INAUGURAL PROFESSORIAL LECTURE

AN INQUIRY INTO THE CAUSES AND COSTS OF ECONOMIC GROWTH:

WHAT POLICY MAKERS OF TODAY CAN LEARN FROM THE MUQADDIMAH OF IBN KHALDUN

Prof. Dr. Syed Omar Syed Agil Razak School of Government

INTRODUCTION
Economic growth has been a subject of debate and controversy in the history of western economics. Research on economic growth has increased tremendously in the past decade. However, we are also seeing economic welfare declining globally. Governments and business find that the current economic path is environmentally unsustainable.

OBJECTIVES OF THIS LECTURE

To elucidate the theory of economic growth and costs of economic growth in the Muqaddimah To set the record straight on the contribution of Ibn Khaldun to the theory of economic growth and costs of economic growth To contribute to the existing literature on the theory of economic growth and costs of economic growth from the perspective of Ibn Khaldun Remember, You and I are here to learn from each other

ECONOMIC GROWTH PARADIGM

Economic growth is measured by real rate of growth in a country's total output of goods and services or real GDP. The paradigm states that the pursuit of economic growth is a sole measure of national success The western economic growth theories evolved from Mercantilism, Physiocrates, Classical economics, Keynesians, Neoclassical to modern theories. Literature on the Benefits and costs of economic growth(environment, global warming, consumerism, inflation, inequality)

BENEFIT S OF ECONOMIC GROWTH IN WESTERN LITERATURE

THE COSTS OF ECONOMIC GROWTH IN WESTERN LITERATURE

J. Mishan (1967, 1977) in his book The Costs of Economic Growth

The Club of Rom in The Limits to Growth (1972)

Herman Daly (1997)

Uneconomic Growth

Robinson (1972) Absolute Poverty

E.F. Schumacher (1973), and Kenneth Boulding (1966)

Environmental Degradation

THE COSTS OF ECONOMIC GROWTH IN WESTERN LITERATURE

A DIVERGENCE OF THE GPI AND GDP WOULD SUGGEST THAT ECONOMIC GROWTH IS COMING AT THE EXPENSE OF OTHER CONTRIBUTORS TO WELL-BEING, SUCH AS ENVIRONMENTAL QUALITY OR LEISURE TIME

 Report published by the State Environmental Protection Agency (SEPA) and the National Bureau of Statistics (NBS) re-examines Chinas 2004 GDP, estimating that pollution cost the country 511.8 billion yuan (US$64 billion) in economic losses that year, or 3.05 percent of 2004s total economic output

INITIATIVES RESULTED FROM THE NEGATIVE EFFECTS OF ECONOMIC GROWTH The World Conservation Strategy (1980)
The World Commission on Environment and Development (WCED) - (1987)
The Human Development Report (HDR) (1990): The (ISEW) and (GPI) consider the impact of economic activity on the environment.

Agenda 21, the Rio Declaration on Environment and Development

European Commission (2001) discussed A European Strategy for Sustainable Development.

QUICK SURVEY

How

many of you have heard OR read about Ibn Khaldun?

WHO WAS IBN KHALDUN?

Born in 1332 in Tunis, North Africa and died in 1406 in Egypt. An outstanding 14th century scholar in various branches of knowledge including philosophy of history, historiography, education, political economy and sociology. He came from an aristocratic family of scholars. He studied both religious and philosophical sciences at an early age. A renowned public administrator and a Professor dedicated to teaching and research.

POLITICAL CONDITIONS
The Islamic empire was in the stage of senility Internal threats due the political upheavals and fragmentation within the Islamic empire Several rival dynasties emerged on the North African coast. External threats due to the encroachment of the Mongols and the Christians

ISLAM AND TRADE IN NORTH AFRICE

Islam came to North Africa when the Arabs from Arabia conquered Egypt and later Spain. From 8th to 9th century, the Spanish Muslim traders converted the North Africans to Islam. From North Africa, the Arabs spread Islam to West African states through the salt-gold trade network. Trade in Africa flourish with the advent of Islam which triggered the process of urbanization. Europe was a trading partner of Africa as they required gold, the high quality textile and steel from Africa Tunis became a well known trading and learning centre

Muslim traders from North Africa shipped goods across the Sahara desert using large camel caravans -- on average around a thousand camels. Caravan leaders and religious teachers spread political, religious, and societal values to the people along the trade routes They brought in mainly luxury goods such as textiles, silks, beads, ceramics, ornamental weapons, and utensils. These were traded for gold, ivory, woods such as ebony, and agricultural products

To Egypt

From Hadramaut, Yemen

WHAT DID HE WRITE?

Kitab Al-Ibar-The Book of History which consists of 7 Volumes The Muqaddimah or also known as the Prolegomena is the first volume and it is the introduction to Kitab Al Ibar The Prolegomena alone contains more than 1,500 pages and it was written in just 5 months He also wrote his own biography or Al-Taarif bi Ibn Khaldun.

The MUQADDIMAH First Volume

KITAB ALIBAR SEVEN VOLUMES

Al-Taarif bi Ibn Khaldun

HIS LIFE AND EXPERIENCES

WHAT ARE HIS GENERAL CONTRIBUTIONS?

1. A precursor and forerunner of modern historiography, economics, sociology, education and political theories. 2. He studies the rise and decline of nations based on empirical and rational nature of inquiry 3. He was the first to develop a scientific approach to the study of human behavior, society and history 4. He discovers the theory of human social development

GENERAL CONTRIBUTIONS
FATHER OF SOCIOLOGY HISTORY AS A SCIENCE POLITICAL ECONOMY

WHAT THE WEST SAY ABOUT IBN KHALDUN?

In more than 1,000 years between the times of the philosopher Aristotle in ancient Greece and the writer Machiavelli in Renaissance Italy, the most preeminent social scientist was a Muslim Arab scholar named Ibn Khaldun. He was a historian, philosopher of history, and sociologist, much of whose life was devoted to public service and teaching (Encyclopedia Britannica)

 It is true that Tacitus and Thucydides lay much of the groundwork of the science of society. However, it is Ibn Khaldun who makes the headway in turning the study of society and history into a scientific endeavor. If Thucydides is the inventor of history, Ibn Khaldun introduces history as a science(Lakoste)

 After reading through a small piece of Khaldun's work, I have to admit I am awed by the man's genius. How could I have spent so much of my life in politics without being led to him before?.....Ibn Khaldun is not an Arab neoPlatonist, as his world view subsumes theirs and is an original one not previously expressed in the world. This singular breakthrough not only is awesome, but practically evidence of divine inspiration (Jude Wanniski, Supply Side Economist)

 In his chosen field of intellectual activity he appears to have been inspired by no predecessors, and to have found no kindred souls among his contemporaries, and to have kindled no answering spark of inspiration in any successor; and yet, in the Prolegomena (Muqaddimah) to his Universal History he has conceived and formulated a philosophy of history which is undoubtedly the greatest of its kind that has ever yet been created by any mind in any time or place (Arnold Toynbee, British Historian)

WHY DID HE WRITE THE MUQADDMAH? THE RAISON DETRE

Changing circumstances (changing composition of the population, pandemic) Errors made by past historians (the internal and external meaning of history) It gave him the opportunity to write history in a different way.

CHANGING SOCIAL, ECONOMIC AND POLITICAL CIRCUMSTANCES

RAISON D`ETRE
INTERNAL MEANING OF HISTORY ERRORS MADE BY PAST HISTORIANS

KUALA LUMPUR IN THE 1880sA SWAMPY AREA

KUALA LUMPUR 120 YEARS LATER

From swampy to rapid development and growth and now the side effects of growth.

THE KHALDUNIAN MIND

What Shapes it His View of the World Theory of Man and Society

WHAT SHAPES THE KHALDUNIAN MIND His dual education in religious sciences and philosophical sciences His experiences as a public administrator and teacher The trials and tribulations The political, economic and social realities of his time. The Muqaddimah is a reflection of these events and his experiences.

PRINCIPLE OF CAUSALITY
Ibn Khaldun believes there are nexus between events. There are similar patterns in the past, the present and the future. Use inductive and deductive methods to derive economic theories and laws which he finds govern economic and social phenomena.

INTERRELATIONSHIPS IN THE MULTITUDE OF FACTORS

He believes in the interrelationships between economic, social, political, psychological and religious factors. They are inseparable and an economic problem is a result of a economic and non economic factors. We cannot understand economic phenomena merely by economic factors alone.

Is More Better Than Less?

There is a fundamental notion in economics that more is better than less Ibn Khaldun disagrees with this. At one point more of anything will cause detrimental effects on man, society and environment.

His View of Man

He began his analysis of economic growth by looking at the 4 qualities of man Ability to think. Natural need for leadership Economic ways of living Natural need for society, cities and civilizations

SPIRITUAL BEING INTELLIGENT BEING ECONOMIC BEING

MAN
SOCIAL BEING
POLITICAL BEING

PHYSICAL BEING

MAN AND HABITS

A trait or quality as a result of doing things repeatedly. Habits in knowledge and skills result in higher quality of human capital and goods. It is bad when it comes to excessive luxury or blameworthy qualities It will be difficult to get rid of it even though it has detrimental effects on the society and the environment.

SOCIETY
Man needs society to obtain his basic needs and wants Society needs leadership and the spirit of solidarity to achieve prosperity and growth. He differentiates the rural and urban societies.

Society behaves like an organism and introduce the life-cycle theory of society, leadership and civilization.

Birth of New Society

Dissolution

Growth

Decline

Peak

IBN KHALDUNS CONTRIBUTION TO THE THEORY OF ECONOMIC GROWTH

CREATE

DISAPPEAR

GROWTH

DECLINE

PEAK

POPULATION

RELIGION

GOVERNMENT

JUSTICE AND ECONOMIC FREEDOM

ECONOMIC GROWTH

IDEAS AND TECHNOLOGY

PRIVATE SPENDING

HUMAN CAPITAL

TRADE

LIFE CYCLE THEORY AND ECONOMIC GROWTH

Ibn Khaldun suggests a

life cycle theory of

society.
Due to 2008 financial crisis, some contemporary western economists are now talking about

cellular economic theory.

Business behaves according to the nature of living things that goes through the cycle of birth, growth and death.

 We know intuitively and logically that continuous growth can't be sustained in living things. It's likewise unsustainable (and undesirable) in business. Cellular economic theory suggests an alternative to linear growth: circular growth. `We are realizing all systems are like biological systems--even economic ones. Growth-at-all-costs business is malignant (Stalnaker, Stan(2009). The Next Evolution in Economics: Rethinking Growth, Harvard Business Review.)

INDUSTRY LIFE CYCLE

Gort and Klepper (1982) defined five life cycle stages: Introductory stage Growth stage Maturity stage Shakeout stage Decline stage
(http://bear.warrington.ufl.edu/dickinson/Dickinson_ Working_Paper.pdf)

PRODUCT LIFE CYCLE

The stages through which individual products develop over time.
The classic product life cycle has four stages: introduction; growth; maturity and decline.

Product Life Cycle Theory

Corporate Entrepreneurship Stages of Firm Growth (Life cycle theory) (Taken from the lecture slides conducted by Prof. Rice in the Babson College entrepreneurship workshop collaboration with UNITAR

Startup

Growth

Maturity

Renewal or Decline

Size

Time

BUSINESS CYCLES

Economic activity fluctuates in business cycles in every society with contractions and expansions representing short-term changes

LIFE CYCLE HYPOTHESIS Franco Modigliani (1954,1980) received his Nobel price in economics due to his contribution in the development of the life cycle theory of savings.

MEMORABLE COMPANIES THAT VANISHED: REAL WORLD

16 year old Enron, 233 year old Barings Bank, 150 year old
Lehman Brothers, 85 year old financial power house Bear Stearns, 33 year old American Motors Corporation(AMC), 129 year Montgomery Ward, 64 year old Pan Am, 41 year Standard Oil, 23 year old WorldCom, 89 year old Arthur

Anderson, 71 year old TWA, 20 year old Compaq.

http://money.aol.com/special/companies-that-have-vanished

Why Great Companies Have Disappeared - Consider Firestone

http://www.articlesbase.com/managementarticles/why-great-companies-havedisappeared-consider-firestone-1259809.html

Companies that will disappear in 2009

http://247wallst.com/2008/12/19/companiesthat/

LABOR AND ECONOMIC GROWTH

He considers labor as a source of economic growth. Division of labor creates economic surplus and wealth (does this ring a bell?) He outlines the labor theory of value in which value of a product is based on the amount of labor embodied in it or needed to produce it.

POPULATION AND ECONOMIC GROWTH

Ibn Khaldun finds that population is a cause and effect of economic growth. The Dual Sector Model(Lewis, 1954) in which rural-urban migration cause an increase in population and economic growth. Ibn Khalduns findings show that initially higher population results in higher economic growth but eventually beyond a certain level higher population cause lower economic growth due to the social costs.

Meier(1995), Becker, Glaeser, and Murphy(1999), Dawson and Tiffin (1998), Thornton (2001), Easterlin (1967); Thirlwall (1972); Simon (1992); Kelley and Schmidt (1996); Ahlburg (1996), Fumitaka(2005), Zhang and Li(2007), Savas (2008), Habtu(2003) Malthus(1798), Steinmann and Komlos(1987), Simon-Steinmann Economic Growth Model(1984) This model states that an increase in total population would lead to increase in technology and innovation and yield a greater per-capita income.

POPULATION

ECONOMIC GROWTH

POPULATION GROWTH

SOCIAL COSTS

LIMIT TO ECONOMIC GROWTH

NATIONS WITH HIGH POPULATION AND ECONOMIC GROWTH IN THE MUQADDIMAH

DOES RELIGION RESULTS IN ECONOMIC DECLINE? Ibn Khaldun says Definitely No! In fact religion stimulates economic growth. Africa became the worlds largest trading centre in the 14th century after the advent of Islam.

HOW RELIGION SPURS GROWTH?

religion prohibits unjust policies and thus provides incentives for business activities, creates growth and increase tax revenue religion introduces public policies conducive for business activities to flourish, provides economic freedom and macroeconomic stability.

religion develops good character in man, enhance solidarity to pursue a common goal for political stability and economic growth.
religion can influence the cyclic process of economic growth and decline by nurturing good men and good leaders who practice good governance and protect public interest

His findings support the thesis by Max Weber(1904) and the recent empirical studies by Barro and McCleary (2003), Noland(2005), Osoba(2008), Khan and Bashar(2008), Blum and Dudley(2001), Guiso et al. (2003),Grier (1997) that there is a positive relationship between religion and economic growth. In fact Noland(2005) using multivariate analysis finds that Islam promotes economic growth.

GOVERNMENT SPENDING, TAXES ECONOMIC GROWTH

Economic growth depends on the type of political leadership, size of the government and economic freedom. Leadership or government plays an important role in affecting the economic conditions of a city or nation. Religious government establishes justice and safeguard public interest creating incentive for business and entrepreneurial activities compared to rational politics.

Excessive public spending is the cause of bad public policies. Policy to introduce higher taxes will discourage commercial and entrepreneurial activities, reducing the tax base and tax revenue. Policy that allow governments to get involve in business activities will create unfair competition with private sector. He suggests moderate government spending, moderate taxes and other business friendly public policies to promote growth and increase government revenue.

 The Heritage Foundation and the Wall Street Journal created the Index of Economic Freedom in 1995, Hanke and Walters (1997), Goldsmith (1997Heckelman(2000), Altman(2007) find that there is a positive relationship between economic freedom and economic growth. States that have lower taxes, smaller government and flexible labor markets tend to have comparatively more economic growth( 2006 annual report from the National Center for Policy Analysis (NCPA) and Canada's Fraser Institute

ADAM SMITH OR KEYNES

Although Ibn Khaldun(1377) like Adam Smith(1776) believes that economic freedom is a necessary condition to foster business activities, like Keynes, he also believes that government spending is necessary to promote growth and macroeconomic stability. Government presence should not be too large at the expense of private businesses and entrepreneurial activities.

 Inverted

U shaped relationship between size of the government and economic growth (The Rahn Curve) Inverted U shaped relationship between taxes and economic growth (The Laffer Curve) Moderate taxes and public spending for optimal economic growth.

Ibn Khaldun(1377), Arthur Laffer(1974), Jude Wanniski(1978) believe that the relationship between tax rate and tax revenue is an inverted U shape curve

LEADERSHIP, MOTIVATION AND ECONOMIC GROWTH

In other words Ibn Khaldun believes there is a significant relationship between political leadership, motivation and economic growth. Leadership and government should introduce polices that enhance the motivation of individuals and businesses to promote growth.

 Recent empirical analysis suggests that individual national leaders can have large impacts on economic growth(Jones, Benjamin F(2009), Menon, Sudha (2007), Zainal Aznam Yusof, Deepak Bhattasali(2008), Stimson, Stough, Salazar(2009)

IST STAGE POLITICAL LEADERSHIP COMING TO POWER AND ECONOMIC IMPLICATIONS

2ND STAGE POLITICAL LEADERSHIP AND ECONOMIC IMPLICATIONS

3RD STAGE POLITICAL LEADERSHIP AND ECONOMIC IMPLICTIONS

4TH STAGE POLITICAL LEADERSHIP AND ECONOMIC IMPLICATIONS 5TH STAGE POLITICAL LEADERSHIP INDULGE IN EXCESSIVE SPENDING LEADING TO MORAL, ECONOMIC AND POLITICAL DECLINE

AMERICAN ECONOMIST JAMES GWARTNEY SHOWED THE HIGHER THE LEVEL OF TAXATION AND SIZE OF GOVERNMENT THE LOWER THE GROWTH RATE

 Arthur Laffer himself admitted that it was Ibn Khaldun who first introduced this idea of the inverted U shaped relationship between tax rates and tax revenue (Laffer, 2004). Laffer attempted to proof the validity of this theory of Ibn Khaldun by citing examples in US history: During the 20th century, the U.S. had three major period of tax-rate cuts: the Harding/ Coolidge cuts of the mid-1920s, the Kennedy cuts of the mid-1960s, and the Reagan cuts of the early 1980s. Each of these periods of tax cuts was remarkably successful in terms of virtually any public policy metric (The Laffer Curve, Thinking Economically).

A 2009 study by Harvard economists suggest that taxes and spending should be cut to spur economic growth and reduce deficits.(Alberto Alesina and Silvia Ardagna, 2009). They argued that fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increase.

RAHN CURVE
Rahn Curve is an economic theory, developed by Richard Rahn supported by empirical analysis which says there is a level of government spending which maximizes economic growth.

The Rahn Curve relationship is similar to the Laffer Curve relationship between tax rates and tax revenue.

IBN KHALDUN, LAFFER CURVE AND RAHN CURVE

Laffer Curve and the Rahn Curve are consistent with the views of Ibn Khaldun which suggests that there is an optimal level of government spending and tax rate which maximizes the rate of economic growth.

POLITICAL STABILITY AND ECONOMIC GROWTH

Ibn Khaldun finds that one of the causes of economic downturn is political instability. He believes that political stability creates a conducive environment for business to flourish, create employment opportunities and migration into the cities which increase demand and stimulate economic growth.

 Younis, Lin, Sharahili, Selvarathinam(2008) found that there is a positive relationship between political stability and economic growth in Asia. A study by Feng Yi(1997) indicates a positive relationship between political stability and economic growth.

INTERNATIONAL TRADE AND ECONOMIC GROWTH

During his time, North Africa was in a global trade business. He cited nations like China, Egypt, Syria and India which were prosperous and achieve economic growth because of international trade He suggest ways to become a successful global trader including finding new markets even though it may be riskier.

IDEAS AND ECONOMIC GROWTH

Role of ideas, education and learning by doing in economic growth With his ability to think, interactions, constant practice and habits, man is able to find new ways of doing things resulting in higher economic growth. He traces the evolution of the various industries and skills known to man during his time and how these industries emerged and transformed as new ideas and technology were gradually introduced.

IBN KHALDUN AND THE RELATIONSHIP BETWEEN EDUCATION, IDEAS AND ECONOMIC GROWTH

education, constant practice and learning

result in expertise, new ideas and development of human capital, technology and high quality goods

development and evolution of the various industries, skills and economic activities

Ibn

Khalduns theory is consistent with the findings of Paul Romer with his Economics of Ideas and Robert Lucas with his Learning by Doing

COSTS OF ECONOMIC GROWTH

CONGESTION POLLUTION EPIDEMIC INFLATION UNEMPLOYMENT POVERTY CORRUPTION CRIME MIGRATION

COSTS OF ECONOMIC GROWTH

POLLUTION
MORAL DECLINE, CRIME AND CORRUPTION

EPIDEMIC

UNEMPLOYMENT AND MIGRATION

LACK OF SOLIDARITY, POLITICAL INSTABILITY DECREASE IN REVENUES POPULATION GROWTH, HIGH PRICES

INFLATIO N

POVERTY

CONGESTION

HABITS AND COSTS OF ECONOMIC GROWTH

High economic growth results in excessive spending leading to luxury habits and conspicuous consumption Difficulties to get rid of the habits Spending exceeds income Inflation, corruption, crime, poverty, unemployment, environmental degradation

ECONOMICS AND LIMITS TO GROWTH Dennis Meadows, MIT Professor.

What caused the environmental degradation and global warming affecting us today ?

HABITS.
http://www.youtube.com/watch?v=4iHr9mzLE
ZU

GOOD GOVERNMENT AND PUBLIC POLICY

BUSINESS AND JOB OPPORTUNITIES
POPULATION GROWTH

ECONOMIC GROWTH
EXCESSIVE SPENDING AND INFLATION

DECLINE IN PRIVATE SPENDING

ECONOMIC CONTRACTION, UNEMPLOYMENT AND MIGRATION

RURAL
necessities morality solidarity

URBAN
comfort and luxuries

LUXURY HABITS, EXCESSIVE SPENDING, GREED AND LOVE OF POWER

COSTS OF ECONOMIC GROWTH

HUMAN NATURE, ECONOMIC GROWTH AND BEHAVIOUR

EMERGENCE OF TWO DIFFERENT SOCIETIES

THE DECLINE IN HUMAN CIVILIZATION

Division of labor, creates economic surplus, production of conveniences and luxuries, generates wealth and spur growth Labor as a source of profit and capital accumulation

DIVISION OF LABOUR AND SPECIALIZATION

the hard living Bedouin society with the features of rural culture the easy and affluent living of the sedentary society having the characteristics of city dwellers

Due to the exposure to luxury, human nature unleashes the elements of greed and love of power that weakens the human soul, solidarity and eventually leads to the decline in political and economic power of nations and cities.

 when people become more prosperous, they move from consuming necessities to conveniences to luxuries. Eventually, they reach a point where consuming more brings trivial benefits (Seigel, 2006).

huma nature and ability to think

human society and organization and leadership

division of labor

population growth

wealth creation and economic growth

exchange

higher demand and supply of products and inputs

Higher Wages

necessities to comforts to luxuries

inequalities of income, poverty, corruption, unemployment, migration and lower economic growth

higher prices for goods and inputs Luxury habits and conspicuous consumption

higher quality of products and inputs through improved methods and technology

WHAT POLICY MAKERS CAN LEARN FROM THE MUQADDIMAH

Determinants of economic growth as propounded by Ibn Khaldun are the combination of the Classical, Neo Classical, Keynesian and New Growth Models. Ibn Khaldun s Growth Theory also includes the Rahn Curve, Laffer Curve and life cycle theory which are not emphasized by western economic growth models. Fiscal policy should therefore consider these findings in proposing the optimal combination of taxes and government spending as suggested by Ibn Khaldun. The role of religion, ethical leadership and good governance to stimulate growth

 However, he sees the relationship between economic growth and costs of economic growth. That relationship stems from the presence of luxury habits and excessive spending by the government and the consumers. Excessive spending by the government causes budget deficit and the introduction of bad policies to finance the deficit resulting in economic contraction. Excessive spending by the consumers may lead to inflation and eventually lower spending and lower economic growth.

 He suggests business friendly public policies based on economic freedom, justice, public interest and fairness to spur economic growth. Due to the exposure to excessive luxury resulting in luxury habits, human nature unleashes the elements of greed and love of power that weakens the human soul and solidarity and the emergence of unethical behavior

 Self interest, greed, the lack of solidarity and the decay in the spirit of common good due to luxury habits can cause a decline in economic and political power of nations and cities. There is a need to address these issues through the use of religious and spiritual methods so that the members of the society share the common goals of nation building, protecting public interest and human welfare. GDP should not be the only criteria for human welfare. Economic growth paradigm should be revisited.

 The economic system is a part of a larger ecological system and they are interdependent and interwoven. Economic system is connected to the ethical, environmental, social and political systems. Therefore policy makers also should consider the effects of an economic decision on other subsystems to reduce the costs of economic growth and slows down the limit to growth.

 Ibn Khaldun finds that ideas, human capital, innovation and technology are important for economic expansion although the limit to growth is inevitable. Ibn Khaldun focuses on mans ability to think as an impetus to growth. Therefore intellectual development has to be nurtured in various ways including education, freedom of expression, intellectual network and discourses, and commercial exchanges and network.

THAILAND ECONOMIC MODEL: SUFFICIENCY ECONOMICS

Focus on sustainable profit, moderation, avoid indulging in overconsumption, ethical approach to business, role of government in alleviating poverty and guiding macroeconomic policies, careful risk management, mental and spiritual development. Raising ethical standards for economic management, getting rid of conflicts of interest and introduce transparency. This economic model was endorsed by United Nation's main development agency(UNDP) http://www.dailynews.lk/2007/03/20/fea03.asp

FINANCIAL CRISIS
Ibn Khalduns view: As a result of luxury habits, man is transformed from a moral individual seeking common good to a self interest economic man indulge in excessive spending causing corruption, unethical behavior, financial and economic crisis. Non economic factors affect the economy. We have to differentiate between the root cause and the symptoms.

ROOT CAUSE OF THE ECONOMIC CRISIS

The economic and financial crisis that have affected the global community is partly due to self interest and greed which characterized the capitalist economic system. This include the 1997 Asian Financial Crisis and the recent 2008 Global Economic Meltdown.

 .the nation's current economic crisis was not the result of chance but the result of greed..there is plenty of blame to go around, from greedy Wall Street executives who made dangerous decisions to lax regulators to banks that did not take into consideration whether borrowers could make good on their loans to consumers who took advantage of easy credit to take out mortgages they could not afford. "Reckless greed and risk taking must never endanger our prosperity again," (Barack Obama in a speech at George Mason University in Fairfax, Va)

International financial crises, I might even say domestic financial crises, are built into the human genome. When we map the whole thing, we will find something there called greed and something called fear and something called hubris. That is all you need to produce international financial crises in the future. I have not seen anything to raise any doubts about that. (Paul Volcker (1999), in 1998, )

former Chairman of the Federal Reserve Board, referring to the Asian Financial Crisis

For us urban dwellers and the so called modern man, Ibn Khaldun asks
Why the demand for physicians is higher in the urban areas than rural areas? Abundance of food Poor air quality Lack of exercise

ABUNDANCE OF FOOD

POOR AIR QUALITY

RUBBISH AND POLLUTION

ROTTEN FOOD AND POLLUTION

LACK OF EXERCISE

More growth may lead Higher taxes may lead to social costs to lower economic Excessive spending growth and tax and luxury habits may revenue(Laffer Curve) cause unethical and Higher government immoral behavior, spending may reduce inflation, private business unemployment, activities, economic poverty and growth and environmental revenue(Rahn Curve) degradation.

IBN KHALDUNS IDEAS ON ECONOMIC GROWTH.