The Economic System of Islam — Page 99
99 no longer determined by a country’s balance of trade, but is fixed by the great economic powers. In fixing the exchange rate, these pow- ers pursue basically their own self-interest and trade strategy. They take into account not only the current balance of trade but also the development of future commercial relations. As far as the weaker or poorer economies are concerned, their exchange rates are in the hands of banks. Weaker countries often complain about the prevailing system but their protests go unheeded, and they continue to face a disadvantage in trade, as they lack sufficient economic influence. As things stand, an exchange rate between two currencies is essentially artificial and can be utilised to their advantage by banks as well as governments. As a result, international trade, instead of being governed by supply and demand conditions in the markets of commodities and precious metals, is driven by the exchange rates between different currencies. Consequently, the trade of the weaker economies is subject to manoeuvring on the part of banks, while the trade of the stronger economies is influenced by political considerations. There is no doubt that the exchange rate system has facilitated commerce, and the growing volume of international trade would not be possible without a satisfactory system of exchange. But it is not necessary that for the exchange rates to be subject to politics and used as a means to exploit poor economies. With careful consideration, it should be possible to adapt the old barter system—which was based on the exchange of goods, not the exchange rate—to meet the present-day requirements of trade, while protecting it from government interference. After due consultation with traders and government representatives, the exchange rate regime could be adjusted as needed, but its guiding