Farhad Rassekh is Professor of economics and Associate Dean at the Barney School of Business, University of Hartford. He’s also one of the brightest and well-versed people I know in terms of understanding the Baha’i teachings on economics. I recently caught up with Farhad over email, and he was kind enough to share his thoughts.
FTB: A while back you wrote a paper for the Journal of Baha’i Studies in which you compared the views of capitalism’s original thinkers (most notably, Adam Smith) with those of the Baha’i teachings. Since then we’ve had the 2008 global financial crisis and a new wave of criticisms of capitalism. Have the events of the past few years changed how you think about this issue?
FR: The article I wrote a decade ago explores some fundamental concepts in economics and the Baha’i Faith. These concepts are impervious to the changing circumstances and experiences we encounter from time to time. The criticism against capitalism is not new; it goes back to Plato, Aristotle, and many other seminal thinkers. One aspect of the market system that I learned after the publication of the paper was that most, if not all, Classical economists who strongly believed in free markets, made an exception for the financial industry; in that, they believed some regulations and restrictions in this industry are necessary. When an economic recession is caused or accompanied by a banking crisis is more severe and more difficult to recover from than a recession without a banking crisis. The economists Carmen Reinhart and Kenneth Rogoff in their wonderful book, This Time is Different: Eight Centuries of Financial Folly, document that during the banking crises in 22 countries over the period 1929-2007, Real per Capita GDP fell by 9.3% that lasted for two years; Unemployment Rate stayed above 7% for nearly five years; Real Equity Prices fell by 56% for more than three years; and Real House Prices fell by 35.5% that lasted for six years. The task of identifying the cause or causes and finding solutions is very difficult.
Returning to your question, in my paper I just attempted to present the views of the Faith on the market economic system. That will never change.
FTB: The last time we talked, you mentioned that in your opinion ‘Abdu’l-Baha’s Secret of Divine Civilization is a charter for Baha’i economics. Could you explain what you mean?
FR: ‘Abdu’l-Baha’s Secret of Divine Civilization provides much guidance concerning the policies a developing country needs to undertake to grow economically and reduce poverty. The prescription includes the promotion of education, the development of infrastructure, opening up to world markets, entering into international trade agreements with other countries, and more. Here are a few relevant passages: “The primary, the most urgent requirement is the promotion of education. It is inconceivable that any nation should achieve prosperity and success unless this paramount, this fundamental concern is carried forward. The principal reason for the decline and fall of peoples is ignorance.” (SDC, p. 109). He urges countries to “enter into binding treaties with the great powers” and “look to the expansion of trade with the nations of East and West.” And I think it is most notable that ‘Abdu’l-Baha’ (in 1875 when He wrote the book) called attention to the example of Japan, which was a poor country at the time. He wrote, “Japan has opened its eyes and adopted the techniques of contemporary progress and civilization, promoting sciences and industries of use to the public, and striving to the utmost of their power and competence until public opinion was focused on reform” (SDC, p. 111).
FTB: Shoghi Effendi, the Guardian of the Baha’i Faith and one of its most important historical figures, has reminded us that there is no official Baha’i economic system, just guidance that will help economists construct a better system in the future. Is it necessary or even feasible for future economists to construct a new economic system based on Baha’i principles? If so, how close are we toward achieving this?
FR: I am not aware of any concerted efforts in this regard. Perhaps some Baha’i economists are working towards this goal. It should be noted that this is a difficult task because economics is a highly technical field and, as you pointed out, from certain principles and directions in the Writings such a system needs to be created. Shoghi Effendi himself noted that many aspects of economics are not stated in Baha’i writings precisely because they are technical. At this point it helps to remind ourselves of the primary function of all religions including the Baha’i Faith, which is to inculcate a sense of spirituality in people and through that to instill virtues in them. ‘Abdu’l-Bahá has said, “Man is, in reality, a spiritual being, and only when he lives in the spirit is he truly happy. This spiritual longing and perception belongs to all men alike…” (Paris Talks, p. 72). And Shoghi Effendi has noted, “the Cause is not a system of philosophy; it is essentially a way of life, a religious faith that seeks to unite all people on a common basis of mutual understanding and love, and in a common devotion to God” (Directives from the Guardian, p. 75). Often we hear that all economic problems have spiritual solutions. The source of this conviction is the following statement of ‘Abdu’l-Bahá’s, “The fundamentals of the whole economic condition are divine in nature and are associated with the world of the heart and spirit” (The Promulgation 238). And Shoghi Effendi has explained, “By the statement ‘the economic solution is divine in nature’ is meant that religion alone can, in the last resort, bring in man’s nature such a fundamental change as to enable him to adjust the economic relationships of society. It is only in this that man can control the economic forces that threaten to disrupt the foundations of existence, and thus assert his mastery over the forces of nature.” (Shoghi Effendi’s statement is in a compilation on Baha’i economics by Hooshmand Badii, page 17). The point is that the role of religion is too sublime to get involved in relatively mundane issues such as price theory or monetary policy.
FTB: What are your thoughts on what’s going on in the Eurozone right now, and the prospect of a breakup of the currency union? Was the euro really a mistake?
FR: At the time that I’m writing this, Greece seems to be headed towards abandoning the euro. This means it was a mistake for Greece to join the zone, but it does not mean the euro was a mistake. The experience with the euro demonstrates that the creation of a common currency for a group of countries is an enormously complicated task. Many conditions must be met before we can have a single currency in any area. I do not believe that the currency union in Europe will break up, but it is possible that if Greece does exit the zone, some other members of the union will also exit. The union itself will survive, perhaps, with fewer members.
FTB: Generally speaking, what do you think is the most pressing issue facing the global economy today?
FR: At the present time, the European economy is posing a real challenge to the world economy. Several European economies are already in recession and if they shrink significantly, the economies of countries such as the US, Japan, and even China will suffer to some extent. The contagion effect will actually spread the European pain to most if not all countries. However, in all likelihood, Europe and the world economy will eventually recover from the recession. I think right now that is the most pressing issue in the global economy. But of course with or without a recession in Europe or elsewhere, the problem of global poverty, although much less severe than it has ever been in history, ought to be at the forefront of all issues.