US ambassador to Libya killed in violence over anti-Islam film

The reaction to a nonsensical and offensive film has sparked protests in Bengazi and Cairo.

With the US ambassador to Libya killed in Bengazi and a protest of 2,000 in Cairo raising an Al-Qaeda-associated flag above the US embassy on the anniversary of 9/11, it is clear the reaction to a small video published online yesterday has got out of hand.

The YouTube clip of a film named "Innocence of Muslims" has been reported in the (rumour-filled) Egyptian press to have been the work of Koran-burning Florida Pastor Terry Jones and Coptic Egyptian Christians, who make up about 10 per cent of the population in Egypt. It was in fact produced by an Israeli filmmaker named Sam Bacile. "Islam is a cancer," he told the Wall Street Journal. "The movie is a political movie. It's not a religious movie."

The film itself is comic in its ridiculous condemnation of Islam, almost a satire of far-right Christians’ worst stereotypes about the Middle East. It features a cast of orange-looking Americans with large stick-on beards attacking Christians and burning down their houses.

Scenes of the Prophet’s life take place against a static computerised desert backdrop and include historical incongruities such as plastic-looking weapons taken from a range of periods and women combining their hijabs with low cut mini-dresses.

The film accuses Muhammad of paedophilia, extortion, womanising, drinking wine, being gay (“Is the master dominant or submissive?” a follower asks, while Muhammad replies “both - remember the night at the gym?”), terrible grammar “how pleasurable is our Islamic ways”, and generally portrays him as being a murderous brute. A 102-year-old woman with an extremely strong New York accent claims “never have I seen such a murderous thug as Muhammad”, before being dragged away attached to a camel's leg.

Other figures from the Koran, such as Bilal, make an appearance. Although a freed slave of Ethiopian descent, known to be a companion of the Prophet famed for his beautiful voice, he is here presented as a large overweight white man with strange markings on his face.

The film has caused conspiracy theories to fly. Was it a plot by Morsi to provoke the US on the anniversary of 9/11? A Salafi plan to spread sectarian tensions? Protests are rumoured to intensify in Cairo today, with the violent football fans the Ultras Ahlawy heading down to the embassy. Sheikhs in Egypt are already calling for the revocation of citizenship of Copts living abroad.

All over a film that is so ridiculous it seems like a parody of itself. Much like the Danish cartoon controversy, something trivial has highlighted extreme underlying tensions and insecurities. They say that the offensive cartoon caused widespread anti-government protests in Libya. The film may also have brought to the surface tensions which will be harder to bury.

“Man + X = Islamic Terrorist” one character in the film philosophises in a characteristically nonsensical scene. What is X, we are left to wonder. By this film's estimation, the most obvious conclusion would be fake tan, a cheap beard, and some strong glue.

A still from "Innocence of Muslims".
Ralph Orlowski / Getty
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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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