The Economic System of Islam — Page 100
100 principle must remain the exchange of goods rather than paper money. After the war [of 1914–18], Germany manipulated its exchange rate and depreciated its currency so much that capital began to flow into the country from all over the world. And when it had built up large enough foreign exchange reserves to meet its commercial re- quirements, Germany just abolished its currency at little or no cost. This kind of measure could not have been possible under the barter system. Russia did attempt to follow in Germany’s footsteps, but because of its lack of financial expertise and backward industry, it could not derive much benefit from it. An artificial exchange rate, in short, is a weapon that the strong can use to gain control over the trade of weaker countries and to make trade flow not in its natural directions but into channels of their choice. By accepting the prevailing exchange rate system, Communist Russia in effect has left the foundation of capitalism intact. As a consequence, with the growth of its industries, the country would resort increasingly to this weapon to secure new markets, thereby gaining control over the trade of weaker countries. The Soviet State may of course amass great wealth this way, but in the process she would undermine the weaker economies and thus nullify the very principle that gave it birth: 25 25 Note: The author’s above remarks were both profound and prescient. Soon after the time of this lecture, The International Monetary Fund (IMF) and the World Bank were established, and currency manipulation by any coun- try was made unacceptable and subject to sanctions. (publishers)