US Trade Deficit: Symptom of the Riba Disease

Ensuring Socio-economic Justice

Kevin Barrett

Rajab 25, 1440 2019-04-01

Opinion

by Kevin Barrett (Opinion, Crescent International Vol. 48, No. 2, Rajab, 1440)

Donald Trump ran for president bashing Islam and Muslims — and promising to reduce America’s bloated trade deficit. Perhaps Trump doesn’t realize that Islam can help solve the foundational problem — usury — of which the trade deficit is only a symptom.

Let us begin by considering Trump’s view of the trade deficit. Like his advisor Peter Navarro, Trump sees the US manufacturing trade deficit, which has grown to over $890 billion, as an unmitigated disaster for Americans. Trump and Navarro argue that American capitalists destroyed their own country’s industrial base by shipping it to China and other low-wage countries in search of higher profit margins. In their heretical attack on neoliberal orthodoxy, Trump and Navarro echo the perceptions of most working-class Americans.

The deindustrialization of America has had both fiscal and human consequences. Since the early-1990s, America’s manufactured goods trade deficit has ballooned from roughly $50 billion to its current trajectory approaching one trillion dollars — a more than 1,600% increase! And the human consequences have been even more shocking. Exploding inequality, allowing the parasitic casino-capitalist upper classes to earn exponentially-increasing profits while ordinary working Americans see their incomes and living standards plummet, has been the predictable result.

For the first time in history, Americans’ life expectancy is declining. This unprecedented overall decline in US life expectancy has been ongoing since 2014. It is driven by skyrocketing deaths from drug overdoses, chronic liver disease, and suicide: diseases of despair. And the hardest-hit segment of the population has been working people — especially white working people, whose living standards and social status have sharply dropped due to the collapse of US-based manufacturing.

Trump rode a wave of populist anger all the way to the White House by promising to drastically lower the trade deficit and bring back industrial jobs back to America. He blamed the Chinese and their supposedly crooked trade practices, rather than the American capitalists who had moved their factories to China, for America’s industrial decline and the impoverishment of its working class (Trump’s penchant for blaming Mexicans, the Chinese, and Muslims for America’s problems provides a classic example of scapegoating — the hoary political trick that has produced the Spanish Inquisition, witch hunts, the US lynching epidemic, and various other holocausts and genocides).

Despite all his populist campaign rhetoric, Trump’s promise to shrink the deficit and reindustrialize America has proven empty. In reality, Trump’s performance on the deficit has been worse than Obama’s. When he assumed office in 2008, Barack Obama inherited an $800-billion-plus trade deficit in goods. When Obama left office at the end of 2016 it had decreased slightly. Today, after two years of Trump, it has ballooned to over $900 billion! And the industrial jobs Trump was supposed to bring back to the US, thereby “making America great again,” have also proven somewhat chimerical. Though the economic boom Trump inherited has produced a significant increase in manufacturing employment, that increase (from 12.3 million to 12.8 million) has not even recouped the jobs lost during the 2008 collapse, much less restored the nearly 20 million mostly high-paying manufacturing jobs that existed in 1979.

Trump has failed because he has been focusing on symptoms, and blaming scapegoats, rather than attacking the root of the problem. Trump boasts that he can get a better trade deal with China, and reduce the US trade deficit, due to his superior negotiating skills and his willingness to play hardball with the Chinese government. But all informed observers agree that no conceivable new US-China trade agreement could dramatically alter the current landscape. As with Korea, where Trump has surrendered to the new reality of North Korea as a permanent nuclear weapons state, Trump will also have to surrender to the realities of the US-China trade relationship — unless he wants to start an apocalyptic trade war that would cripple the US and global economies and possibly lead to World War III.

Let us back up a few steps and ask: is the US trade deficit a serious problem? Mainstream neoliberal economists say no. They argue that the US can continue to finance its deficit by borrowing from abroad and printing money (which also amounts to borrowing from abroad). And they have no problem with jobs migrating to wherever the wages are lowest, a process that pushes everyone’s wages toward the barest minimum — which doesn’t bother the neoliberals, who are paid by people whose incomes come from usury, not working class wages. Echoing Voltaire’s Candide, the neoliberals insist that all is for the best in the best of all neoliberal worlds.

Obviously the Trump voters, Brexit voters, Yellow Vests, and other groups of dispossessed working folk do not agree. They understand that they are being robbed. But they don’t have a clear understanding of how the riba-based capitalist system robs them, and what might be done to change the situation.

The most basic problem with trade deficits and other forms of debt is that they must be financed with exponentially-increasing compound interest. At some point the debt-plus-interest becomes unpayable. This is true not only of the US trade deficit, but also of the US government’s public debt, which currently stands at $22 trillion and is projected to approach $30 trillion by 2030. During this period the US debt-to-GDP ratio is expected to climb from its current 78% to around 93%. Clearly the trajectory is unsustainable.

To solve this problem, let’s return to scriptural principles. Islam’s condemnation of riba, unlike Judaism’s and Christianity’s, has endured largely unchanged from its origin in divine revelation. Classical Islamic scholarship agrees that charging interest on loans is haram (forbidden). And scholars likewise agree that a broader concept of riba as “(unjust) increase” or exploitatively unearned wealth also applies. The Qur’anic ayat are clear and eloquent, “Those who gorge themselves on usury behave but as he might behave whom Satan has confounded with his touch; for they say, ‘Buying and selling is but a kind of usury’ — the while Allah has made buying and selling lawful and usury unlawful” (2:275, Asad). And, “Devour not usury, doubling and quadrupling [the sum lent]” (3:130, Pickthall). And, “And [remember], whatever you may give out in usury so that it might increase through [other] people’s possessions will bring [you] no increase in the sight of Allah — whereas all that you give out in charity, seeking Allah’s countenance, [will be blessed by Him].” (30:39, Asad).

Ayah 275 of Surah al-Baqarah exposes the greed factor that drives usury while laying bare the weak excuses of the usurer. It explains that buying and selling goods is okay, while buying and selling money itself is not (today’s best secular economic thinkers, people like Michael Hudson and Ellen Brown, agree that money should always be only a means of exchange, never a commodity in and of itself).

The Qur’anic ayah 3:130 links the greed factor (“devour”) to the unnatural exponential increase, the doubling and redoubling, of compound interest. That exponential increase can only exist in the human mathematical imagination; the actual goods and services represented by money cannot themselves increase exponentially. Indeed, the wish for exponential increase in a world of limited resources is unsustainably greedy. Its unsustainability can be illustrated by the fact that if you had invested a penny at 5% compound interest 2,000 years ago, its value today would exceed fifty million balls of pure gold, each one of them the size of planet Earth. All of that without your having to work a single day, or even lift a finger!

In another ayah (30:39), the Qur’an suggests that if we have more money than we need, we should give it generously in charity, not hoard it stingily through usury. This addresses the crucial factor: the human soul and its good and bad motivations. Ultimately we ourselves benefit from our own generosity — and suffer from our own stinginess. Psychologists have discovered the truth of this outlook in wide-ranging experiments showing that giving money away charitably increases happiness, while using the same amount for selfish purposes does not.

So Trump should take the Qur’an’s advice and engage in serious reflection. He should recognize that the problems that got him elected president (including the trade deficit) are endemic to today’s neoliberal capitalism and its central pillar, institutionalized usury. To solve those problems, he should convene a convention of experts to figure out how to transition from today’s usury-based neoliberal order to a sustainable, usury-free future. And if Trump and the rest of the current generation of Western leaders fail to do this — as they almost certainly will — future leaders will face an ever-greater, exponentially-increasing problem.

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