopped for additional questioning. I answered that since I did not stop myself to be questioned, how am I supposed to know why was I singled out? I added that one reason for my special treatment is perhaps the fact that I am a Muslim. Such profiling is supposed to be illegal and the officer dutifully pointed that out. However, overwhelming numbers of people waiting additional questioning were visibly Muslims, most of them American citizens returning from Hajj.

Not only is the fact that I will be stopped entirely predictable (it happened again this Sunday as I was returning from a trip to Egypt) but the questions are exactly the same every time. The officers will ask me questions like where I work, why I traveled abroad, and who I met while abroad. Then they look through my baggage much like a Customs officer will be looking for items like food or seeds (that are illegal to bring in) but unlike a typical Customs stop the DHS/CBP officers seem curious about the books and magazines they find in my hand carry bags. That appears to me an intrusion into my first amendment rights.

An April 2009 report titled, Unreasonable Intrusions: Investigating the Politics, Faith & Finances of Americans Returning Home shows, “that U.S. Department of Homeland Security (“DHS”) Customs & Border Protection (“CBP”) agents have systematically questioned individuals about their political beliefs, religious practices, and charities they support. Questions include “What is your religion?,” “What mosque do you attend?,” “What do you think of the war in Iraq?,” and “What charities do you contribute to?” Agents have also sought to review and copy business cards, credit cards, and data on laptops, digital cameras and cell phones. These interrogations and searches – which appear to be targeting Muslims or those perceived to be Muslim -- are taking place without evidence that the travelers have engaged in wrongdoing.”

Eight years into the so called war on terror, profiling of Muslims remain quite in vogue. Prejudices against Muslims remain real and progressively worsening. A recent ABC News/Post Poll finds that “Americans by 48-41 percent hold an unfavorable opinion of Islam — its highest unfavorable rating in ABC/Post polls since 2001. And 29 percent express the belief that mainstream Islam encourages violence against non-Muslims — down slightly from its peak, but double what it was early in 2002.”

Once again a vulnerable minority in America is being treated with unwarranted suspicion. Such suspicion only provides illusions of security because they yield no suspects plotting to harm Americans. Moreover, they alienate an entire community whose cooperation is critical in keeping our homeland safe and upholding our image as a nation respecting due process. It is time for America to reclaim its true legal tradition of judging a person by their actions, not on the basis of their color or practices of their faith or merely on the basis of their names.

A Muslim advocacy group, Muslim Advocates has asked the Obama administration to make sure that U.S. citizens are not detained and interrogated, or threatened with detention for failure to answer questions that go beyond establishing their legal status to enter the U.S. or whether they are carrying contraband. Also DHS should share data about travelers they are stopping, searching and questioning to demonstrate to the public that they are not engaging in discriminatory profiling of travelers.

The Justice department’s report pointing out the deficiencies in the watch list is a good start but more needs to be done. A congressional hearing on this matter can greatly aid in restoring trust and confidence in a border entry process that appears flawed and discriminatory.

In Search of a Model Muslim State

noreply@blogger.com (Parvez Ahmed) — Tue, 14 Apr 2009 22:30:00 +0000

Huffington Post, April 14, 2009

During his recent visit to Turkey, President Obama spoke about the promise of a new era in Turkish-U.S. relationship that can serve as a "model partnership" between the West and the Muslim world. America's quest to find a "model" Muslim partner is not new. In January 2008, then U.S. President George W. Bush during his visit to Dubai described the United Arab Emirates (UAE) as a "model Muslim state." UAE's economic progress and moderate political views made it a cause célèbre. But now many are predicting Dubai's demise as the global economic crisis strangles easy credit, which was critical in fueling its growth.

The euphoric crowning of UAE in 2008, and the hasty predictions of its demise a year later, both miss an important point. Beneath the glittering gold lies an underbelly that the rulers in the region are fighting to hide with the government planning to impose a fine for "carrying misleading news that harms the national economy."

Dubai is one of seven emirates that make up UAE, which today stands seventh in GDP per capita in the world. It ranks third highest among Muslim majority nations (only behind neighboring Qatar and Kuwait). A fairy story has been unfolding in the desert. In my visits to the region, I was awestruck by the sheer audacity of their dreams.

Dubai's rise as an economic powerhouse is not unprecedented in the region. Following the rapid rise of oil prices in the seventies, Saudi Arabia too had stunning economic growth. And yet it did not transform the country into a "model Muslim state." Like Saudi Arabia then, Dubai today is unable and unwilling to grant its citizens and residents socio-political freedoms that must go hand-in-hand with economic success to propel a country's rise into a model state.

UAE is home to the largest number of foreign-born residents in the world. A few of these residents enjoy great luxuries but most live a life of hopeless servitude. Unlike legal immigrants in most countries, the foreign-workers in UAE and the neighboring states will never gain equal rights in a country where they work, live and perhaps die.

Johann Hari (Huffington Post contributor), writing for the British newspaper The Independent, presents a heart-tugging expose of the many shattered dreams in the desert as a global recession converts Dubai (and perhaps the region) from being "Under Construction" to now teetering "Under Collapse."

A 2008 ABC News report describes working conditions in Dubai (could be said for the other countries in the region as well) as follows, "You are working in a system where you are not really free to leave your job. You actually need employers' consent to change jobs. You're working in a system where your passport is withheld. And really, if you displease your employer, you are going to find yourself on a plane right back to Sri Lanka or Bangladesh or India. Most of the workers live in labor camps an hour outside the city .... The men putting up the world's finest buildings live six to eight, sometimes 12, to a room."

Johann Hari further reports that, "This is all supposed to be illegal. Employers are meant to pay on time, never take your passport, give you breaks in the heat -- but I met nobody who said it happens. Not one. These men are conned into coming and trapped into staying, with the complicity of the Dubai authorities."

For the moment, setting aside the debate about separation of mosque and state, a "model Muslim state" at the bare minimum must embody Islam's normative ethics. At the foundation of economic justice lies a Quranic verse, "Give just measure and weight, nor withhold from the people the things that are their due." (7:85) In addition, verses 42:38 and 3:159 instruct that governance is best when based on "mutual consultation," or shura, which must be infused with three essential elements -- equal rights for all citizens, majority rule for public policy and the upholding of justice and human dignity.

Prophet Muhammad said, "Your servants are your brethren upon whom God has given you authority. So, if someone has their brethren under control, they should feed them with the like of what they eat and clothe them with the like of what they wear. You should not overburden them with what they cannot bear, and if you do so, help them in their hard job."

UAE, like many of its neighbors, has indeed made giant strides in transforming the region's commerce and culture. U.S. exports to UAE are expected to surpass those to Israel and Saudi Arabia. Perhaps this economic growth is a precursor to other freedoms, particularly those pertaining to democracy and worker rights. But if history is any guide, the translation of economic success into socio-political freedoms will not be automatic or organic. It will require an effort by all who benefit from the status quo to look beyond their immediate comforts and aspire to doing well while doing good. There is no reason why economic well being should come at the expense of common sense decency and values.

A model Muslim state will uphold those values that the faithful most desire to see reflected in state policies. John Esposito and Dalia Mogahed, analyzing a recent worldwide survey by Gallup write, "Muslims across the world want neither secularism nor theocracy. They want freedom, rights and democratization." A model Muslim state will not only dazzle the world with commerce but also exhibit moral leadership in addressing common concerns like environmental stewardship and bridging the growing economic disparity between the haves and the have-nots.

Turkey perhaps stands a chance of achieving leadership that, in the words of President Obama, is "respectful," "secure," and "prosperous." States like UAE, Saudi Arabia and Qatar have achieved economic success but little of anything else. In any case, American President's should not try too hard to sell "a model Muslim state." The world will know one, when they see one.

Passover Tells a Story Familiar to Both Muslims and Jews

noreply@blogger.com (Parvez Ahmed) — Fri, 10 Apr 2009 14:13:00 +0000

Huffington Post, April 9, 2009

A week before Passover, a local interfaith group called the Table of Abraham organized a Seder event at Congregation Ahavath Chesed, a Reform Jewish congregation in Jacksonville. The goal was to enact all of the rituals that are part of Seder as a way of informing and teaching people who are unfamiliar with this tradition.

Turning the pages of the Haggadah, I was specially struck by the similarity in both Judaism and Islam about this seminal Jewish event of Passover. At a time when so much of the contemporary narrative about Jews and Muslims is written in the context of differences and conflicts, it is useful to mark the solemn occasion of Passover as a mutual reminder about the commonalities between the faiths.

No other story in the Quran is recounted as frequently as the bondage of the Children of Israel in Egypt and their subsequent deliverance from the tyranny of the Pharaoh. God says in the Quran:

O children of Israel! Remember those blessings of Mine with which I graced you, and how I favored you above all other people; .... And [remember the time] when We saved you from Pharaoh's people, who afflicted you with cruel suffering, slaughtering your sons and sparing [only] your women - which was an awesome trial from your Sustainer; and when We cleft the sea before you, and thus saved you and caused Pharaoh's people to drown before your very eyes. (2:47-50)

The genesis of Muslim-Jewish relationship goes back to the founding of a political state in Madinah by Islam's Prophet Muhammad in 622 of the Common Era. Madinah of that time was a city inhabited by primarily polytheist Arab tribes, a few Jewish tribes and some Christians (although not as organized tribes). The Jewish tribes joined the rest of the city in welcoming Prophet Muhammad and upon entering the city the Prophet signed a treaty with all of the surrounding tribes.

This treaty is called the Charter of Madinah. It is perhaps the earliest known constitution in the world, predating the Magna Carta by 600 years. It is also the first known legal document that confers rights and responsibilities upon distinct religious minorities. It particularly recognizes Jews as a distinct nation (or ummah) entitling them to the same rights and responsibilities as any other signatories to the document. The treaty required each to assist the other another against any violation of the covenant. When placed in the context of the socio-economic-political conditions of the seventh century this document was indeed revolutionary.

Azizah al-Hibri, a legal scholar wrote:

The Charter .... declared all Muslim and Jewish tribes of Madinah to be one community. At the same time, each tribe retained its identity, customs and internal relations. The "federal" system of Madinah was responsible, however, for such matters as common defense and peacemaking, purposes similar to those in the Preamble to the American Constitution.... The Charter also contained its own partial bill of rights, ... among the rights that it protected were the right to freedom of religion, and the right not to be found guilty because of the deeds of an ally, a form of guilt by association which was widely practiced at the time.....The Charter of Madinah repeatedly emphasized the principles of fairness and equity for Jews and Muslims....It is readily apparent that there are significant parallels between the concepts expressed in the Charter of Madinah, executed in the seventh century, and those of the American Constitution, drafted in the eighteenth century.

Despite such early documentary evidence of reciprocal respect, relationship between the two communities was clouded by mutual mistrust leading to several bloody conflicts.

And yet there are also many inspiring examples of coexistence and cooperation. It was during the Muslim rule in Spain that Jewish art, philosophy and literature reached one of its golden ages. A recent documentary on PBS characterized that era as, "The fascinating story of a central bureaucracy staffed by elites from all three faiths, with Jews in all but the highest post and Christian scholars outperforming "native" Arabic speakers in their own language and culture, is a fascinating and powerful antidote to our modern stereotypes concerning Christians, Jews, and Muslims."

Which part of our shared history do we want to use as our guide to the future? The part that steers us to presume the worst stereotypes about each other or the part that shows how much we can benefit humanity through our mutual cooperation. How we reminisce the past will dictate how effective we are in building a new future.

By the end of my Seder meal at the synagogue, it was quite apparent that beneath the headlines that scream conflict are Jewish, Muslim and Christian hearts yearning to build a more hopeful future based on mutual understanding. The eternal message of hope was my take-home lesson from the Seder.

Waiting to exhale: Obama visits Turkey

noreply@blogger.com (Parvez Ahmed) — Mon, 06 Apr 2009 03:07:00 +0000

Published in Today's Zaman, April 5, 2009
(Turkey's largest circulating English daily)

Long before Barack Hussein Obama was sworn in as the 44th president of the United States of America, people in Turkey had expressed a sentiment of hope about his presidency. Reporting for The New York Observer in January 2008, Suzy Hansen quoted Omer Taspınar, director of the Turkey program at the Brookings Institution, as saying: "Turks know that Obama represents something quite different -- they've seen 'Roots.' They know the history. So an African-American with an African name and a name like Hussein -- the fact that people are willing to give him a chance, despite that he attended a madrasa, and had a Muslim father, would represent a huge change in the US, compared to the Bush-Clinton dynasties." As Turkey prepares to welcome Obama this week, what can they expect from him? And what can Obama expect in return?

A recent poll by the BBC World Service shows a majority of Turkish people believing that Obama will improve America's relations with the rest of the world. However, the number of people in Turkey who believe this (51 percent) is far below the average (68 percent) in the 17-nation BBC survey. Thus, amidst the general optimism there lies a nagging concern: Can Obama deliver on his promise?

Despite being saddled by a once-in-a generation economic crisis, the young American president has shown an uncanny ability to, in his own words, "walk and chew gum at the same time." Giving his first interview as president to the Arab TV station Al Arabiya, sending video greetings to the Islamic Republic of Iran on the Persian new year, quoting a saying (hadith) of the Prophet in one of his speeches, ordering the closing down of the abomination that is Guantanamo, retiring the use of ill-defined terms such as the "war on terror" and refraining from even rhetorically linking Islam to terrorism are all trends that evoke hope. Although these moves are mostly symbolic, they are nonetheless important, as part of leadership is setting the right tone.

How President Obama translates this emergent goodwill into tangible actions will ultimately determine his success. A recent survey by Gallup shows that nearly nine in 10 Muslims, spread across many Muslim-majority nations, support freedom of speech, defined as allowing all citizens to express their opinions freely on all major issues of the day. Overwhelming majorities support women having the same legal rights as men. Similar numbers hold beliefs that their faith ought to inform and guide them in their politics. Yet most do not want sacred religious texts to be the exclusive source of law in their societies. The most common aspiration, all across the Muslim world, is to see America help in reducing unemployment, improving economic infrastructure, respecting political rights and promoting freedom.

To get the Muslim world right, President Obama will first have to get Turkey right. During the Bush years, Turkish sentiments saw some of the most dramatic swings from overwhelmingly pro-American to stridently anti-American. Turkey sits at the nexus of several hot spots, such as Iraq, Syria and Iran. Turkey is eager to play a role in mediating an amicable solution. Turkey is not just a Muslim-majority nation; it is also a secular democracy. Turkey is also trying to grapple with its own version of separation of church (mosque) and state. The ban on students donning symbols of their faith while attending university classes strikes many in the West and across the Muslim world as excessive. But the fact that the Turkish people are continuing to debate this issue is a sign of religious, intellectual and social vitality. President Obama could use his enormous appeal across the Muslim world to prod other Muslim societies to borrow a page from Turkey and enhance their own internal dialogues about the appropriate role of religion and faith in state governance.

Back at home, a poll conducted by the non-partisan group Public Agenda shows that a clear majority of American's express support for using diplomatic and economic means to resolve conflicts, even with Iran. Most Americans want America's top foreign policy priority to be humanitarian, such as helping poor countries move out of poverty, providing more access to education and controlling the spread of deadly diseases.

All around the world there is an emerging consensus of aspiration. People are less interested in ideologies and care more about how governments can better their lives. This creates new opportunities for cooperation through sustained intellectual and diplomatic engagement. Instead of looking at Turkey as just an important geostrategic military ally, President Obama needs to prod European allies to welcome Turkey into the European Union, giving Turkey a more effective platform to act as a bridge between America, Europe and the Muslim world.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Obama tells Turkey: U.S. ‘not at war with Islam’ (AP April 6, 2009)

ANKARA, Turkey - Barack Obama, making his first visit to a Muslim nation as president, declared Monday the United States "is not and will never be at war with Islam."

Urging a greater partnership with the Islamic world in an address to the Turkish parliament, Obama called the country an important U.S. ally in many areas, including the fight against terrorism. He devoted much of his speech to urging a greater bond between Americans and Muslims, portraying terrorist groups such as al Qaida as extremists who do not represent the vast majority of Muslims.

"Let me say this as clearly as I can," Obama said. "The United States is not and never will be at war with Islam. In fact, our partnership with the Muslim world is critical ... in rolling back a fringe ideology that people of all faiths reject."

Eric Holder Must End FBI's Abuses Against American Muslims

noreply@blogger.com (Parvez Ahmed) — Fri, 27 Mar 2009 01:35:00 +0000

Huffington Post, March 26, 2009

A recent headline on CNN read, "FBI planting spies in U.S. mosques," Muslim groups allege. This outrage was sparked by revelations that the Federal Bureau of Investigation (FBI) had sent an agent provocateur into a mosque in southern California who was coercing worshippers in becoming informants and inciting them to make violent statements. The planting of spies in mosques is just the latest in the FBI's long list of actions that have angered both civil libertarians and members of the American Muslim community.

In March 2003, FBI launched the mosque counting project whereby agents were asked to document the number of mosques in their areas, "to help measure the number of terrorism investigations that the various field offices should be expected to open and pursue." By their actions, the FBI needlessly linked terrorism to mosques despite the paucity of any evidence tying the 9-11 hijackers to the mainstream American-Muslim community and the mainstream Muslim community's absolute and unequivocal rejection of terror. Ahead of the 2004 Presidential election, the FBI had launched a so-called October Plan indiscriminately "interviewing" Muslims. In 2005 FBI agents secretly monitored radiation levels at mosques to determine whether nuclear bombs were being assembled there. Nothing was found. In 2008, an American Muslim was arrested and tortured in UAE at the apparent direction of the FBI.

My concerns also relate to a January 2009 Fox News story that reported the FBI's severing of its ties with the Council on American-Islamic Relations (CAIR), a leading American Muslim organization. It was more disconcerting, when a month later a FBI agent stopped by my office purporting to ask questions about my resignation from the Chairmanship of CAIR, an action I had taken eight months ago.

My reasons for leaving CAIR were no secret. In an interview with my local newspaper, I had noted that in order to make the organization a more effective voice in the American socio-political discourse, CAIR must empower a new and younger generation of leaders. My departure was clearly related to disagreements over governing philosophy and yet the FBI perplexingly found something nefarious in a matter that is not entirely out of the ordinary.

The FBI wants to avoid "formally constructed partnerships" with CAIR stemming from concerns over "distinct narrow issues" specific to CAIR's "national leadership." Such vague pronouncements have provided a pretext for some members of Congress to turn the ambiguity into a "government-wide policy." In order to remain consistent with the constitutional hallmarks of due process, it is essential that our lawmakers and law enforcement agencies do not make hasty pronouncements that can needlessly hurt innocent people. If CAIR has "terrorist ties" as some members of Congress claim then the FBI should shut CAIR down. However, if there is no evidence linking CAIR to any terrorist activity, then the FBI should re-engage with CAIR.

From 2005 to 2008 as the Chairman of CAIR, I participated in numerous meetings and press conferences with the FBI. I conducted sensitivity and diversity training for the FBI and at the Federal Law Enforcement Training Center in Glynco, Georgia. During this time, no one from the FBI ever alerted me about "distinct narrow issues." In all of my association with the organization, I was not aware of any unlawful activity.

The FBI Director Robert Muller recently said, "The communities from which we need the most help are those who trust us the least. But it is in these communities that we must re-double our efforts." It is unclear as to how the steps taken by the FBI will lead to a building of trust.

Perhaps tired of the growing list of provocative actions against the community or perhaps indignation over being side-stepped, CAIR led several American Muslim groups in asking members of the community to "consider suspending all outreach activities with FBI offices." Not all major Muslim groups joined this call perhaps realizing that such a call is counter-productive. Suspending dialogue can only make matters worse. Moreover, it is unclear as to what the groups meant by suspending "all outreach?" If the FBI comes knocking on the door of an American Muslim organization seeking diversity training should they be turned away? The groups seeking boycott went on to say, "The credibility of all Muslim organizations who maintain ties to the FBI that do not react decisively is undermined in the eyes of the community." Does this mean that the American Muslims who just won the 2008 Community Leadership Awards from the FBI are turncoats, if they accept the award?

Whatever legitimate concerns FBI has about CAIR, they need to give the organization's 11-member national governing board a chance to weigh the facts. During my tenure at CAIR, no such overture was made by the FBI.

Even if CAIR feels that it is unfairly taking one on the chin, it should not issue self-serving calls asking members of the American Muslim community to break off relationship with the FBI, especially when such relationships in small measures do help in promoting mutual understanding. While the results of such interactions are not always spectacular, nonetheless these interactions are helpful for building civic harmony.

Speaking from my personal experience, having conducted dozens of hours of training for members of law enforcement, such interactions allow outsiders like me to understand the myriad of challenges facing law enforcement. It helps to ensure that our demands are tempered by the recognition of the enormous challenges law enforcement officials face in an effort to ensure the public safety of all. On the other hand, even the few hours that law enforcement officers spend in diversity training classes allow them better perspective on the concerns of minority communities, helping them to more effectively engage.

The FBI's hasty pronouncements and ensuing misguided responses by some American Muslim organizations have placed undue burdens on the American Muslim community. It is incumbent that both the FBI and American Muslim groups meet to work out their differences before their respective intransigence undermines security and civic harmony. The new Attorney General Eric Holder, who has called for, "adherence to the rule of law," and a cessation of "the needlessly abusive and unlawful practices" must step forward to assure the American Muslim community that the Obama administration will break away from the bad policies that plagued the Ashcroft-Gonzalez Justice department.

FBI Should Not Involve Themselves in Political Theatre

noreply@blogger.com (Parvez Ahmed) — Thu, 19 Mar 2009 17:37:00 +0000

An edited version was first published in Fayetteville Observor on March 19, 2009

In January 2009, the Federal Bureau of Investigation (FBI) told Fox News that it severing its ties with the Council on American-Islamic Relations (CAIR), a leading American Muslim organization. A month later, I was surprised to see a FBI agent stop by my office in Jacksonville seeking reasons for my resignation from being the Chairman of CAIR.

My reasons for departure were no secret. In a June 2008 interview to my local newspaper, I had said that to better serve the interests of its constituents, CAIR must empower a new generation of leaders who will foster greater accountability, transparency and professionalism. I had hoped that my departure will capacitate young talents into positions of leadership. The election of North Carolina State Senator Larry Shaw to succeed me took eight long months and yet there are no visible signs of revitalization to make the organization a more effective voice in the American socio-political discourse.

Despite my substantive disagreements with the organization, I find the FBI's decision to cutoff relations with CAIR as unfortunate and unnecessary. I can only hope that this move does not represent a going back to the future of COINTELPRO, a FBI covert operation of the 1960s that was aimed at subverting civic organizations struggling for racial equality.

In the Fox News story, FBI spokesman John Miller reportedly said, "The FBI has had to limit its formal contact with CAIR field offices until certain issues are addressed by CAIR's national headquarters." The lack of clarity in FBI's pronouncement has provided a pretext for some members of Congress to turn the ambiguity into a "government-wide policy."

If CAIR has "terrorist ties," as Reps. Myrick and McHenry of North Carolina and Broun of Georgia claim they do, then the FBI should not be "limiting" contact with CAIR, but rather should shut the organization down. The American Muslim community, which has repeatedly condemned terrorism, have no interest in seeing any of its organizations tainted with "terrorist ties." However, if there is no evidence linking CAIR to any terrorist activity (in all of my association with the organization, I was not aware of any unlawful activity) then the FBI should re-engage with CAIR on issues of common concern, such as protecting civil liberties, even if they disagree with some views of the organization.

According to published reports, the crux of FBI's angst revolves around the Department of Justice (DOJ) naming of CAIR along with the Islamic Society of North America (ISNA), and the North American Islamic Trust (NAIT) as "unindicted co-conspirators" in a case against the Muslim charity Holy Land Foundation (HLF). In late 2008, HLF was convicted of conspiring to funnel money to Hamas, a Palestinian group designated as a terrorist organization by the U.S. government. Many members of the American Muslim community viewed the case against HLF as more of a political witch-hunt than anything concerning the security of the United States. In a Dallas Morning News report, Tom Melsheimer, a former federal prosecutor, concurred, "To spend millions of dollars in time and expenses to prosecute people who were of no real threat to anyone, under the banner of a terrorism case, is a waste of precious federal resources."

The FBI does not offer any explanation as to why issues with some antecedents going back over fifteen years is reason to cut off ties with CAIR now, particularly all its independently governed local offices? The fact that this decision comes eighteen months after the Justice department named CAIR along with 300 others as "unindicted co-conspirators" makes the move even more perplexing. The DOJ's actions violated its own guidelines, prompting court challenges. Till date the courts have not ruled on the pending motions and it is not clear that they ever will. This is why in Ira Robbins of the American University wrote in the Federal Courts Law Review, "The grand jury practice of naming individuals as unindicted co-conspirators …appears to be an anomaly in United States law, in that it violates the Fifth Amendment guarantee that no person shall . . . be deprived of life, liberty, or property, without due process of law."

The FBI's rather abrupt move to cut off relationship with CAIR is just as misguided as a statement by a coalition of Muslim groups calling on American Muslims to "consider suspending all outreach activities with FBI offices." Limiting "formal contacts" or "suspending outreach" sends the wrong message at a time when the way forward, locally, nationally and globally, is sustained dialogue and diplomacy, even among those at political loggerheads.

Music, a bridge over troubled waters

noreply@blogger.com (Parvez Ahmed) — Thu, 19 Mar 2009 17:33:00 +0000

Source: Common Ground News Service (CGNews), 17 March 2009

Jacksonville, Florida - The noted Indian poet and Nobel laureate Rabindranath Tagore said, "Music fills the infinite between two souls". I experienced this while attending a recital by Choir Al Farah, a musical group that aims to highlight the reality and the possibility of Christians, Muslims and Jews living in brotherhood and peace. Through a fusion of Assyrian, Byzantine, Muslim and Latin musical traditions, Choir Al Farah, in the words of its founder, Elias Zehlawi, seeks to "glorify the one God that we all believe in and that makes all of us brothers and sisters."

Choir Al Farah, a Syrian Christian group, was touring America to take part in the "Arabesque: Arts of the Arab World" festival organised by the John F. Kennedy Center for the Performing Arts in Washington, DC, presented in cooperation with the League of Arab States.

Washington Post staff writer Ellen McCarthy wrote in an article a few weeks ago, "It will be a momentous occasion…. Unshackling ourselves from blurry stereotypes and half-formed conceits, we will step into their world without leaving the borders of our city. We'll give ourselves over to the rare and precious opportunity to see, hear and taste the flavours of Arab culture through the intimate dialogue exchanged between artist and audience. The veil is about to be lifted."

The veil was not only lifted in Washington, DC, but also in Detroit, Michigan, and here in my home city of Jacksonville, Florida, where – thanks to the generosity of my friend Yazan Khatib – Choir Al Farah delighted a diverse crowd of over 400 at the Ritz Theatre.

But why was Khatib, a Muslim, sponsoring a Christian choir group?

He was simply fulfilling a Qur'anic command: "Help ye one another unto righteousness and pious duty. Help not one another unto sin and transgression" (Qur'an 5:2).

At their Jacksonville recital, Choir Al Farah sang not only traditional Christian hymns but also gave voice to the most popular Muslim nasheed, "Tala al Badru Alayna" (Oh, the White Moon Rose Over Us). This Islam-inspired vocal music was originally sung by the children and residents of Medina as they welcomed Prophet Muhammad to their city over 1400 years ago.

The choir also sang "Amen", a word that Jews, Christians and Muslims all use in prayer.

Their music celebrates the nostalgia of Arab culture, which – like other traditional cultures – is trying to retain its relevance in an increasingly globalised world.

Perhaps the most inspiring part of this group's effort lies in its vision and composition. The singers, 120 children between 12 and 17, are all Christian, while most of the musicians are Muslim adults.

How did this cooperation come about? I asked the founder, Father Elias Zehlawi. He said that Choir Al Farah is the result of a dream he had about using his church to bridge the gap between ethnic and faith groups. His goal was to build a common platform to communicate the universal message of love and peace. He believes that all religions share the same spirit of mutual love and mutual respect. Unfortunately, politics and economics have driven a wedge between these groups that extremists on all sides are exploiting.

Zehlawi's aspiration was reciprocated by the Grand Mosque of Damascus, known more commonly as the Umayyad Mosque. The mosque contains a shrine said to hold the head of John the Baptist, who is honoured as a prophet by both Christians and Muslims, to whom he is known as Yahya. Choir Al Farah and a group of singers from the Umayyad Mosque have jointly appeared before sold out audiences in Damascus and aspire to go on joint tours across the world.

I asked Zehlawi why he thought it was important to include Islamic nasheeds in the choir's repertoire. His answer was that God should be a reason to unite us and not to divide us. He articulated a simple but profound idea that resonates in the Qur'an, "O mankind! Lo! We have created you male and female, and have made you nations and tribes that ye may know one another" (Qur'an 49:13).

Father Zehlawi believes that barriers to mutual understanding can be shattered by the voices of children, which can penetrate even the hardest of hearts. We are part of one human family and we must respect, not just tolerate, each other if we are to ever establish peace and justice.

As the world is buffeted by the sinews of economic and political strife, the voices of the 120 children from Damascus are filling the infinite between souls like a bridge over troubled waters.

###

Source: Common Ground News Service (CGNews), 17 March 2009, www.commongroundnews.org
Copyright permission is granted for publication.

Understanding the Current U.S. Economic Crisis and it Impact on Muslims

noreply@blogger.com (Parvez Ahmed) — Thu, 05 Mar 2009 16:26:00 +0000

Orginal Published in Islamic Horizons, Mar-Apr, 2009.

The State of U.S. Economy

On the verge of taking over the Presidency of the United States of America, Barack Obama described the U.S. economy as "very sick" with the situation "getting worse." This worry is best reflected in the fact that U.S. unemployment rate now stands at 7.2 percent, the highest level in the past fifteen years. In 2008, 2.6 million Americans lost their jobs, the highest number in over half a century. Although the U.S. remains the largest economy of the world with a GDP of over 14.3 trillion dollars, it is also reeling from record national debt of 10.6 trillion dollars with 28 percent of that debt being held by foreigners namely Japan, China, U.K., Brazil and the oil exporting countries of Saudi Arabia, UAE, Qatar, etc. In addition, the U.S. budget deficit, which is the difference between what the U.S. government brings in through taxes and what it spends, stands at nearly 455 billion dollars and is expected to be over one trillion dollars (some estimates projecting 2 trillion) in 2009. With the private sector spending slowing down the U.S. government is forced to deficit spend even more with the expectation that the spending will ease unemployment and stimulate a slowing economy. In the last quarter of 2008, the U.S. economy contracted by an annual rate of 5 percent and could shrink by the same amount this quarter. Adding to the grim news is the finding that U.S. manufacturing activity fell to its lowest level in nearly three decades. Compounding the worry is the concomitant fall in global manufacturing.

The Stock Market as a Leading Economic Indicator

Stock markets are regarded as a leading indicator of economic health. Investors in the U.S. stock market lost staggering amounts of money with some estimates putting those losses at $6 trillion. To truly gain an appreciation of how mind-boggling this loss is consider the following fact - between December 1996 and May 2007, the Dow Jones Industrial Average (DJIA is the most popular indicator of U.S. stock market health) had nearly doubled. A year and a half after that high-point the DJIA has lost half its value!. It took the market nearly a decade to double and only eighteen months to give back half its gains! See figure 2 to more details.

The news from around the globe is no better. In 2008, Germany's DAX 30 index lost 30 percent, Tokyo's Nikkei 225 index fell 35 percent, Shanghai's SSE plunged by 59 percent, Kuwait dropped 36 percent, UAE's DFM stocks shed 72 percent of their value and India's Sensex index dropping by 45 percent. Moscow saw the value of their shares decline by more than 70 percent. The Moscow stock exchange even had to be temporarily closed to prevent it from collapsing altogether. In November, a local court ordered the closure of Kuwait's stock exchange after investors complained that the government had not taken enough measures to stem heavy stock market losses, which had fallen 43 percent since June. No trading center has escaped the turbulence. Its impact keeps cascading from bank to bank, company to company, country to country.

Shariah Compliant Finance

In this financial carnage, the Shariah-based investment industry provides a silver lining. Currently it has assets globally worth U.S. $700 billion and is expected to double to $1.4 trillion by 2010. Shariah-based financial products are very much like the socially responsible investment sector, which in the U.S. has nearly 3 trillion dollars worth of financial assets under management. The Shariah-based financial products are far less leveraged (debt) than regular portfolios. During a period where the banking and financial sector has been among the worst performing sector of the market, this attitude towards not investing in interest-based assets and companies, have allowed Shariah based products to do well. In addition, Shariah-based products do not invest in businesses with significant interests in alcohol, tobacco, gambling, pornography and conventional banking. The fact that Islamic Banks are generally viewed as less risky than conventional western banks (partly due to the fact that Islamic banks are not as leveraged as their western counterparts), suggests that Islamic financial institutions are likely to grow as people (not necessarily only Muslims) look for less risky investments in this environment.”

In the U.S. there are 5 major Shariah compliant mutual funds. The Iman fund offered by Allied Asset Advisors, two Amana funds offered by Saturna Capital and two Azzad funds offered by Azzad Asset Management. Taken as a composite category, the Shariah based funds in general outperformed the three major bell-weather U.S. stock indexes (S&P 500, DJIA and NASDAQ). The two Amana funds in particular had stellar performance in 2008 dropping 15 percent less in value than the overall U.S. market. In 2007 all 5 funds outperformed U.S. market averages. This has attracted the attention of mainstream U.S. media. Speaking to the Washington Post Amana's manager, Nicholas Kaiser said, that the fund is attracting not only Muslims but also people of other faiths. About half of the 70,000 investors who buy the funds through financial advisers aren't Muslim. An additional 17,000 shareholders have bought the funds directly. In addition Amana Income Fund (AMANX) is now the top rated fund the large value category for both the past 5-year and 3-year performance. In each of the last 5 years

Year DJIA S&P 500 NASDQ
2007 6.43% 3.52% 9.81%
2008 -33.84% -38.49% -40.54%

Despite the success of Shariah based products, the general drag on the U.S. and world economy will also affect the Muslims. Moody's rating agency is reporting that the growth in Islamic banking assets will slow down sharply in 2009 to around 10-15 percent rate compared to the recent growth rate that averaged 20-30 percent. Like other investment houses, Shariah compliant portfolios will have to seek better ways to diversify their risks including seeking investments in Islamic-derivative products and bonds (sukuk), which are all in early stages of development.

Impact on American Muslims

The impact of economic crisis on American Muslims is varied. Acknowledging the paucity of actual data that measures the attitudes of American Muslims to the current economic crisis, the analysis will thus be anecdotal and correlation based. According to a study by Allied Media Corporation (www.allied-media.com/AM/) American Muslims make up about 2 percent of the U.S. population but they tend to be more educated 6 in 10 American Muslims having Bachelor's degree or higher (compared to 4 in 10 Americans with a Bachelor’s degree or higher). American Muslims also tend to be younger. 67 percent of adult American Muslims are under 40 years old while 33 percent the adult American population is under 40 years old. Finally, American Muslims on average earn above the U.S. average income. Among the top three professions for American Muslims are engineering, medicine and information technology.
Top 10 Occupations of American Muslims
Rank Occupation Percent
1 Student 20.2
2 Engineer 12.4
3 Physician/Dentist 10.8
4 Homemaker 10.0
5 Programmer 7.0
6 Corporate Manager 6.4
7 Teacher 6.4
8 Small Business Owner 4.4
9 Researcher 4.1
10 Admin. Assistant 2.8
Total 84.5
Source: Cornell University April 2002

The job losses for 2008 were across the board with construction, housing and the financial sectors being hit the hardest. Manufacturing, which has been declining for years is seeing even bigger job losses as companies struggle to get loans and consumers cut back on their expenditure. However, in this gloom the silver lining comes from the health care, mining and education sector. Thus, given the preponderance of health care and information technologist in the Muslim community, the economic crisis will have a lesser impact on this strata of the community. On the other hand, with manufacturing slowing down, American Muslim engineers will feel the impact like the rest of the country.

American Muslims students will face the adverse impact of the economic crisis from as financial aid in the form of scholarships and graduate assistantships will be significantly cut-back as more and more states are facing budget crisis (in Florida for example the state is facing a over 2 billion dollar shortfall). Also given the high percentage of American Muslim households being single earner families (homemaker ranking #4 as an occupation), the impact of a job loss on American Muslim families could be devastating. American Muslim charitable institutions need to plan for such contingencies.

On the investment side, more American Muslims are choosing shariah compliant investment products as seen from the increase in the fund flows into mutual funds like Amana. In all major Islamic conferences, Amana, Iman and Azzad are quite ubiquitous, indicating greater demands from the community. These funds are also advertising heavily in American Muslim publications like Islamic Horizons, Message etc. Given the stellar performance of the shariah compliant sector in the last 3-5 years (see Table of "Islamic" funds and Index averages above), the investments of the American Muslim community fared above the national averages.

Finally, fewer American Muslims were the victims of the housing bubble, partly due to the fact that the speculative nature of the housing boom is viewed as being against shariah principles and also partly due to the fact that many Muslims prefer to take mortgages from shariah compliant outfits like Guidance, American Finance House Lariba, which generally eschew mortgages for investment purposes.

Conclusions

American Muslims like the rest of their fellow Americans will bear the brunt of the financial and economic crisis that is gripping the country and now circling the globe. However, given the preponderance of certain professions like health care within the community, American Muslims in general will have a softer landing. Also, American Muslims can significantly benefit from the economic stimulus package that President Obama is seeking, which is heavily geared towards projects related to infrastructure development. Given the high concentration of engineers in the American Muslim community, this augurs well for the community as infrastructure projects will need engineers.

The current economic crisis reminds us in no uncertain terms how the fate of different communities and societies are increasingly dependent on the well being of others. In an increasingly globalized world, it is hard to separate the happiness of one group from that of others. The underpinning of any sound economic system has to be geared towards the idea of common good, which is deftly articulated in Adam Smith's Theory of Moral Sentiment, "All members of human society stand in need of each other’s assistance, and are likewise exposed to mutual injuries. Where the necessary assistance is reciprocally afforded from love, from gratitude, from friendship and esteem, the society flourishes and is happy. All the different members of it are bound together by the agreeable bonds of love, affection and are, as it were, drawn to one common center of mutual good offices.”

Can the US Stimulus Plan Save American Economy?

noreply@blogger.com (Parvez Ahmed) — Thu, 05 Mar 2009 15:08:00 +0000

Orginal Published in IslamOnline, March 4, 2009

On Tuesday Feb 17, U.S. President Barack Obama signed into law $787 billion stimulus package, a measure he described as, "the most sweeping economic recovery package in our history." Almost 38 percent of spending bill contains various tax-cuts to individuals and businesses with the remaining 62 percent mostly in the form of spending (although direct spending is a smaller 40 percent of the overall package). Figure 1 breaks down the percentage spending in the bill by major categories.

Governments use economic stimulus to boost its economy by spending on infrastructure, which in turn can lead to new job creation. Tax cuts encourage short-term spending. While spending related to energy is intended to provide a one-time jolt with the goal of making energy costs cheaper in the long-run. Similar arguments can be made about the portion of the stimulus plan related to health care.

But what lead to this massive spending stimulus? Current GDP numbers show the U.S. economy shrinking at an annual rate of 3.6 percent. Adding to the grim news is the finding that U.S. manufacturing activity fell to its lowest level in nearly three decades. Compounding the worry is the concomitant fall in global manufacturing.

The U.S. unemployment rate now stands at 7.6 percent, the highest level in the past fifteen years and is expected to go up as high as 8 or 9 percent by the end of this year. In 2008, 2.6 million Americans lost their jobs, the highest number in over half a century. This has lead to the spending slow down in the private sector leaving the U.S. government as the only entity that can borrow and spend. Borrowing will inevitably lead to more debt and deficit. However, the expectation is that this sort of deficit spending will ease unemployment and stimulate a slowing economy. The thinking here is a return to Keynesian economics, which believes that it is the government's job to smooth out the dips in a business cycle by interventions in the form of infrastructure spending and tax breaks.

But can such spending program actually work? No one can provide a definitive answer. The best one can do is learn from past history. This economic downturn is beginning to a lot like the Great Depression of the 1930s. By the time President Franklin D. Roosevelt took office in 1993, the U.S. unemployment rate was a staggering 25 percent. Acting on his campaign promise of a "new deal" for Americans, FDR passed banking reform laws and enacted work relief programs. Figure 2 shows the impact of FDR's New Deal on the U.S. economy. Not only did GDP rise but also by 1939 FDR was able to cut the unemployment rate by half of what he had inherited. President Obama expects this history is to repeat itself. However, there are already gathering concerns about the efficacy of the current stimulus plan.

For starters, the scale of the plan is much lower than comparable stimulus plans being offered by China, which in November 2008 announced a $586 billion (4 trillion yuan) spending package. The Chinese plan amounts to 20 percent of China’s GDP while in contrast the Obama plan is about 8 percent of U.S. GDP.

The next concern stems from the type of stimulus dollars. According to a study by Moody's Economy.com tax cuts have the least impact on stimulating a sagging economy. Things like food stamp or infrastructure spending provide the most bang for the buck. The Obama stimulus plan devotes almost 4 out of every 10 dollars to tax cuts. This is a serious shortcoming of the bill. The inclusion of tax cuts was a necessary compromise in order to get the minimal Republican support needed to pass the bill in the U.S. Congress (only 3 Republican Senators voted for the bill).

Another concern about the bill is its "buy American" clause that requires materials purchased with funds from the bill to be U.S. made. To mitigate the obvious protectionist tendency of this clause, the bill requires that the "buy American" clause be implemented in a manner that is consistent with U.S. international trade obligations. Proponents say that the current provision is similar to the 1982 highway bill that called for federal highway projects to use only American steel. Given that all of the stimulus money will have to be borrowed, lawmakers were looking to get the biggest bang for their buck by keeping the stimulus money circulating in the U.S. economy as much as possible. The fear is that this provision could lead to trade wars, making a bad recession even worse. Stephen Harper, prime minister of America's biggest trading partner Canada said, "We want to avoid protectionism in this economic slowdown." During his recent visit to Canada, President Obama tried his best to reassure Canada and the rest of the world that the US would comply with all its international trade related treaty obligations.

The fact that all of the stimulus bill will have to be paid using borrowed dollars is a grave concern. It will add more debt to the ever growing national debt. Although the U.S. remains the largest economy of the world with a GDP of over 14.3 trillion dollars, it is also reeling from record national debt of 10.8 trillion dollars with 28 percent of that debt being held by foreigners namely Japan, China, U.K., Brazil and the oil exporting countries of Saudi Arabia, UAE, Qatar, etc. In addition, the U.S. budget deficit, which is the difference between what the U.S. government brings in through taxes and what it spends, stands at nearly 455 billion dollars and is expected to be over one trillion dollars (some estimates projecting 2 trillion) in 2009. Increases in international borrowing brings with it the small but not insignificant prospect that the United States could default on its international debt, triggering a global financial meltdown. Some economists believe that it is this fear that made President Obama limit the size of the stimulus plan to under $1 trillion. Nobel Prize winning economist Paul Krugman believes that the stimulus plan leaves a nearly $1.2 trillion dollar spending gap.

A CNN poll shows that 53 percent of Americans think that the stimulus will improve economic conditions, while 44 percent think it will not. The stimulus package is not the only massive spending program being enacted by the Obama administration. The Treasury Department and Federal Reserve has committed more than $1 trillion in financing for loan purchases aimed at injecting financial stability into a jittery financial sector. On Friday, Feb 20, the Dow Jones Industrial Average hit a near 11-year low of 7,365. In addition, President Barack Obama introduced a $275 billion homeowner relief program to stem the foreclosure crisis and prop-up a sagging housing sector.

It will be years before anyone can definitively say if these massive government interventions worked. Will Keynesian economics rescue us? Or are we witnessing the beginning of an epic economic upheaval? Concerns about the economy has replaced all other fears. America's new intelligence chief Dennis Blair said that the global economic crisis could topple governments, trigger waves of refugees and undermine global security. The current economic crisis shows how the fate of different communities and societies are increasingly dependent on the well being of others. In an increasingly globalized world, it is hard to separate the happiness of one group from that of others. The current economic crisis is certainly dangerous but like the Chinese symbol for risk the economic crisis also provides an opportunity to forge new alliances and develop a more multi-lateral framework towards addressing global challenges from climate change to economic perils. If nations and societies seize this opportunity then out the ashes of this economic crisis could emerge a new economic order that is more equitable and sustainable for all people. That is a hope we can all believe in.

Community at a Crossroads

noreply@blogger.com (Parvez Ahmed) — Fri, 27 Feb 2009 04:50:00 +0000

http://www.altmuslim.com/a/a/a/2945/

Recently I had a conversation with two officials from the US government. Among the many subjects of our conversation, one was about the circumstances that lead to my resignation from the helm of a major American Muslim organization. Despite my discomfort in having a conversation about things I had long forgotten about and moved beyond, I found myself agreeing with the substance of their argument. American Muslim organizations have come a long way and yet they need to evolve further by taking the necessary steps towards greater transparency, more accountability and higher professionalism. Failure to act with diligence and urgency could relegate them to footnotes in history at a time when a new administration in Washington is open to engaging diverse voices spanning the full spectrum of American social life.

In some strange and perhaps tangential way, I kept thinking about this conversation as I contemplated on the disturbing news that Muzzammil Hassan, the founder and owner of a television station, Bridges TV, founded to overcome negative stereotypes of Muslims in America, was charged with decapitating his wife Aasiya Hassan. The news was naturally shocking and it evoked many questions. What role, if any, could the American Muslim community have played in preventing this tragedy?

The Aasiya tragedy and my conversation with government officials both pointed to the simple fact that the American Muslim community has come to an important crossroads requiring serious introspection and positive action for change.

Aasiya Hassan's murder was the result of a private failure of a man who used community organizations to promote his business. Does this make those organizations or individuals that gave Muzzammil a platform to promote Bridges complicit or culpable? Absolutely not. Although Muzzammil had problems in his previous two marriages, his shortcomings were largely hidden from the public eye. Those that met him in the course of doing business, as I did, could not have foreseen the dark side of his personality.

Despite this lack of direct culpability, the American Muslim community must treat this tragedy as a wake-up call. Domestic violence is as much a problem in the Muslim community as it is among other groups across America. Mosque-based organizations and social service institutions must devise mechanisms to not only discuss the un-Islamicity of domestic abuse and violence but also find ways to band with American social service agencies in developing practical strategies to address this scourge. An occasional Friday sermon is a necessary but not a sufficient step towards addressing the problem.

Islamic centers and Muslim organizations have not devoted sufficient resources towards addressing the myriad of social issues dogging the community. The percentage of budget devoted to social services remains quite small. Moreover, the leadership of American Muslim institutions, by and large, remains heavily dominated by men over the age of 40. Many are first-generation immigrants (with the exception of those institutions catering predominantly to the African American community). Few Islamic centers have proportional representation from women or younger second-generation Muslims. This creates an echo chamber among leadership, to the detriment of the aspirations of the community.

When faced with tragedies and opportunities, words like "transparency," "accountability," and "professionalism" are not mere fads or slogans. They can become the key to averting a tragedy or harnessing an opportunity. The spirit behind these words finds resonance in many Islamic teachings, particularly in the life of Prophet Muhammad, whose life was an open book. About no historical figure are so many details known. He lived among people and had a ready ear for their problems. He was constructively critical of his community and thoughtful in providing solutions, on many occasions accepting the views of others over his own.

There are many practical ways for American Muslim organizations to translate the ideas of transparency, accountability and professionalism into practical success. In the spirit of brevity I will list only a few.

First, the ideas of professionalism, transparency and accountability are reflected in the Islamic concept of Ihsan (excellence). As God says in the Qur'an, "Worship God and do not associate anything with God. And practice Ihsan (excellence) with your parents and relatives and orphans and paupers and neighbors and the companion by your side, and the traveler on the road, and those in your legitimate custody. For God does not love any who are arrogant and vain." (4:36)

Prophet Muhammad exemplified that the removal of doubt is an attribute of good leadership. Those familiar with Islamic traditions will recall the incident where Prophet Muhammad went out of his way to let a fellow passerby know that the lady he was taking a stroll with was his wife, even though the passerby had no reason to doubt otherwise. American Muslim organizations can embody this transparency by publishing independently audited financial statements on their websites. In the same vein, organizations can publish bios of their board and staff, including such details as their educational and professional backgrounds. If membership based, organization should provide membership numbers. At a time when the American public remains skeptical of Muslims, such proactive steps will be in the best traditions of Islam and help can calm jittery nerves among prospective partners and donors.

Accountability can be fostered by instituting a regular transition of power, as many responsible mainstream institutions have. And yet some American Muslim organizations have stagnated due to lack of appropriate turnover in leadership. Accountability can also be further fostered by ensuring a diversified funding base rooted in the constituency that the organization is serving. Using new social networking technologies, American Muslim leadership can foster better dialogue with their constituents.

Engendering professionalism in organizational culture is crucial to efficiently serve constituents. Professionalism can be enhanced by a process of continuing education of board members and staff. It can also come from the adoption of best-practices for non-profit governance, a subject about which a great deal has been written.

The American Muslim community is relatively small, perhaps accounting for no more than 2-3 percent of the overall population. To maximize participation, organizations must expand constituency to include those whose association with the organized Muslim community may not be as strong as the regular mosque-going Muslim. To appeal to the hearts and minds of a new generation of Muslims will require an openness to new ideas.

Improvements in the governance of Muslim organizations will bring obvious benefits to the American Muslim community. It will also be good for America. The paucity of credible Muslim voices in American policy making circles is a limitation that hampers the efficacy of many U.S. policies. Part of the problem is the result of policy makers not sufficiently reaching out to the Muslim community allowing their fears to transcend their better angels. But another part of the problem is undoubtedly the fact that the community has not been effective in spotting and promoting new talents within a professional and institutional framework.

The American Muslim community will face many more challenges in the future, over and above the many it is facing now. The community cannot remain in its current reactive fire-fighting mode. It needs to become proactive, preventing fires from erupting in the first place.

Muslim world responds to Obama

noreply@blogger.com (Parvez Ahmed) — Sun, 01 Feb 2009 03:27:00 +0000

Source: Common Ground News Service, 27 January 2009, www.commongroundnews.org
Copyright permission is granted for publication.

Published in the Florida Times Union. Wed, Feb 4, 2009

In his first interview with Dubai-based Arabic TV network Al Arabiya, President Barack Obama connected with Muslim audiences, saying, “I have Muslim members of my family. I have lived in Muslim countries.”

News reports from around the Muslim world show an upsurge of optimism as America inaugurated its first African American president last week. This optimism is not just the product of President Barack Obama’s race or his middle name, Hussein, but rather a reflection of his thoughtful leadership.

In his inaugural address President Obama displayed rare perceptiveness by asserting, “To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect.” He followed this with a warning “to those leaders around the globe who seek to sow conflict, or blame their society’s ills on the West, ... your people will judge you on what you can build, not what you destroy.”

With these words, he affirmed the need for all nations to find ways to solve their internal problems without blaming them on the Western world, while simultaneously acknowledging America’s role: “... As the world grows smaller, our common humanity shall reveal itself. America must play its role in ushering in a new era of peace.”

Obama’s words of hope present Muslims with a new opportunity for engagement. By rebuilding their communities on a positive vision of economic, educational and political opportunities for all citizens, Muslims can effectively counter the morally bankrupt ideology of religious extremism so abhorred in normative Islam.

Obama assured Muslims that they would not be alone in this battle. He vowed to defeat terrorism “in a manner that is consistent with our values and our ideals.” This means not only banning torture and renditions, but also stereotyping and finger-pointing.

In his Al Arabiya interview, he underscored the need to “look forward and not simply think about all the conflicts and tragedies of the past.”

To create a clean break from the past, Obama should, like the European Union, ban language linking the faith of Islam to terrorism, and make ill-defined words like “Islamofascism”, “jihadist” and “Islamist” relics of the past. Several American military and security experts, including Dr.

Douglas Streusand, and Lt. Col. Harry Tunnell of the National Defense University, concur that rhetorically tying terrorism to Islam only alienates Muslims, without solving the problem of terrorism.

President Obama can also usher in a new era of US-Muslim cooperation through clear changes in policy and a new use of diplomacy. For example, foreign assistance programmes should be re-examined to make sure that they balance security imperatives with social investments in health, education, innovation and entrepreneurship. And the rejuvenated State Department could expand educational exchange programmes around the globe, particularly with countries in the Muslim world.

One of the most difficult issues Obama inherits is the yet unresolved conflict between Israel and the Arab world. In the words of Gandhi, an eye for an eye leaves the whole world blind, and this sadly expresses the reality of this conflict. An assertive and neutral America will be able to break the cycle of conflict on the basis of mutually assured security, dignity and prosperity.

In addition, Obama will have to put forth the idea of a grand détente, providing all regional players – including Syria and Iran – a real stake in shaping the future of their region.

Obama should make clear that in helping the Muslim world, America will not waiver in its values and ideals – championing democratisation, re-establishing the rule of law, expanding the notions of religious freedom, and upholding the ideals of equality, especially for women and minorities.

A 2008 Gallup Poll shows that majorities in the Muslim world share many of these values. A friendly America can strengthen these attitudes.

In engaging with the Muslim world, Obama should also take into account the role Muslim Americans can play in affecting foreign policy. During election season, former Secretary of State General Colin Powell made special note of the patriotism of Muslim Americans, who unfortunately remain invisible in our mainstream public discourses, except in the context of terrorism.

Imagine President Obama, eschewing the invariable attacks he may face and publicly seeking the help of Muslim Americans to shape his new policy agenda towards the Muslim world. This very effort will undermine the narrative at the heart of anti-Americanism – the perception in the Muslim world that America is at war with Islam.

###

This article was written for the Common Ground News Service (CGNews) and can be accessed at www.commongroundnews.org.

Irrational Exuberance

noreply@blogger.com (Parvez Ahmed) — Thu, 15 Jan 2009 20:17:00 +0000

This article appeared in the Jan/Feb 2009 issue of Islamic Horizons, Page 26.

In December 1996, then Chairman of Federal Reserve, Alan Greenspan said, “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…?” Immediately after he said this, the stock market in Tokyo fell sharply and closed down 3%. Hong Kong fell 3%. Then markets in Frankfurt and London fell 4%. The stock market in the US fell 2%. This strong reaction made the term “irrational exuberance” famous and focused global attention on fear and greed being the two most powerful factors that shape market behavior.

A decade later in May of 2007 the Dow Jones Industrial Average (the most popular indicator of the stock market’s health) had nearly doubled from the time Greenspan uttered the famous words. A year and a half after that high-point the markets had dropped 49 percent in value. It took the market nearly a decade to double its value and only 18 months to precipitously drop half that value!

Financial markets impact Main Street. Jobs are being lost at record pace. Unemployment rate, which stood at 4.5 percent in May 2007, now stands at 6.1 percent in September 2008, a whopping 35 percent sharp increase in less than a year and a half. At the core of this malaise stands the collapse of the housing market created by the astronomical foreclosure rates. In August 2008 RealtyTrac reported 303,879 foreclosure filings — default notices, auction sale notices and bank repossessions. This represented a 27 percent increase from just a year ago, showing one in every 416 U.S. households received a foreclosure filing during the month. These foreclosures have led to credit squeeze in the banking sector, which in turn lead to the $700 billon bail-out package passed by the U.S. Congress and signed by President Bush in September, 2008.

Are Investors Really Rational?

How did we get to this point in history? Why were ordinary taxpayers forced to underwrite the gambling practices of the rich and powerful, when the U.S. Congress passed and the President signed into law the $700 billion bailout package? It is indeed bad economics when the federal government socializes risk while keeping profits privatized. It would have been equally foolish to allow the federal government to stand on the sidelines, as a terrible credit squeeze paralyzed the general economy.

Not that the bailout (euphemistically called the rescue package) will solve our current economic problems. For the current woes are the result of decades of a dogmatic belief that the “invisible hand” can in-and-of-itself keep markets efficient and in Pareto optimum (an economic system is Pareto efficient if by changing the allocation of goods some individuals can be made "better off" without any other individual being made worse off).

For over a decade those in charge of the economy (the Fed and the Treasury) both placed an inordinate emphasis of laissez-faire (French for hands-off or let do) ideology, thus favoring systems that tilted the playing field towards efficiency without regards to the equally important societal concerns of fairness. Moreover, they assumed investors to be “rational” disregarding an emerging body of literature in finance and economics that posited investor behavior to be less than rational, influenced by psychological biases like cognitive dissonance that are the result of human beings pursuing heuristic simplifications (shortcuts to decision making) and self deception (people deluding themselves to believing that they are better than they actually are).

Learning From History

Not knowing the past is a sure recipe for being condemned to repeat history. The crisis of 2008 actually has many antecedents. Perhaps none more important than the repeal of the Glass-Steagall Act in 1999. The demise of Glass-Steagall allowed Wall Street and the banking system to become essential enablers of our current crisis.

The Glass-Steagall Act was enacted in the wake of the financial market crash of 1929, which many economists believe was partly responsible for the Great Depression that followed. While the Act itself was in response to the greatest economic catastrophe faced by our nation (among other tell-tale signs one in five banks had failed), its repeal came without much fanfare and perhaps more noteworthy not the result of any structural change in the market or economy. The proponents of the repeal put forward the argument that in a globalized economy the removal of the barrier separating commercial and investment activities will allow U.S. banks to be more competitive in the world market.

The Slippery Slope of Deregulation

By the 70s, banks began to lobby against the Glass-Steagall Act and brokerage firms began encroaching on banking by offering credit or debit cards and interest-bearing money-market accounts that allowed check-writing. A major blow against the Act was leveled in 1987 when the Federal Reserve Board, which regulates banks, voted 3-2 in favor of easing some of the restrictions. The vote came despite dire warnings from the then Fed chairman Paul Volcker (now economic advisor to Presidential candidate Barrack Obama). The result of this vote allowed depository institutions like banks to get involved in the underwriting business. Volcker’s prescient observation that the loosening of the Act will lower credit standards as banks will pursue lucrative securities offerings (often at increased risks to depositors) and market bad loans to the public, rings prophetic today.

Shortly thereafter President Regan appointed, Wall Street’s own, Alan Greenspan to become the Chairman of the Federal Reserve. But the death nail to the coffin was struck during the Clinton era. Sandy Weil of Travelers insurance hooked up with John Reed of Citicorp to announce the formation Citicorp that brought under one roof Travelers Insurance, Salomon Smith Barney and Citibank, thus creating the world's largest financial services company. The audacity of the merger was not in the fact that it was at the time the biggest corporate merger in history but the fact that the merger went against the letter and spirit of Glass-Steagall. Weil had successfully lobbied then Treasury Secretary Robert Rubin and the Fed Chair Greenspan to allow him “temporary” approval, allowing Weil time to lobby the Congress to repeal Glass-Steagall. After furious lobbying efforts and without much public discussion in 1999 the U.S. Congress repealed Glass-Steagall.

The Inherent Moral Hazard of the System

Banks are originating loans thereby expecting to participate in the profits from those loans. However, they are passing those loans to agencies like Fannie and Freddie who then securitizes those loans into mortgage backed derivative securities (being sold on unregulated market due to the passage of another law favoring deregulation - the Commodity Futures Modernization Act in 2000). These derivatives are being marketed by the brokerage houses owned by the same bank that originated the loan. This creates a vested self-interest on the part of Wall Street to hype the value of real estate. At one level the entire thing becomes a giant ponzi-scheme enabled by the moral hazard of housing brokerage, investment and banking under common ownership.

Ironically countries like China maintain a separation between commercial banking and the securities industries. The World Bank reports that China has continued use a form of the Glass-Steagall Act to regulate their system.

Unregulated Derivatives

Undoubtedly derivative markets serve an important societal function by allowing appropriate management of risk for both farmers and factories. Derivatives are form of insurance that allows the transfer of risk from parties that cannot bear them to those who can or want to bear them. The derivative markets in-and-of-themselves are not the problem. It is the unmitigated greed of speculators and the herd mentality of the rest that lays the seed for the formation price bubbles (like we saw recently with the increases in oil prices).

Derivative securities are high risk-high reward assets. In light of the psychological biases of individuals thus, these markets are more susceptible to being swayed by fear and greed. Thus, when the Commodity Futures Modernization Act of 2000 left open the so-called "Enron loophole", which exempts energy derivative trading on electronic commodity markets, it laid the foundations of for today’s excessive speculation.

The "loophole" was drafted by lobbyists for Enron working with Senator Phil Gramm (former advisor to Presidential candidate John McCain). In September 2007, Senator Carl Levin (D-MI) introduced a bill to specifically close the "Enron Loophole". On June 18th, 2008 the bill was enacted into law. In her book “The Tyranny of Oil” author Antonia Juhasz illustrates the connection between the CFMA and devastating run-up on the oil prices that we observed earlier this summer. Even though the “Enron Loophole” has been closed the CFMA still keeps credit derivatives from being regulated.

Where Do We Go From Here?

Adam Smith in his “The Theory of Moral Sentiment” wrote, “All members of human society stand in need of each other’s assistance, and are likewise exposed to mutual injuries. Where the necessary assistance is reciprocally afforded from lover, from gratitude, from friendship and esteem, the society flourishes and is happy. All the different members of it are bound together by the agreeable bonds of love, affection and are, as it were, drawn to one common center of mutual good offices.”

Thus the underpinning of an economic system has to be geared towards the idea of common good. The ethical ideal is to pursue the internal good, which Adam Smith defines as being “perfectly virtuous” i.e. “the man who acts according to the rules of perfect prudence, of strict justice, and of proper benevolence.” This does not imply that we need to discard the traditional financial economic goal of wealth maximization. Attaining “internal good” is necessary not just for altruistic reasons but also for profit making purposes. Providing profit by harming society perverts the purpose of business. To enable this pursuit of internal good by societal norms and internal business culture must be made intrinsic to both personal and professional goals.

Ethics must become an internal motivation for individuals to pursue moral excellence as a goal in-and-of-itself. This approach is based is based on the philosophical foundation of what is called “virtue ethics.” A virtue is an internal good that the characteristic of which is the achievement of good for the whole community and not just the individual. Thus, virtue ethics views professional development as a moral process, arguing that one cannot be practically rational without being just. Virtue ethics secondly emphasizes the existence a community that nurtures these virtues. The third aspect of virtue ethics is the role of moral judgment. This implies that virtue ethics is not so much about rules as it is about exercising sound judgment.

These concepts are rooted in the theology and hermeneutics of every religious system, including Islam. The comparable word for ethics in Islam is Akhlaq or khuluq. Goodness in Islam is conveyed through a whole range of words - khayr (goodness), birr (righteousness), qist (equity), ‘adl (equilibrium and justice), haqq (truth and right), ma‘ruf (known and approved), and taqwa (God consciousness or piety).

The goals of Islam are based on Islamic concepts internal good, which is expressed as preservation of mind, body and spirit. Thus the Islamic system stress brotherhood/sisterhood and socioeconomic justice and require a balanced satisfaction of both the material and spiritual needs of all humans.

Islam considers that the fundamental purpose of human beings is to worship their Creator (God). "I have created the spirits and humankind only for My worship," Quran, Chapter 51, Verse 56. The word worship (ubudiyah) in Islam is a not limited to ritual prayers but encompasses each and every human act that leads to internal good. In Quran, Chapter 6, Verse 162 reads: “Say: 'Surely my prayer, my sacrifice, my living and my dying are for God, the Lord of all the worlds.'” The Quran also gives the purpose of human life on earth as “[It is He] who created death and life to test which of you is best in conduct; and He is the Mighty, the Forgiving" Quran, Chapter 67, Verse 2.

Taqwa is the Islamic concept of "God-consciousness." Having taqwa allows a person to be constantly aware of both God's omnipresence and attributes and a reminder of their relationship and responsibility to God as his creation and servant. Ihsan is an Arabic term meaning "perfection" or "excellence." Ihsan is the Muslim responsibility to obtain perfection, or excellence, in worship, morals, manners, attitudes and social interactions.

Another Islamic concept that relates well to the issue of internal good is the concept of unity (tawhid). Unity is a coin with two faces: one implies that God is the sole creator of the universe and the other implies that people are equal partners or that each person is a brother or sister to the other.

The issue of “moral judgment” is best exemplified by two Islamic concepts of justice (adl) and trusteeship (khilafa). In pursuing wealth maximization, people should not lie or cheat; they must uphold promises and fulfill contracts. Usurious dealings are prohibited. Islam teaches that all wealth should be productive and hoarding of wealth is shunned.

The intense commitment of Islam to justice and brotherhood demands that Muslim society take care of the basic needs of the poor. But while helping the needy is encouraged, Islam also obliges individuals to earn a living. The hand that gives is considered better than the hand that accepts. The Islamic institution of zakah is form of a wealth tax comprising compulsory charitable-giving for specially designated groups in society, facilitates the care of all members of society. In the Islamic hermeneutics, the rich are not the real owners of their wealth; they are only trustees. They must spend it in accordance with the terms of the trust, one of the most important of which is fulfilling the needs of the poor.

The word “zakah” means purification and as such, income redistribution is not only an economic necessity but also a means to spiritual salvation (“. . . of their wealth take alms so that you might purify and sanctify.” Qur’an 9:103).Thus, economics is effectively integrated with ethics.

In Islam, human beings are viewed as God’s vicegerent or trustee (khalifa) on earth. This does not negate private ownership of property but does have some important implications. It implies that there is no conflict between the moral and socio-economic requirements of life. Resources are for the benefit of all and not just a few and everyone must acquire resources rightfully. Given the right motivation, all economic activity assumes the character of worship. Indulgence in luxurious living and the desire to show-off is condemned. Islam does not tolerate conspicuous consumption.

One important consideration in virtue ethics is the role of an exemplar. For Muslims the best exemplar is Prophet Muhammad who advised Muslims to be moderate in all their affairs; he described Islam as the “middle way.” A balance in human endeavors is necessary to ensure social well-being and continued development of human potential.

Prophet Muhammad said, “work for your worldly life as if you were going to live forever, but work for the life to come as if you were going to die tomorrow.” Islam, like some other religions, places a greater emphasis on duties than on rights. The wisdom behind this is that if duties (relating to justice and trusteeship, for example) are fulfilled by everyone, then self-interest is automatically held within bounds and the rights of all are undoubtedly safeguarded. Society is the primary institution in Islam, not the state. This point also illustrates the centrality of the concept of “community” in Islam, which is the fourth and final pillar of virtue ethics.

Wall Street and Main Street are joined at the hip. The task before the next President will be to create sensible regulation that promotes greater transparency, curbs excessive speculation and fosters efficiency. Furthering this goal requires support from ordinary Americans. Muslims should be at the forefront demanding such reforms. Their faith demands it. Their country needs it.

Terrorism: Muslims also victims in Mumbai

noreply@blogger.com (Parvez Ahmed) — Tue, 09 Dec 2008 17:06:00 +0000

Letter in Florida Times Union, Dec 9, 2008

Terrorism is not new to India.

Muslims, Hindus, Marxists, Sikhs, Tamils, among others. have all been perpetrators, just as Indians of all religious and ethnic backgrounds have been its victims.

The latest attacks in Mumbai claimed the lives of 174 people and injured nearly 320. According to one Indian newspaper, nearly 40 Muslims were among the dead, accounting for nearly 23 percent of the casualties.

Back in the United States, pundits are describing the terrorists as “Islamic,” even though there is nothing Islamic about terrorism.

Muslims worldwide, including in America, condemned all such acts of terror, and Indian Muslim groups have gone a step further.

Islamic clerics in India described the Mumbai carnage as an attack on the nation and reiterated that Islam forbids the killing of innocent people and is against any form of terrorism.

“We are deeply aggrieved by the loss of human lives and especially by the brutal killing of Jews,” they said. In a show of respect for the dead, they have asked Muslims to wear a black ribbon on Eid al-Adha (Festival of Sacrifice), a day when Muslims commemorate Abraham’s steadfast faith in God.

A leading Indian Islamic seminary is asking Muslims to avoid the traditional sacrificing of cows on Eid al-Adha, in a show of respect for the religious beliefs of Hindus, who view the cow as sacred. Mumbai’s Muslim Council has refused burial rites for the killed terrorists.

Indian officials are insisting that the terrorists came from Pakistan and were perhaps aided by Lashkar-e-Tayyiba, a terrorist organization with past links to Pakistan’s intelligence services. Even if the alleged official Pakistani links turn out to be false, Pakistan needs to demonstrate a greater commitment to curbing militancy.

India, on the other hand, must avoid any provocative moves that heighten tensions with Pakistan or unleash any backlash against its Muslim minority.

The fact that nuclear-armed Pakistan is teetering on the verge of bankruptcy and is itself the victim of terrorism, underscores the need for deft diplomacy to defuse this volatile situation.

In an increasingly globalized world, where some of our biggest challenges require common solutions, religious diversity within India and with Pakistan can be a source of strength.

But to achieve this, leaders of all faith groups will have to work hard to promote inter-faith understanding and politicians will have to eschew the divisive politics of religion baiting.

PARVEZ AHMED,

professor,

Jacksonville

Mumbai Attacks Raises More Questions with Few Answers

noreply@blogger.com (Parvez Ahmed) — Mon, 01 Dec 2008 23:07:00 +0000

Media Monitors Network

Terrorism is not new to India. In the last two decades terrorist groups have wrecked havoc all across the country, conducting operations in major cities like Mumbai to relatively obscure areas like Manipur and Mizoram. Muslims, Hindus, Marxists, Sikhs, Tamils, among many others have all been perpetrators, just as Indians of all religious and ethnic backgrounds have been its victims. The latest attacks in Mumbai claimed the lives of over 180 people and injured nearly 320. Like other similar acts, they were intended to create paranoia and induce fear. Who were these terrorists and what did they want? At this point, there are more questions and few answers.

Indian officials are insisting that the terrorists came from Pakistan and were perhaps aided by Lashkar-e-Tayyiba (LeT), a notorious terrorist organization operating in South Asia. LeT first came to prominence in 1993 when it used Afghan and Pakistani mercenaries to carry out attacks in the disputed area of Kashmir. LeT is officially declared a terrorist organization by the United States, European Union, India, and Pakistan. Indian media and officials often insist that LeT is unofficially aided by ISI, the Pakistani CIA.

Former FBI agent and renowned profiler Clint Van Zandt once said, "Motive is the reason, the why, …. Motive is important because without an understanding of why people commit certain crimes in the way they do, we are left to begin at square one on every investigation." The alleged official Pakistani links to the Mumbai attacks seem unlikely. Pakistan's military, intelligence and political establishment have no incentive to support commando style attacks in India. Pakistan is teetering on the verge of bankruptcy. It is under heavy pressure from the U.S. to crack down on militants who are causing havoc across its Western borders in Afghanistan. Pakistan is also a victim of terrorism, best exemplified when a massive bomb attack in Pakistan's capital Islamabad killed over 50 people earlier this year in September. Like Mumbai, the target in Islamabad was a famous hotel frequented by politicians, foreigners and elites.

Back here in the U.S. media pundits described the terrorists as "Islamic" even though there is nothing Islamic about terrorism. Some commentators suggested that the goal of the terrorists were to establish an "Islamic" state in India. The pertinent question to ask is to how will these terrorists establish an Islamic state in India where Muslims, according to Indian census, make up less than 14 percent of the population? How can anyone gain political power, far less legitimacy, by subjecting large populations to indiscriminate violence and terror?

Just because terrorists claim that their goal is to establish a "caliphate" from Indonesia to Morocco does not mean people of conscience should just repeat the terrorist narrative without pausing to check its plausibility. Unfortunately when such absurdities are repeated they begin to assume a larger than life narrative obfuscating the root causes of terrorism. Unfortunately thus terrorism continues to metastasize while in the words of John Mueller, professor of political science at Ohio State University, "Politicians will be inclined sanctimoniously to play to those fears . . . bureaucrats will stoke the same fears . . .And the press . . . will continue to make sure that what bleeds leads."

Another narrative at play is that the Mumbai terrorists were homegrown in India. While this is possible, it is not plausible that homegrown boys will have access to military grade AK-47s and have the requisite training to use them expertly keeping elite Indian commandos at bay for nearly 59 hours. At a time when Indian Muslims are being subjected to unprecedented police harassment, profiling and fake encounter killings by police, escaping the detection of Indian security and planning this brazen attack is hard to fathom.

In addition, on September 29 bomb blasts in Malegaon and Modasa killed five Muslims. According to Mumbai police the attacks were carried out by extremist Hindu militants with known links to India's leading opposition party BJP (Bharatiya Janta Party). This troubling nexus between Hindu militants and a BJP, a party vying to be the next ruling majority in Indian parliament was first brought to light by Hemant Karkare, one of India's best and brightest anti-terrorism police officer. Karkare was gunned down during the course of these latest Mumbai attacks. For Indian Muslims, Karkare was an oasis in the vast desert of India's security establishment, which with its strong arm tactics has alienated much of India's over 150 million Muslims. Why would Indian Muslims shift the wrath of the security apparatus back on them just when the public debate in India was beginning to see terrorism as not just a Muslim-problem but rather as scourge that has no religion?

The answer to these vexing questions will only come if and when India conducts an open investigation into these attacks. India owes this to its own citizens. Given the global nature of terrorism, the world has a vested interest in knowing the answers to these puzzling questions. Once results of a thorough and transparent investigation are made known, Indian authorities should spare no means to bring the perpetrators of such a heinous crime to justice.

Terrorism is obviously a threat, but does not necessitate a declaration of war to overcome this challenge. Since President Bush declared a global war on terrorism, the threat of terrorism has gone up. India is now contemplating declaring its own "war on terror." Rather than exhibiting the same knee jerk reaction that led America down a disastrous path after 9-11, India needs to take heed that the blustery rhetoric that is now dominating Indian airwaves will only make the problem worse. It has already began to give rise to new jingoism with talks now of India sealing its border with Pakistan.

While democracies and free societies are especially vulnerable to terrorism they need not give up their freedoms (or their sense of fairness) to gain security. More of one does not necessarily mean less of the other. Terrorists cannot derail any democracy. However, democracies can be severely undermined if policymakers enact laws that are contrary to the fundamental guiding principles of any liberal democracy. In Ben Franklin's words, "They who would give up an essential liberty for temporary security deserve neither liberty nor security."

The spectacle created by the Mumbai attacks gives the new Obama administration an opportunity to pursue a more holistic approach towards South Asia. Given the fact that both India and Pakistan have their fingers on the nuclear trigger and in light of the security failures in both Islamabad and Mumbai, America cannot leave this matter to be solved exclusively by Indian and Pakistani goodwill. President-elect Obama to his credit offered the idea of sending Bill Clinton to the region to serve as mediator.

Security is of mutual interest to both India and Pakistan. Cooperation between the two nations will be requisite in enacting balanced policies that will eventually lead to goodwill between the many faith-based communities who call that region their home. Outside of America, the Indian sub-continent is one the most religiously diverse regions in the world. In an increasingly globalized world, where some the biggest challenges require common solutions; such diversity can be a source of strength. But to achieve this, leaders of all faith groups will have to work hard to promote inter-faith understanding and politicians will have to eschew the divisive politics of religion baiting.

India's greatest challenge lies in the social transformation where religious, ethnic, and class differences are transcended in order realize the ideals stated in the Preamble to the Indian Constitution, "to secure to all its citizens, JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation."