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When they began staging their protests in downtown Cairo, it seemed so risky, so unimaginable, so likely to be brutally swatted away by the heavy-handed hordes of government thugs.
In the republic of fear that has long reigned over Egypt, such things didn’t happen. Showing the smallest hint of disobedience could be painful and sometimes fatal.
Yet the workers kept on coming despite the beatings, the threats and long confrontations with the government and companies that seemed to be going nowhere, and rarely toward workers’ interests.
But they were—I know what I saw in Cairo last year. The nation’s workers were one of the groups who began to open the doors to the room where Egyptians have for decades stored their collective grit and outrage. They are now rediscovering those national assets.
The forces that first brought angry workers to downtown Cairo and to factories’ gates across the country a few years ago were powerful and deeply disruptive —the reason for the venom that poured forth.
Several years ago, when the state stepped up its privatization of government-owned facilities in a further liberalization of the one-time socialist economy, workers more often wound up as losers.
The new owners trimmed the ranks of the facilities, cut wages, reduced benefits and essentially wiped out the tiny sense of economic security that the workers had clung to. As the demonstrations grew against the new owners, the government promised to look into the problem and to slow the privatization. But the damage was already done and the promises were rarely met.
While Egypt’s economy boomed and luxurious gated communities blossomed in the desert surrounding Cairo, workers’ lifestyles were withering away as inflation ate away at their meager earnings and wages remained stuck at subsistence levels.
Time and again workers pleaded for the government to boost the minimum wage, which was about $7 per month for most of last year. But the government held off and officials said that workers actually were doing better. Their average wages were up around $70 a month, according to government officials.
So as new hotels and new malls bloomed, four out of ten Egyptians were earning less than $2 a day last year.
This viper economy meant that there has been a booming market in Egypt for people to sell their body parts to merchants in Egypt and across the Middle East. But even when they do, they are often cheated out of the money and left terribly sick from an economic fantasy gone bad.
Desperation has brought a brisk trade in selling young girls as short-term brides to wealthy Arab visitors, a euphemism meant to deal with Muslim sensitivities. In actuality, the girls are prostitutes who are sold for weekend services to super rich Gulfies, who have left behind thousands of youngsters without financial or any other support.
In most countries of the world, the ones with the highest unemployment rates are the low educated. Not in Egypt. College graduates dominate the ranks of the unemployed because many of their degrees are worthless, and the only jobs many can find are low-wage service jobs.
That is why there has been a slow trickle of young well-educated Egyptians trying to smuggle themselves into Europe and into better lifestyles. A number of these have lost their lives at the hands of heartless smugglers.
Without stable, decent-paying jobs, they have no prospects for improving themselves and no chance of getting married. Before marrying in Egypt, a groom needs to be able to support a new family. Many young men can’t and that is just one reason why you see mostly young faces marching in Cairo and Alexandria today.
On the books, Egyptian officials have been able to point to figures showing a national economy growing steadily.
But when Egyptians have reached into their pockets, they have often found barely enough to keep them going. That’s one reason why the country has a high rate of stunted children – youngsters who never grow to full size.
On paper, most workers belong to unions. But in reality the unions have shown little interest in workers’ rights or securing a better future for them. That is why nearly all of the more than 3,300 factory occupations, strike and other forms of protest since 2004 involved workers on their own or through their attempts to create dissident unions.
In a traditional society, the men have been the ones that have led the protests. But female workers began shouldering their share of the fury several years ago, taking part in the demonstrations and protests. In one case, women alone led and dominated a factory occupation, their children by their sides.
Hungry, tried and frustrated, workers began challenging the government to improve their lives several years ago. Sometimes the uproar was so great that the government caved in and met their demands. But it always took a clinched battle for the government to eventually back away and reach a deal, factory by factory.
But this time, they are no longer worried about what they could lose.
When Money Runs Dry, Frauds Come to the Surface
One of the sad truths of economic crises is that people first learn how they have been cheated out of their money when the economy collapses.
Why is this true in crises?
In good times, schemes can flourish because there is a lot of money floating around. The typical scheme is a pyramid arrangement. A businessperson convinces investors that he can earn them great profits by investing. In fact, he does not earn great profits. What he does is take money from one investor and give it to another. That is why we call it a pyramid scheme.
But such schemes collapse when people withdraw their money, and when there are fewer people willing to take part in such operations.
What keeps these operations going year after is the hope of earning more money, the failure of regulators to catch the swindlers, and good times that keep the schemes afloat.
Suggestions for reporting
In the current global crisis, several of these pyramid schemes have surfaced around the group of investors who thought they were earning exceptional profits. The challenge for a reporter is keeping in touch the regulatory agency that might catch such schemes. In most markets, companies’ profits do not go up at perfect angles or regular percentages. But swindlers mistakenly keep improving their results in the same manner.
Some questions you might ask:
Are there persons with a history of such frauds now selling stocks?
Have a great number of people lost large amounts of money from the same business person?
What were the promises that the alleged swindler made to the investors?
What were the relationships between the business and government regulators?
Is there a record of investigations that raised questions but took no action?
Are there any persons who were found guilty of frauds who now will talk about these operations?
What records do government agencies keep on such frauds? What are the international agencies that track such companies? Are there any agency officials who have retired or joined other organizations and how can you reach them? Before you do, make sure you know who they are working for now.
Are there news stories about investors that promise very high profits?
Did you draw a diagram to show who is linked to who and another diagram to show the flow of funds from investors and another to show the timeline of events?
Understanding the vocabulary of the global economic crisis
Here are some of the important words and concepts
Bank panic – When investors fear that their bank does not have enough money to pay them, they go to the bank and take their money out. When a large number of investors try to withdraw their money, this may cause the bank to collapse or to close permanently. In the current crisis there have been several times when worried investors rushed to their banks, and a number of banks have gone out business across the world.
In Iceland the collapse of the banking system led to loans by the International Monetary Fund, Denmark, Finland and Norway. The collapse of the banking system in the small country was a surprise for many.
But there were several factors in the collapse.
Credit was easily available. The economy had taken off and construction had helped the economy prosper. But most importantly, changes in regulations had allowed the banks to expand, to operate under new systems and to do business beyond Iceland. As a result of the deregulation, the banks expanded to the U.K., the United States, Europe and elsewhere.
One lesson from the collapse in Iceland was that countries need to be able to supervise foreign firms that do business in their country.
Bear market – This is when stock markets are in trouble. The markets are declining and investors are worried about the future. Pessimism is common. A bear is an investor who sells stocks with the hope that they can be bought back at a less expensive price.
Bull market – The opposite. Here, the market is growing and investors are earning money. Confidence encourages investors and the stock market is flourishing. A bull takes advantage of the market’s boom and buys stocks, hoping that their value will go up.
Bonds – Large companies issue bonds. So do governments and institutions. The bonds pay interest. To measure the safety of investing in the bonds, they are rated by companies. But this crisis showed a problem with the system.
Islamic Financing and the global economic crisis
Islamic financing is a unique development not only for Muslims but for global economics. It is a way of finance that marries Islamic faith with economics. The idea of linking finance to a moral, ethical or religious belief is not new. This is true for Islamic financing.
But the growth of Islamic financing as a part of global finance is a recent development. The first major Islamic financial organizations did not begin until the1960s’ and 1970s’.
And as they have developed, Islamic financial organizations have created new ways to adopt Islamic beliefs to modern day economic dealings.
The guiding rules for Islamic financing come from the core principles in Islam.
The role of Shariah in Islamic financing
Shariah or Islamic law prohibits interest. It bans uncertainty in contracts unless everyone involved in the business dealing clearly understand the conditions. It does not allow involvement in businesses that are prohibited by the religion. These would include businesses that deal in alcohol, pornography, gambling or pork-related products.
A mortgage or real estate dealing offers a good example of how Islamic financing differs. In most real estate agreements, the lender pays interest to the seller or the bank. But in Islamic financing, the banks own the property and the buyer pays rents until the cost of the property is covered.
Recent expansion
In the last few decades Islamic financing has grown markedly. It is estimated that this form of financing has increased by an average of 10 to 15 percent annually from the end of the 1990s’.
How large is Islamic financing?
Most estimates say that it represents between $700 and $800 billion in assets across the globe.
There are an estimated 300 Shariah-compliant organizations in 75 nations. A Shariah-compliant organization is one that uses the laws of Islams as its guiding principles.
The largest Islamic banks are located in Saudi Arabia, Kuwait, Dubai, Qatar, and Bahrain. The major organizations that issue Islamic bonds are located in the United Arab Emirates, Saudi Arabia and Kuwait.
But experts point out that the spread of Islamic financing is still quite limited. It is estimated that Islamic financing accounts for only 1 percent of the world’s financial assets.
Islamic financing exists mostly in the Gulf, Iran, and Southeast Asia. Islamic financing has especially grown in Malaysia where, according to new reports, it accounts for 12 percent of the banking assets in the country.
There are also organizations based on Islamic financing in Europe, and United States.
Most of the money involved in Islamic financing is tied up in banking. A smaller share is committed to Islamic bonds, equity funds, and mutual funds.
How have Islamic financial organizations survived in the economic crisis?
To supporters of Islamic financing, the global economy crisis is proof that these organizations are an alternative to conventional financing. Why?
This is because they are barred from dealing in the kind of debt contracts that have led to the collapse of the world economy. It is also said that Islamic financial organizations are a safe haven for those frightened by the uncertainty of the conventional financial system.
But Islamic organizations are not immune from the collapse that began in depth in 2008. A study by Gulf One Investment Bank in 2008 said that Islamic financing has largely outperformed the traditional financial system in the last few years.
But it suffered a greater decline at the end of 2008 than conventional markets, the report said.
One of the problems of Islamic financing is that it heavily invests in real estate. This is a problem because it overly exposes the system and organizations to the weaknesses of the real estate market. Another concern is that the system is also heavily reliant on loans to consumers.
As a result of its reliance on real estate investments, Islamic financial organizations suffered marked loses as the economies of the Middle East began to weaken in 2008 and real estate values as well as construction suffered declines, according to news reports
Problems and Questions
Here are some of the criticisms and challenges facing Islamic financing:
Some of the newly created financial devices are too similar to those provided by conventional financing. This raises the question whether they are truly Islamic in nature.
Religious scholars have challenged some of the new financial instruments, forcing them to delay their work or to close down. Aand that has caused uncertainty for businesses and governments dependent on dealing with Islamic financial organizations.
There is a lack of Islamic scholars and experts versed in Islamic finance who can oversee a system that is growing very rapidly. This puts a strain on businesses trying to expand within the framework of Islamic financing.
Governments in some Muslim countries have not provided enough legal and financial support to make the system available to their citizens.
Scholars fear that Islamic financing can lose the it’s religious spirit and meaning by following the path of conventional financing.
Suggestions for reporters;
Can you identify the major Islamic financial organizations in your country?
What has been the impact of Islamic financing on your nation’s economy and ways of doing business? What have been the benefits? What have been the problems? How are these organizations regulated? Do they have the small level of openness of transparency to investors and regulators as in traditional financing?
Who are the major investors in Islamic financing and was the major borrowers?
What percent of all banking and loan applications in your country are controlled by Islamic financial groups?
Have Islamic financial organizations adopted new financial tools like Hedge funds in your country? Such tools would also involve stock derivatives, insurance and mutual funds.
Who are the leaders of these organizations, and who are their Islamic advisors? How do they guide their organizations differently from traditional ones?
Can you take examples of lenders or groups that rely on Islamic financing and show it has impacted their lives? Are loans easier to acquire? Is there a social benefit from the loans given out by the organization?
How much access do low-income borrowers and business and persons in rural areas have to Islamic financing?
