Britain is truly bankrupt

The Financial Times reported today that for Britain to recover from its current economic status it would have to return to the old fashioned custom of only spending and investing what the nation has in savings.

The UK has long suffered from the Capitalist disease of greed and consumption and living beyond ones means. This in turn contributed to the artificial economic boom and subsequent bust we now find ourselves in.

The implication is that a sustained economic recovery depends upon a major rebalancing of the economy - less consumption, more savings and more investment. But current economic policy is exactly the reverse: to try to boost consumption and borrow unprecedented sums: an even greater mortgage. This is what “crass Keynesianism” in economic policy amounts to - short-term consumption against long-term sustainability.

 

The problem that the UK finds itself in is that a large chunk of the economy is driven by the service sector as opposed to industry. The service sector itself is driven by finance.

Since decolonisation of its empire, the UK moved away from its industry based economy which at one time had a 60% share of world production and moved towards a service based economy, which led to increased manufactured imports and gave rise to the financial sector that we know is largely to blame for the economic situation at present.

Bailouts as we have seen are not the solution as they haven’t achieved their main aim of stimulating production nor is quantitative easing as this has merely devalued the pound further and reduced peoples real wealth and spending ability.

 

Investment in industry would stimulate the real recovery as it would lead to increased production and creation of jobs in the process, however the problem the UK faces is that whilst its financial sector dominates the economy this has led to the creation of hyper finance products where no real trade takes place but where money is circulating in a virtual world where the aim is to make money from money.

The Islamic economic model views the financial sector in a completely different way. Rather that seeing it as a sector in itself Islam views it as an outlet supplying money into the real economy stimulating real production and growth. This leads to a true circulation of wealth and would prevent boom and bust cycles as growth would be real and not artificially created via greed and an over debt products.