Wednesday, December 2, 2009

Islamic Finance

Mrs. P points me to this post over at The Corner, which strikes me as something akin to a paranoid conspiracy theory about Jewish bankers.

Beginning in the 1970s with the Carter-era oil embargo and accelerating during the post-9/11 oil-price spikes, Persian Gulf countries like Saudi Arabia and the U.A.E.’s wealthiest city-state of Abu Dhabi have been awash in liquidity. These trillion-dollar cash reserves are controlled in every case by the respective royal families, typically in sovereign or quasi-sovereign wealth funds.

Another phenomenon that followed the great Oil Rush of the post-9/11 era was the promotion and aggressive exportation of a Muslim Brotherhood doctrine called Shariah-compliant finance (SCF). SCF or “Islamic finance” was first articulated in the mid-20th century by men like Sayyid Qutb of Egypt and Abul Ala Maududi of Pakistan, both of whom argued for a jihad against Westernization and for the creation of Islamic polities that would ultimately join in a hegemonic global Caliphate, with the goal of establishing Shariah not merely as the supreme law of the land, but as the supreme law of the world.

I've actually read Qutb and Maududi. I have concerns about both. For example, Maududi rejects the notion of popular sovereignty. He writes “Islam, as already explained, altogether repudiates the philosophy of popular sovereignty.” Maududi’s primary objection to Western democracy? The will of the people does not necessarily adhere to the principles of what is right and just as specified in the Qur’an. Unjust and immoral laws can be enacted, and just, moral laws can be rescinded solely by the will of the people. Basically the will of the people, not Allah's will, is sovereign in Western democracy.

I don't remember either of them writing about finance, but it wouldn't really surprise me either.

Anyway, apparently, these sovereign wealth funds and other Sharia compliant finance somehow present a threat to our national security because they're trying to sneak in Sharia to the West.

To understand the rather opaque world of Islamic finance, one must understand the players. Since its founding, the modern SCF world has been driven by essentially two groups. The first we can label the Shariah fundamentalists. They come in the form of the fundamentalists in Saudi Arabia and Iran and the Muslim Brotherhood “political Islamists” operating principally in Egypt, Jordan, Pakistan, Indonesia, and Malaysia. These Shariah-inspired financiers understand SCF as “financial jihad” — indeed, as part of a larger stealth campaign to institutionalize Shariah in the West.

Ah, but Western financiers are blinded by their greed into accepting this doctrine promoted by people who want to destroy them.

Greed, self-indulgence, and even treason are of course not new to the international banking and multinational corporate worlds. But what the Shariah advocates have found even more to their liking is the fact that the Western technocrats and government policymakers have been more than willing to ignore Shariah’s call for global jihad and its resonance as the common doctrine articulated by jihadists around the globe.

But it's also a fiction in reality:
Dubai World, a company wholly owned by the Dubai sovereign, has funded itself through debt to the tune of $60 billion in the form of Shariah-compliant bonds (or “sukuk”). These bonds pay interest just like their forbidden cousins in the Western markets, but the interest is put into the black box of Shariah-created fictions and “special purpose vehicles” to keep the forbidden interest off the books. What we now see as a real-estate-bubble collapse in Dubai is no different and no more or less ethical than any other financial failure. But what makes this collapse so problematic is precisely what makes SCF and sovereign wealth funds so dangerous.

I, for one, am worried about Islamic Finance itself about nil. The trillions in reserves the ruling classes in the Mid East have are slightly more concerning, but not whether they are Sharia compliant or not. The argument in this post seems to be Sharia, Islamic Fundamentalists, Banking --- oogiddy boogidy!

As far as I can tell, this isn't very much different than Jews, Switzerland, Gold! New world order! Lizard aliens! --- oogiddy boogidy!

While I'm not an expert on either finance or Islamic finance, I'm not completely ignorant either and color me seriously unimpressed.

6 comments:

Zinah said...

As a muslim and women's rights activist, I am amazed at your assessment that Shariah is benign. Have you read about Rifqa Bary? Or the Said sisters in Texas. Shariah is all about male supremacy and more. I do believe there is a serious problem with anything Shariah including finance. Many of us are trying to reform Islam sans Shariah. Go to www.stopshariahnow.org and get educated.

Anonymous said...

Aw FLG, you didn't emphasize the best sentence:

"What we now see as a real-estate-bubble collapse in Dubai is no different and no more or less ethical than any other financial failure."

The enlightened have made much about how much better sharia compliance finance that traditional Western finance -especially in the last 18 months. Well Dubai is now California.

(I do like how you've routed out another Joseph Sobran at NR.)


Mrs. P

Anonymous said...

Aw FLG, you didn't emphasize the best sentence:

"What we now see as a real-estate-bubble collapse in Dubai is no different and no more or less ethical than any other financial failure."

The enlightened have made much about how much better sharia compliance finance that traditional Western finance -especially in the last 18 months. Well Dubai is now California.

(I do like how you've routed out another Joseph Sobran at NR.)


Mrs. P

FLG said...

Zinah:

I'm not saying that Shariah is benign. I'm saying that Islamic finance is not a threat to Western civilization. Furthermore, I'm not exactly clear how Islamic finance has anything at all to do with honor killings except that they are both based on certain interpretations of Shariah. Shariah, like everything in the world save God, has both good and bad things about it. I'd even agreed with you that Shariah has more bad things about it than good, but I was writing specifically about Islamic finance, which as far as I can tell has little to no negative consequences.

Also, the idea that you could get rid of Sharia and still have Islam seems a bit wishful. Or, to put it another way, one could blame Islam itself for the honor killings and the misogyny in Islamic culture.

I realize there are passages in the Quran that can be interpreted in a way conducive to women's rights , but there are also others that can be interpreted to the contrary.

Lastly, you might want to think about how condescending a term like "Get educated" is. I realize the appeal for activists because it then makes the solution to their problem one of simply getting the message out, but it's still condescending because it implies I don't know about Shariah, and that if I knew about Shariah that I would inevitably share your conclusions.

zinah said...

Did not mean it in a condescending way. sorry. Just that the issue is quite complicated there is a lot of good reading out there. And there is published information on how Shariah finance benefits the regimes of the Taliban and Iran, and hurts many many Muslims who oppose its radical ways. Money is power. The Taliban and Iran is able to exercise power because they have access to financial markets.

Withywindle said...

But if adopting sharia-compliant finance is done to defer to Islamist sensibilities, then, like so much else, it is part of the creeping cultural surrender to the Islamic world.

 
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