How Economic Injustice Is Producing Angry People

      People get angry for a perceived reason of some sort or another and people get angriest when this reason involves a threat  to property, dignity, and cherished values or even to life itself. These reasons we have for getting angry are also frequently culturally determined. The sight of someone eating a pork chop would not disturb most Christians but it would genuinely revolt an Orthodox Jew or a fundamentalist Muslim. People and cultures also have habitual ways of expressing anger. Some shout, some cry and others just get even.

There are two main reasons that the Taliban is angry at the USA and at Western civilization. Firstly they perceive us as unholy, immoral and idolatrous. This perception is not helped by what they may have seen at the movies or on TV. Secondly they are clearly being exploited economically by many of the multi-national forms that do business in developing countries such as Afghanistan. For instance the charging of interest is forbidden in both Judaism and Islam but practiced ruthlessly by “Christians” (we will explore this later). In their eyes they are poor but faithful to Allah while we are rich, wicked and idolatrous. A third and to my mind lesser reason is because the USA protects Israel.

The main two reasons are of course linked through various aspects of unjust trade. The sex trade, drug trade and export of pornography make the West appear licentious and immoral. Unjust interest rates and currency trading and exploitative trade agreements make us appear as powerful economic oppressors of the poor. The unfettered acquisition of huge amounts of weaponry that clearly are not intended to be used against other developed Western democracies countries makes them fearful as to the possible real targets.

Deep resentment is built up when they realize that the wages they are being paid in Karachi or Kabul are as low as a fiftieth of what they would receive for doing exactly the same work in the USA. What developing nations do not realize is that those Westerners that are powerful oppressors of the poor are a minority, and are largely operating outside of the control of Western governments and outside of the agreement of most of the population of Western countries.

I believe most decent people would be rightly appalled at the injustices inflicted by unjust trade in developing countries if they understood the issues. However such issues are too complex for 30-second sound bites, uncomfortable to hear about and have a steep learning curve for people unversed in basic economics so they rarely get much space in the media. So by the unjust trade of a small percentage of people, our own ignorance and our lack of control of rogue traders we have let the developing nations perceive the West as powerful, immoral and unjust. We have sown the wind and reaped the whirlwind.

How Anger Develops

Conflict resolution counselors talk about “the 4 R’s” in the development on anger. The 4 R’s are – Resolve, Resent, Reject, and Revenge. If an issue is not resolved it turns into resentment, if the resentment is not dealt with it becomes rejection and the person starts to distance themselves in some way. If that fails then the rejection turns outward and becomes revenge and the person retaliates. We often see this pattern in mass killers angry at society. First repeated failures and disappointment give rise to brooding resentment, this is then followed by rejection of society and withdrawal from society so that it is often said of them “he was such a quiet person and kept to himself”, and finally revenge is enacted against the “cold cruel world” in the form of a burst of rage with a high-powered rifle. The same pattern occurs in troubled marriages as squabbles become resentments, followed by rejection and less sexual intimacy, a quite patch of living separate lives, then the all out war of divorce. Everywhere you turn you can see the 4 R’s of Resolve, Resent, Reject, Revenge in operation. It is certainly evident in the less developed Islamic societies where the predation of world trade and the powerlessness of their situation have become gone from resentment in the early part of this century, to rejection such as nationalization of oil assets, the overthrow of Westernized regimes such as the Shah of Iran and finally a retreat into isolation and rejection of Western values. This long period of rejection of the West has finally culminated in the “revenge” phase, which, if it turns out to be like the revenge phase of a mass murderer, will be spectacular and eventually suicidal.

I think it is constructive to further develop this analogy between the terrorists and the crazed gunmen that suddenly start shooting into a crowd. Both are violent and ultimately suicidal acts by people who perceive themselves as having little or nothing to lose and who primary motive is one of self-aggrandizement. They want to feel significant before they die. Osama Bin Laden has told a Palestinian interviewer that he has lived too long, that he wished he had died in the campaign against Russia, and that he wishes to die a martyr. The Taliban are the war-hardened rulers of a country with nothing to lose. The 4R’s indicate that at some point they will fight like holed up bandits who know this is their “last stand”. For them this last battle will be their glory.

Thus the current conflict probably will slog on to its grim, terrible and inevitable conclusion and the annihilation of Afghanistan. So the questions for the future seem to be “Are there other similar situations which could develop in parallel ways?” and “Can we do anything to stop this?” The 1999 Human Development Report examined 177 nations ranking them in order of development (Canada came out number 1), of these 177 there were 35 nations listed as having “low human development”. (Afghanistan was not listed, perhaps because of lack of data available in 1999 in the midst of the war at that time.) I cross-checked this list of least developed nations with religious data from the 1993 Operation World as a rough guide. It appears that Sudan, Yemen, and Mauritania, are a Muslim republics under full or partial sharia law. Bangladesh, Senegal, Djibouti, Guinea, Gambia, Mali, and Niger are overwhelmingly Muslim but are “secular”. Nigeria, Chad, Burkina Faso and Sierra Leone are about half Muslim and among them Burkina Faso at least is highly radicalized. These 15 very poor nations with substantial Muslim sympathies are obvious possible seedbeds for terrorism. If we add Libya, Iran, Iraq, the Palestinian people and possibly Pakistan and some on the Central Asian Republics to the list we soon have over 20 potential trouble spots around the globe. This is not an exhaustive geo-political analysis in one paragraph! Rather it is just an indication that the combination of Islam and poverty is not confined to Afghanistan and that it may be worthwhile for the West to mend its ways with regard to trade before even greater waves of terror are unleashed from many of these smaller nations.

Even if the recruitment and development of terrorists were to stop today, angry radicalized people will still be out there for a long while. In these nations a youth is often highly radicalized with set radical opinions by the age of 15 and by 19 or 20 may be well and truly involved in terrorism. Few terrorists are over 55 though some like Osama Bin Laden are well into their forties. This time from ages 15 to 55 gives a 40 year possible operational lifespan for a terrorist. The radicalized 15 year olds of today could still be plotting destruction in 2041! Assuming 25 billion spent per year combating these threats (and that is probably a fairly minimal amount) over 40 years that would cost the West 1 trillion dollars! Add to that the costs of fear, destabilization and infrastructure damage and the cost would be enormous. Obviously the easiest way to stop potentially enduring radicalism is to ensure the angry young men have good jobs and full stomachs. While abject poverty continues terrorism will seem glamorous and martyrdom a great way out of a miserable life.

How miserable is life in these countries? Is it really that bad? When your relatives die because they cannot afford basic medicines, when you live under sheets of rusty galvanized iron and broken packing cases are your walls, when your children cannot afford school fees or even the most basic books, when there is no clean, safe drinking water and very little food – then life is truly miserable and visibly and acutely miserable. The burdens borne by those in the less developed countries are immense, lifelong and painful.

Here are some statistics about what the 1997-8 Asian currency crisis did to the world’s largest Muslim nation – Indonesia:

Items

1996

1997

1998

Inflation rate

6.47%

11.09%

77.63%

Economic Growth

+7.8%

+4.7%

-13.01%

GDP per capita (USD)

729.31

466.24

230.98

Foreign Investment

(millions USD)

29,931.4

33,832.5

15,563.3

Domestic Investment

100,715.2

119,872.9

60,749.3

Exchange Rate Rupiah to USD

2500

NA

10,000+

Population Under The Poverty Line (millions)

34.5

NA

49.5

Source – Indonesian Central bureau of Statistics 1990 and cited in the paper “How Indonesia Is Coping With Ethnic and Cultural Diversity: A Politico-Economic Perspective” presented at the 2001 Hanoi Conference on Globalization.

In 1998 an Indonesian Muslim saw their GDP drop by a factor of three, their currency devalue by a factor of 4, inflation hit nearly 80% and 15 million extra people thrown into poverty. Korea, Malaysia and Thailand had similar shocks and Korea described it as a “national shame” in the deep pain it inflicted. A few wealthy people in the West got even wealthier out of the currency manipulation behind it. Does any amount of profit justify doing this to a nation and to its poorest people?

Thus we see that there are millions of very poor Muslims with nothing to lose by becoming terrorists and everything to gain. They are rapidly going down the road of Resolve, Resent, Reject, Revenge and have very good reasons for doing so. Since charging interest is one of the major bones of contention, and is forbidden in Islam it will help us to take a biblical look at the charging of interest. Tackling one specific issue in depth can often give us a feel for how things operate better than a mass of statistics on many issues.

Interest As Iniquity

The Bible clearly sees charging interest on loans, particularly on loans to the poor, as wrong and Jewish bankers in NT times paid interest (Matthew 25:27, Luke 19:23) but did not charge it. They used money deposited with them to trade with and the profits from the trade paid the interest to the depositor. From a Christian perspective it is not wrong to receive interest on money invested or deposited but it is wrong to charge interest, especially to the poor. There are nine clear injunctions on this in Scripture and because they are so little preached on and yet of so great a consequence for world trade I am reproducing them in full here.

(Exodus 22:25 NASB)  "If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest.

(Leviticus 25:36-37 NKJV)  'Take no usury or interest from him; but fear your God, that your brother may live with you. {37} 'You shall not lend him your money for usury, nor lend him your food at a profit.

 (Deuteronomy 23:19-20 NASB)  "You shall not charge interest to your countrymen: interest on money, food, or anything that may be loaned at interest. {20} "You may charge interest to a foreigner, but to your countryman you shall not charge interest, so that the LORD your God may bless you in all that you undertake in the land which you are about to enter to possess.

(Psalms 15:5 NASB)  He does not put out his money at interest, Nor does he take a bribe against the innocent. He who does these things will never be shaken.

(Proverbs 28:8 NASB)  He who increases his wealth by interest and usury, Gathers it for him who is gracious to the poor.

(Ezekiel 18:5-9 NKJV)  But if a man is just And does what is lawful and right; ….{8} If he has not exacted usury Nor taken any increase, But has withdrawn his hand from iniquity And executed true judgment between man and man; {9} If he has walked in My statutes And kept My judgments faithfully; He is just; He shall surely live!" Says the Lord GOD.

(Ezekiel 18:12-13 NKJV)  If he has oppressed the poor and needy, Robbed by violence, Not restored the pledge, Lifted his eyes to the idols, Or committed abomination; {13} If he has exacted usury Or taken increase; Shall he then live? He shall not live! If he has done any of these abominations, He shall surely die; His blood shall be upon him.

 (Ezekiel 18:17 NASB)  he keeps his hand from the poor, does not take interest or increase, but executes My ordinances, and walks in My statutes; he will not die for his father's iniquity, he will surely live.

(Ezekiel 22:6-13 NKJV)  "Look, the princes of Israel: each one has used his power to shed blood in you. {7} …{12} "In you they take bribes to shed blood; you take usury and increase; you have made profit from your neighbors by extortion, and have forgotten Me," says the Lord GOD. {13} "Behold, therefore, I beat My fists at the dishonest profit which you have made, and at the bloodshed which has been in your midst.

You cannot get clearer than that! God regards charging interest, especially to the poor as wicked and dishonest profiteering. This is well illustrated during the time of Nehemiah:

(Nehemiah 5:1-13 NKJV)  And there was a great outcry of the people and their wives against their Jewish brethren. {2} For there were those who said, "We, our sons, and our daughters are many; therefore let us get grain, that we may eat and live." {3} There were also some who said, "We have mortgaged our lands and vineyards and houses, that we might buy grain because of the famine." {4} There were also those who said, "We have borrowed money for the king's tax on our lands and vineyards. {5} "Yet now our flesh is as the flesh of our brethren, our children as their children; and indeed we are forcing our sons and our daughters to be slaves, and some of our daughters have been brought into slavery. It is not in our power to redeem them, for other men have our lands and vineyards." {6} And I became very angry when I heard their outcry and these words. {7} After serious thought, I rebuked the nobles and rulers, and said to them, "Each of you is exacting usury from his brother." So I called a great assembly against them. {8} And I said to them, "According to our ability we have redeemed our Jewish brethren who were sold to the nations. Now indeed, will you even sell your brethren? Or should they be sold to us?" Then they were silenced and found nothing to say. {9} Then I said, "What you are doing is not good. Should you not walk in the fear of our God because of the reproach of the nations, our enemies?" {10} "I also, with my brethren and my servants, am lending them money and grain. Please, let us stop this usury! {11} "Restore now to them, even this day, their lands, their vineyards, their olive groves, and their houses, also a hundredth of the money and the grain, the new wine and the oil, that you have charged them." {12} So they said, "We will restore it, and will require nothing from them; we will do as you say." Then I called the priests, and required an oath from them that they would do according to this promise. {13} Then I shook out the fold of my garment and said, "So may God shake out each man from his house, and from his property, who does not perform this promise. Even thus may he be shaken out and emptied." And all the assembly said, "Amen!" and praised the LORD. Then the people did according to this promise.

Here the interest charge by the rich was forcing people into slavery and destitution and to the loss of houses and lands. They were foreclosing on their brethren! Nehemiah’s response was fierce and unequivocal and sealed with a curse that the house of those who did not comply with the order to restore all that was taken would be shaken out and emptied by God. Also Nehemiah and all who followed him graciously and freely lent food and money to the poor.

If you have ever struggled to pay off a car, a credit card or a mortgage you will know how devastating interest can be. Frequently you end up paying double the original cost of the goods by the time the interest period is over. Biblically speaking, the only justifiable interest is a small charge to match the inflation rate as that preserves the real value of the money lent. Above that the lender is starting to exploit the poverty and desperation of the lender.

Charging interest deepens poverty and robs people of their power to make wealth. Unfortunately I have seen microfinance schemes designed to ‘help the poor’ that charge as much as 2 to 3 per cent per month - that is up to 40% plus per annum. Even Christian microfinance schemes are run on the most impractical idea that the poor will borrow the money, start a small business and then repay the capital in one year plus interest rates of 2-3% per month (equivalent to 25%-40% annual interest rates). This requires the small business, in its first year of operation, to make 140% on capital invested - before the owner receives a single dollar in profit or wages from the enterprise. To ask this of the poor starting out in business is grossly unfair.

Lending to the poor can increase their power to make wealth if it is used to purchase a means of production of some sort. But the power to make wealth is in turn decreased by interest payments. The interest payments ensure that funds generated from the means of production simply return to the lender. At the end of 12 months the microfinance scheme has received their capital plus 40% back again but what has the poor person got “in hand” after a years work? Probably nothing, other than the means of production (such as a sewing machine), that they purchased. They are unlikely to have made a wage at all. The interest payments have entirely consumed their power to make wealth.

Some may ask “If the micro-finance schemes were stopped from charging interest to the poor how could the poor get access to capital?” In some senses that is a good question, in other ways it is a quite mistaken question. “Access to capital” implies that the poor are best off starting a small business, which needs capital.

Small business is not all its cracked up to be. Even in the West 85% of small businesses fail within five years and 95% of people who go into small business would have been better off financially if they had simply been in full-time employment. What I am saying is that the poor generally do not need funds to start small businesses – they need jobs that pay a fair wage. What the poor need is not access to capital but access to liquidity. They need to be able to borrow money to pay a medical bill when it is due and then repay that money without being charged interest. Basically they need an interest free overdraft facility and a decent job. Thus I believe that microfinance should rethink itself as an interest free overdraft facility for the poor.

If Christian micro-finance chooses to stay with starting small businesses I think they should not lend money to any enterprise, no matter how small or how well intentioned, that does not have a workable and thought-through business plan. To my mind there is a certain amount of glorious hopefulness among those who help the poor with financial schemes. Ideas that a bank manager or accountant would say are quite impractical and commercially non-viable are funded in the “hope” that they will work - and out of a genuine desire to be kind and gracious and to give people a chance. But what actually happens? The vast majority of such hopeful enterprises fail, leaving the person with a debt. The person is worse off than before. If the person cannot pay their debt and defaults on the loan the microfinance scheme loses capital and has to seek more funding. The “kindness’ does not produce a winner, in fact it produces two losers.  The hard reality of business life is that undercapitalized businesses frequently fail and microfinance is just that – micro. There is no spare capital and not much room for mistakes.  Unless the venture is very well thought through from the start the likelihood of failure is high. Thus if microfinance is to succeed in increasing the wealth of the poor  it must be interest free and it must insist on adequate level of capitalization and on sound business plans. [For an interesting read try Gina Neff’s article “MicroThis, MicroThat Left Business Observer #74, October 1996 – just one quote: “For example, Grameen rules insist that its borrowers own their homes - not unlike the assumption that shoeless women have bootstraps. Evidently Bangladeshi homeless women don't count as the poorest of the poor. And unfortunately, Grameen borrowers are staying poor. After 8 years of borrowing, 55% of Grameen households still aren't able to meet their basic nutritional needs - so many women are using their loans to buy food rather than invest in business.”]

Even worse are the pawnbrokers that charge what is known as “5 – 6”. That is for every 5 dollars loaned you pay back 6 dollars, generally three to six months later. That amounts to 4 per cent per month or over 50% per annum. Since the poor have regular financial crises when it comes to medical bills or school fees; they have little choice but to borrow money at outrageous interest rates. The alternative is to watch their family members die or their children drop out of school. Thus loans are a necessary part of survival. The pawnbrokers and other lenders are thus preying on the very vulnerability of the poor. When the poor pay 40%-50% annual interest on borrowed money their power to make wealth is not being increased but rather is being halved. Pawnbrokers also are “secured” creditors able to sell what has been deposited as collateral on the loan. They also lend money for any purpose, not just starting a small business. Thus the funds are simply used on household expenditure, the interest rates consume any power to make wealth and in the event of a default their goods are sold.

Interest has national and international implications as well. This has become known as the “International Debt Crisis” and is being addressed by a group known as the Jubilee 2000 coalition, which seeks relief from debt for a range of poor countries and especially a group known as the Heavily Indebted Poor Countries such as Mozambique. In such countries the interest repayments alone outstrip GDP by a factor of three or four times. Because the obligation to pay back these loans is primary and onerous the money cannot be used for public infrastructure such as health or even for food. Some calculations estimate that 7 million children die each years simply as a result of the debt crisis. The six million who died during the Jewish Holocaust are remembered because the Nazis killed them. The 7 million who die each and every year from the greed of the world banking system, however are simply forgotten.

If poverty is to be solved interest in all its forms must be abolished as the Muslims have done and as Scriptures prescribe; or at least reduced to the level of the annual CPI increase. Can this be done? There is increasing attention being paid to “non-interest income” in the banking sector as interest rates are at their lowest levels for many years. Below is a diagram from a report produced by the Canadian Banking Commission. It shows that 51% of bank income came from non-interest sources.

Note that 51% of bank revenue is obtained WITHOUT CHARGING INTEREST.

Could 100% of bank revenue be obtained without charging interest to the poor? Looking at the 49% that is designated as “Interest Income” we find it is broken down into mortgages, personal loans, commercial loans and banks own investments. Commercial loans are in the millions of  dollar category and generally do not affect the poor. The banks own investments are in the tens of billions of dollars and are outside this category as well. That leaves mortgages and personal loans as being of concern. Exact figures for each of these segments are not given in the report so I have to take an “educated guess” that mortgages and personal loans would constitute say one-third of the 49% that would be about 16 to 17 per cent of the total bank revenue. Of these mortgages and personal loans the poorest 30% of the country would perhaps account for 5% of the mortgages and personal loans (by loan volume). Five percent of 17% is about 0.85%. If 0.85% of the revenue comes from charging interest to the poor - then 99.15% % does not come from charging interest to the poor. So we can see that banks in Canada now earn around 99% of their current revenue without charging interest to the poor. Even if my figures are a factor of five out that would still mean that banks would earn 95% of their revenue without charging interest to the poor. It does not seem impossible that they could make this 100%.

Obviously a much deeper analysis with the exact figures is necessary but this small example helps puncture the myth that banks would “go broke” if they did not charge interest to the poor. Banking is perfectly feasible without charging interest on loans to those in need. There are many other profitable sectors of financial activity for banks to engage in. Muslim banks that are strict about their adherence to sharia law go into partnership with the person much as a venture capitalist does in the West. A July 5th 2001 New York Times article discusses the emerging market for Muslim banking in the USA with its dual requirements of a) no interest b) the lender and borrower share risk equally (thus the bank cannot foreclose in most cases). Large banks such as HSBC and finance companies like Freddie Mac are trying to tailor products, mainly house and car loans, for the USA’s 7 million Muslims. Up until now this kind of lending has mainly been the province of small co-operatives. The nature of the lending varies but seems to be mainly based on a partnership contract between the lender and the home-buyer. One institution is funding the lending by making a bond issue on the loans and promoting it overseas to wealthy and religiously correct Muslims.

Why is interest one of the factors that is radicalizing people and producing terrorists? In the USA Muslims feel deprived of a way to buy a house or a car according to their value system. They feel they are being forced into sin by an unjust system. Or as one US Muslim executive said "It's frustrating when you know there is a right way and a wrong way, and you're being driven toward the wrong,"

Outside of the USA, in the developing world interest is crushing them. Here in the Philippines, which is listed 77th out of 170 countries in the Human Development Report and is thus in the “upper half” of world nations, interest is a huge problem. Firstly government borrowings have the nation heavily indebted, secondly the peso is falling and it is harder to pay those obligations, thirdly the average person pays anywhere between 18% to 50% annual interest on personal borrowings. Repayment periods are short, and deposits are high, typically a car is purchased on 50% deposit - “half down, the rest in two years”.

The ability to earn decent interest on savings and investments is almost nil for the average person. Most are receiving only 1 or 2% return in real (after inflation) terms on their deposits in the banks. Many receive a negative real return. Banks routinely collapse taking depositors savings with them and corruption has eroded the major government superannuation scheme with 8 billion pesos being siphoned off to a crony of former President Estrada

The repayment rate for most microfinance schemes is the reverse of the Grameen bank in Bangladesh where 95% do not default. Here 95% do not repay their funds and the micro-finance loan is seen as a handout. The vast majority of microfinance schemes fold and the only successful Christian microfinance scheme charges 3% per month interest (40% per year) and is highly commercially driven. Over 90% of co-operatives collapse due to corruption.  A prevailing culture of grasping immediacy has developed as exploitation has bred an equal and opposite reaction of opportunistic commercial shrewdness even amongst the poor.

The early colonial mentality of Spanish conquistadors, pirates and spice traders seems to live on in a national culture of piratical plundering and holding people to ransom. Interestingly “national plunder” is a capital crime, and much is made of this in the media, but no-one has ever been successfully convicted of it! (The “national plunder” trial of former President Estrada is continuing as I write). Here, exorbitant rates of interest are the institutionalized and acceptable method of plunder. While it may be officially sanctioned it is still deeply resented. People who are scammed at every turn by financial institutions become angry much as you may have done at times when dealing with banks or credit card companies. When a whole nation is being done over systematically then you get millions of people crying out “economic injustice” and fighting back in ways that are both fair and unfair, legitimate and illegitimate. This backlash in the Philippines includes kidnapping and terrorism particularly on the extremely poverty-stricken southern island of Mindanao where three major Muslim insurgent groups operate and the Abu Sayaf regularly kidnap Western hostages for ransom.

When people are being economically oppressed by a practice their religion condemns they will react strongly and they will feel justified in that reaction. Charging interest is one of many economic practices that are creating deep resentment and breeding terrorists who believe they are fully justified in what they are doing.

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