World Economic Crisis: An Analysis

There is something clearly wrong in the economic system of the world today and it is the most vulnerable who are having to pay the price. Since the start of 2006, the average world price for rice has risen by 217 percent, wheat by 136 percent, maize by 125 percent and soybeans by 107 percent, (according to a Wikipedia entry on 2007-2008 world food price crisis). These price hikes have sparked a wave of protests around the world: from Haiti to Kenya to Indonesia to Egypt and Ivory Coast.

In an interesting article (Hoarding Nations Drive Food Costs Ever Higher, 30 June 2008), the New York Times explains that since 1980 “even as trade in services and in manufactured goods has tripled, adjusting for inflation, trade in food has barely increased. Instead, for decades, food has been a convoluted tangle of restrictive rules, in the form of tariffs, quotas and subsidies….[T]he world is increasingly dependent on a handful of countries…that are still exporting large quantities of food…. [P]oor countries have frequently cut farm assistance programs and lowered tariffs to balance budgets and avoid charging high prices to urban consumers. But they have found that their farmers cannot compete with imports from rich countries — imports that are heavily subsidized”.

In our Economics 101 lectures we were taught about Adam Smith’s ”invisible hand“, about comparative advantage and the importance of free trade. By the time we made it to post-graduate courses, our lecturers could no longer hide the fact that Messers Smith, Keynes and Friedman did not have it all worked out, and that in fact “free market forces” did not have the power to fix everything.

In a statement entitled Valuing Spirituality in Development (18 February 1998), the Baha’i International Community posits an entirely different view of economics:

"Central to the task of reconceptualizing the organization of human affairs is arriving at a proper understanding of the role of economics. The failure to place economics into the broader context of humanity’s social and spiritual existence has led to a corrosive materialism in the world’s more economically advantaged regions, and persistent conditions of deprivation among the masses of the world’s peoples. Economics should serve people’s needs; societies should not be expected to reformulate themselves to fit economic models. The ultimate function of economic systems should be to equip the peoples and institutions of the world with the means to achieve the real purpose of development: that is, the cultivation of the limitless potentialities latent in human consciousness."

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