This chapter describes another fundamental criticism of the Western economic system – that from Islamic economics. This is included not because the authors are advocating for Islamic economics, but because Islamic economists generally have a clearer understanding of the fundamental dishonesty of the Western monetary system than mainstream Western economists, who almost entirely ignore this glaring flaw at the heart of the Western economic system. Having forbidden interest-bearing loans, like Islam, for its first 1600 years, Christianity relaxed its rules, and thereby lowered its guard against the “money power,” which is now running rampant in what was once “Christendom.” Recent collaboration between Islamic economists and “dissident” Western economists is very promising.
TopIntroduction
“[We are now in the] final stage of a fraudulent monetary system designed to impose complete financial slavery upon mankind.” Sheik Imran Hosein (Hosein, 2007)
Although the criticisms discussed in the two previous chapters are sufficient to explain why the current US dollar-based economic system is losing its international influence and popularity, there is yet another direction from which unrelenting criticism of the half-century of inconvertible, debt-based, paper dollars (and paper euros, pounds, yen and other fiat currencies) has come. This is from the Islamic world, comprising a fifth of the world population, which forbids all activities which are judged to be “Riba” – that is, a dishonest use of money – and considers unbacked paper money to be inherently fraudulent, and so “Riba”. As the Christian church also did for more than 1,600 years, Islam still today prohibits the charging of interest on loans, compound interest, and related financial devices, which are considered to exploit most people’s ignorance of financial risks, and are hence “Riba”.
This topic is discussed here not in order to introduce religious issues, but because, as an unfortunate matter of fact, the great majority of the work of “western” economists simply ignores the dishonesty of the debt-based monetary system controlled by privately-owned banks, which is the underlying cause of most economic problems such as poverty, unemployment and worsening inequality, as discussed in Chapter 3. By contrast, Islamic economists openly recognize this fundamental problem, and though their body of work is much smaller than that of the “mainstream” economics profession, their objective is to cure it. The small number of “dissident” western economists have the same aim, although they take a different approach, primarily to return the power of money creation to governments as the representatives of their citizens, without aiming to eliminate the practice of lending at interest.
Refusing to participate in activities that involve interest-bearing debts restricts Islamic finance to a subset of all investment activities, but is not otherwise incompatible with “western” economics or capitalism. Many western financial companies nowadays offer “Shariah-compliant” financial services, which have grown to several percent of the world market. In particular it is not incompatible with mainstream western finance, which might also be called “post-Christian” finance, having evolved in the western countries which achieved scientific and technological leadership under Christendom. Moreover, in recent decades, the “financialization” of the western economic system has given ever greater political and economic influence to banks and other financial companies, which also use financial derivatives to profit from less financially sophisticated customers, including various levels of government and consumer services. This would not be allowed if western anti-monopoly laws and regulations to protect investors were honestly applied and infringements prosecuted, but this is generally no longer the case today (Martens & Martens, 2021).
Top4.1 Usury Forbidden In Islamic Economics
It is no more than common sense that being able to borrow money is extremely valuable in enabling people to improve their lives by, for example, buying a house or starting a new business, and hence facilitating economic growth. Islamic economics supports this, but insists that the lender must share in the borrower’s risk. That is, Islam considers it to be unjust that a business failure that may occur through no fault of the entrepreneur (such as due to an earthquake, or having their business “locked down” by government), should ruin the hard-working borrower, while the lender can still demand that their loan be repaid in full.
Although this history may be unfamiliar to people living in OECD countries today, it should be remembered that Christianity too forbade “usury” – that is, lending at interest – until the 17th century, when the meaning of the word was revised to mean charging an excessively high rate of interest. As an example of this, in Shakespeare’s plays written in the early 17th century, Christians are still forbidden to lend money at interest.