From an article, or rather, a book-review and summary by Daniel Pipes of Professor Timur Kuran's indispensable study, "Islam and Mammon":

"Islamic economics increasingly has become force to contend with due to burgeoning portfolios of oil exporters and multiplying Islamic financial instruments (such as interest-free mortgages and sukuk bonds). But what does it all amount to? Can Shari'a-compliant instruments challenge the existing international financial order? Would an Islamic economic regime, as an enthusiast claims, really imply an end to injustice because of "the State's provision for the well-being of all people"?

To understand this system, the ideal place to start is "Islam and Mammon," a brilliant book by Timur Kuran, written when he was (ironically, given heavy Saudi backing for Islamic economics) King Faisal Professor of Islamic Thought and Culture at the University of Southern California.

Now teaching at Duke University, Kuran finds that Islamic economics does not go back to Muhammad but is an "invented tradition" that emerged in the 1940s in India. The notion of an economics discipline "that is distinctly and self-consciously Islamic is very new." Even the most learned Muslims a century ago would have been dumbfounded by the "Islamic economics."

The idea was primarily the brainchild of an Islamist intellectual, Abul-Ala Mawdudi (1903-79), for whom Islamic economics served as a mechanism to achieve many goals: to minimize relations with non-Muslims, strengthen the collective sense of Muslim identity, extend Islam into a new area of human activity, and modernize without Westernizing.

As an academic discipline, Islamic economics took off during the mid-1960s; it acquired institutional heft during the oil boom of the 1970s, when the Saudis and other Muslim oil exporters, for the first time possessing substantial sums of money, provided the project with "vast assistance."

Proponents of Islamic economics make two basic claims: that the prevailing capitalist order has failed and that Islam offers the remedy. To assess the latter assertion, Kuran devotes intense attention to understand the actual functioning of Islamic economics, focusing on its three main claims: that it has abolished interest on money, achieved economic equality, and established a superior business ethic. On all three counts, he finds it a total failure.

1) "Nowhere has interest been purged from economic transactions, and nowhere does economic Islamization enjoy mass support." Exotic and complex profit-loss sharing techniques such as ijara, mudaraba, murabaha, and musharaka all involve thinly disguised payments of interest. Banks claiming to be Islamic in fact "look more like other modern financial institutions than like anything in Islam's heritage." In brief, there is almost nothing Islamic about Islamic banking which goes far to explain how Citibank and other Western majors host far larger Islam-compliant deposits than do the specifically Islamic banks.

2) "Nowhere" has the goal of reducing inequality by imposition of the zakat tax succeeded. Indeed, Kuran finds this tax "does not necessarily transfer resources to the poor; it may transfer resources away from them." Worse, in Malaysia, zakat taxation, supposedly intended to help the poor, instead appears to serve as "a convenient pretext for advancing broad Islamic objectives and for lining the pockets of religious officials."

3) "The renewed emphasis on economic morality has had no appreciable effect on economic behavior." That's because, in common with socialism, "certain elements of the Islamic economic agenda conflict with human nature."

Kuran dismisses the whole concept of Islamic economics. "[T]here is no distinctly Islamic way to build a ship, or defend a territory, or cure an epidemic, or forecast the weather," so why money? He concludes that the significance of Islamic economics lies not in the economy but in identity and religion. The scheme "has promoted the spread of antimodern currents of thought all across the Islamic world. It has also fostered an environment conducive to Islamist militancy."

Indeed, Islamic economics possibly contributes to global economic instability by "hindering institutional social reforms necessary for healthy economic development." In particular, were Muslims truly forbidden not to pay or charge interest, they would be relegated "to the fringes of the international economy."

In short, Islamic economics has trivial economic import but poses a substantial and malign political danger."

Posted by: Hugh at February 18, 2008 8:54 AM

A posting on "Islamic bonds" by Mary Jackson at www.newenglishreview.com, slightly edited:

"The arrangement giviing rise to these "Islamic bonds" is a sham. This is a secured loan. The Government sells the asset; in other words it raises a loan. The Government guarantees to repurchase the asset, that is to redeem the loan. The rent, paid by the Government, and in turn by the taxpayer, is interest in all but name. There is no risk to the investor.

I object in principle - or should that be "principal", since this gets repaid? - to the idea of securing loans to wealthy Muslims on Government assets. Any acceptance of sharia, even if it is only the appearance of sharia, is wrong, and will be seen as a victory for Islam, which cares more about appearance than reality.

These vehicles are not Islamic. Even Muslims know this:

"In the case of sukuk, the silly bonds marketed as "Islamic" by rent-seekers, there are numerous legal risks that are very poorly understood, including by the lawyers and bankers who structure the instruments. The problem in this case is self-inflicted: the lawyers want to structure the instruments, e.g. lease-backed bonds or sukuk al-ijara, in such a way as to assure "Shari`a scholars" that bond-holders have material ownership of the underlying assets and receive "rent" rather than "interest". At the same time, they want to assure markets and rating agencies that the instruments are indistinguishable from conventional bonds, where the only mateiral risk is credit risk of the issuer. The rating agencies read the legalese and conclude that the lawyers are right: the "Islamic" structure is merely a fiction, and there is only credit risk. They give the sukuk the same credit rating they would give any other unsecured bond issued by the same entity (see, e.g. S&P's analysis of Qatar's Global Sukuk, where the rating was based on the soundness of the Qatari economy, without any significance lent to the asset ostensibly being leased back by the issuing SPV).

Unless and until we have a high-visibilty case of bankruptcy, we will not know with any certainty who owns what in the maze of SPVs that lawyers and structured financiers love to use. Until then, many will continue to line their pockets with legal, structuring, and advisory fees, as they congratulate themselves on "innovative Islamic products." What a shame!

The proposal may well not go ahead, but it is wrong of the Government even to consider it. By doing so, the Government appears eager to yield territory to Islam, but because the bonds are not even properly Islamic, Muslims will not be satisfied. Neither one thing nor the other, yet somehow the worst of both worlds."

Posted by: Hugh at February 18, 2008 8:58 AM

Shari'a compliant bonds are a fraud, plain and simple. To make them compliant with shari'a the instruments would have to convey property rights in the underlying assets that will be purchased by the principal of the loan. Even with commercial bonds such a notion is absurd.

As for the demise of western capitalism, it appears that no British government officials have read Hayek and Schumpeter since Maggie Thatcher.

Posted by: DrMack at February 18, 2008 10:23 AM

Without oil money, this won't even be discussed.

Time to develop new energy sources.

Posted by: tanstaafl at February 18, 2008 10:32 AM

Assalamau Laikum all,

I have been busy with election here in Pak today...plenty of tension, some inaction....but lots of police.

peoples are wary of suicide bombers...but with huge barriers keeping vehicles away from the polling booths...peoples are rolling in.

On the question of Sharia, it seems that whether muslims ask for sharia laws or not....your impotent peoples will give it to us (and you, the soon to minority) anyway.

We didn't push Rowan for Sharia....he pushed it himself.

Now we didn't ask for Islamic bonds either...not in any formal way really...but here we are...your government literally bending over to give it to us.

Don't blame us for this...but please keep your grandaughters abreast of the situation...they will be the most affected....buy your (and their) burkas in the hot sales (or is that illegal within sharia)...hmmmm....the UK is so confusing these days.

Posted by: Naseem at February 18, 2008 11:25 AM

We ran out of nails a long time ago, I suggest we start using glue.

Posted by: OLDEngland at February 18, 2008 11:44 AM

From the Dail Mail article:

"Islamic bonds are slightly more expensive than Western-style bonds, mainly because they require extensive legal and religious advice."

"Special rules for Islamic finances have been challenged by Mahmoud El-Gamal, chairman of Islamic economics at Rice University, Houston."

"The main beneficiaries are lawyers, multi-national banks and self-styled religious scholars retained as consultants to certify the Islamicity of re-engineered financial products," he said."

Brilliant, just fucking brilliant. Assholes doesn't even begin to describe these cretins.

Posted by: johnb at February 18, 2008 11:59 AM

"On the question of Sharia, it seems that whether muslims ask for sharia laws or not....your impotent peoples will give it to us (and you, the soon to minority) anyway.

We didn't push Rowan for Sharia....he pushed it himself.

Now we didn't ask for Islamic bonds either...not in any formal way really...but here we are...your government literally bending over to give it to us." --Nasseem

For once, Nasseem is right.

Hey Leaders of England - why don't you quit your shilly-shallying and just hand over your country to the Mohammedans?

Posted by: darcy at February 18, 2008 12:21 PM

From the Dail Mail article:

"Islamic bonds are slightly more expensive than Western-style bonds, mainly because they require extensive legal and religious advice."

"Special rules for Islamic finances have been challenged by Mahmoud El-Gamal, chairman of Islamic economics at Rice University, Houston."

"The main beneficiaries are lawyers, multi-national banks and self-styled religious scholars retained as consultants to certify the Islamicity of re-engineered financial products," he said."

Brilliant, just fucking brilliant. Assholes doesn't even begin to describe these cretins.

Posted by: johnb at February 18, 2008 11:59 AM

Basically, I don't like seeing profanity in comments. But, concerning this colossal, colossal folly, johnb I don't blame you.

"Islamicity" - if I ever see that word again it will be too soon.

Posted by: darcy at February 18, 2008 12:26 PM

Since when have arabs or muslims disliked money in any form ?

Posted by: ericthekuffar at February 18, 2008 12:56 PM

OT but related:
CAIR stifling free speech via Google

From Sharia Finance Watch :

I have been blogging about Shariah finance, and recently all our google alerts have disappeard.

I just found out that CAIR had google screen us OUT. I am so upset that CAIR can dictate to google what they can post on their alerts.

I need help, and you need to be aware that this can happen to you, especially when it gets to censorship.

Posted by: miira at February 18, 2008 1:55 PM

Whether some in the British government are encouraging the collapse their civil justice and monetary system for the sake of inanely vacuous multicultural ideals, the hope of jockeying a more powerful position in some future Reichiphate, or just plain gutless cowardice, we should be wary of the potential catastrophe in the making.

Britain, unlike Iraq, Iran, or even Pakistan, has an advanced WMD arsenal with global reach already in place.

If this is the path Britain is going to take, we should be planning now to retrieve or destroy their Trident arsenal. This needs to be accomplished before the British government completely submits.

Britain is on a very short road to 'paradise'. Watching their willing submission, one law, one crime, one tradition at a time is painful, but we should not allow them to take us along for the ride, regardless of our past cultural ties with them.

Allowing an Islamic government to acquire fully functional, thermonuclear tipped, submarine based ballistic missile arsenal is insanely suicidal.

The only bit of humor in the whole story is the name of the architect of the plan: Ed Balls, a misnomer if their ever was one.

Posted by: RalphInfidel at February 18, 2008 2:44 PM

Ralphinfidel, please do not write off the Brits too readily.

I sympathise with your sentiments, but the British people are fed up to the back teeth with the appeasing multiculty antics of Nu-Labour / Blu-Labour / Lib-Labour, and are showing an increasing tendency to turn their attentions to the politics of the far right.

We have a long history of the removal of administrations which do not please us - however powerful their political and military support.

Ask Charles 1st.

The recent popular reaction to the meanderings of the leader of the Anglican Church, following his suggestion that the incorporation of aspects of sharia law are an inevitability in the UK shows how close we are to a crucial breaking point.

A small downturn in our economic fortunes would take us all the way.

I don't think you need to raid Faslane or Holy Loch quite yet.

Posted by: idiotboy at February 18, 2008 3:17 PM

PS: The machinations and devices indulged in by the sharia banking community in order to avoid being seen to pay "interest" are indicative of the thread of self delusion which typifies the whole Wonderful World of Islam.

Posted by: idiotboy at February 18, 2008 3:22 PM

darcy wrote:

"Basically, I don't like seeing profanity in comments. But, concerning this colossal, colossal folly, johnb I don't blame you."

darcy, I agree with you and this may be the first time I have commented like this (here or at other blogs). The idiocy of this, and similar cases, frustrates the hell out of me. How supposedly intelligent people can be so blinded by political correctness astonishes me. And mark my words, there will be hell to pay sometime in the future and when it happens I can only hope the U.S., Canada and Australia stay out of it. Let the Euros stew in their own mess.

Posted by: johnb at February 18, 2008 3:36 PM

I wonder if the Bin Laden family will be involved in the whip around Chancellor Alistair Darling has been setting up.

Posted by: OLDEngland at February 18, 2008 4:15 PM

Posted by idiotboy;
I don't think you need to raid Faslane or Holy Loch quite yet.

Not what I had in mind at all.

But, the specter of a George Galloway, or someone loonier, with his finger on the button should be sobering for all of us. We should be watchful that the political realities which propel the erosion of British civil law do not, out of public sight, do the same to weapon deployment safeguards.

…please do not write off the Brits too readily.

Still, I have to admit, I like your attitude. Keep it up. :)

Posted by: RalphInfidel at February 18, 2008 4:42 PM

I was always expecting Brownism to be bad, but I have to say that it is almost exceeding my wildest nightmares, some of which are very wild indeed.
As madness piles on madness, I sympathise with johnb in being forced to resort to deletable expletives.
February 2008 is looking like an another unpleasant stain on the pages of history, and it is not over yet.

Posted by: M Al-Content at February 18, 2008 5:39 PM

"The Government sees sharia-compliant bonds as a way of tapping Middle-East money and building bridges with the Muslim community.' from the article

While I'm all for building bridges to various communities, I think this particular Bridge to the River Sharia needs to be blown to smithereens.

Posted by: Josephine at February 18, 2008 6:12 PM

Oh yeah, now I *know* Naseem is nothing less or more than the LoyalDemocrat of Townhall fame. Well, maybe not the same person, but definitely the same type.

Keep it up, though - you're doing alright.

One good thing about 'Islamic financing' is that the interest rates (oope, I meant dividend) are typically better than those of standard savings accounts. If you're money-faced like I am, you won't care too much at this stage.

Where I would care is if you turn around and say this is the ONLY form of financing allowed. At which point, I will start hunting around for arms. Not just firearms. And then there will be trouble.

Posted by: gkong3 at February 18, 2008 10:13 PM

Ah yes, good old medieval anti-usury laws. A large part of what kept the Dark Ages so dark.

And it will inevitably lead to a mohammedan buy out of UK's infrastructure. Peachy!

One small step forward for the jihad, a huge suicidal leap backward for the civilized world!

Posted by: joeblough at February 18, 2008 10:42 PM

Best get your Gun Club registration while you still can gkong3 this is going to get a lot worse before it smooths out.

Posted by: OLDEngland at February 18, 2008 10:47 PM

It's not "interest" if you call it by another name, right?

(Cue: canned laughter.)

It's not War if you call it Peace.

"War is deception."

Islam: a corkscrew with no wine.

Posted by: profitsbeard at February 18, 2008 11:49 PM

Hello....England? Nose........Camel..........Tent?

Posted by: tanstaafl at February 19, 2008 8:33 AM

"How supposedly intelligent people can be so blinded by political correctness astonishes me." --johnb

Every day I marvel at that blindness.

Posted by: darcy at February 19, 2008 11:24 AM

The Government sees sharia-compliant bonds as a way of tapping Middle-East money and building bridges with the Muslim community.

Posted by: US_infidel at February 19, 2008 5:44 PM

Every time you see a report such as this in the U.K. just sit back and think...

GORDON BROWN...... this is ALL down to him!!!.

Posted by: Stopmakingsense at February 19, 2008 8:27 PM

&$%^#@*)$$#@!!!...:

My contribution to the explicatives.

Posted by: ElizaDoolittle at February 19, 2008 9:51 PM

Are these people insane? Repeating several comments above, (*&^%%^%*)&)_@#&!!!!!

But perhaps we are underestimating our British cousins in this apparent folly -

Let me describe a scenario that I fervently hope is being played out behind the scenes.

During the 1980's I lived in Los Angeles, and at the time Japan was buying up high profile American companies such as MGM (now Sony), with Japanese loans being collateralized by inflated Tokyo real estate prices. At one time it is said that as much as 60% of downtown LA was owned by various Japanese companies.

Many people were naturally concerned about this, but when I mentioned this to an investment banker friend of mine he shrugged his shoulders and said "Son, I wouldn't be too concerned. That property isn't going anywhere, and soon you'll witness another demonstration of just why it is that America won the war in Pacific (referring to WWII). It will be back in our hands soon enough." The connection wasn't apparent to me at the time, but sure enough, when the real estate bubble inevitably burst in Tokyo the new owners of the downtown real estate were forced to dump their investments at a huge loss. Many of the properties were bought back by the original owners at a fraction of the price they had received when they sold the properties earlier, making a huge profit in the process. It would appear that this outcome had been planned all along.

Now, I don't think the situation in Britain is the same vis a vis the Arabs as I described above. For one thing, it wasn't likely that some Shinto faction would send suicide bombers to LA in retaliation for having been taken for a ride, whereas the same could probably not be said about any Islamic business that thought it had been bested in a business deal.

But let me ask it anyway. Is it possible that there is a similar game going on behind the scenes in the British business community? Or is it simply greed, without thought of the consequences for the larger society. I hope it is the former.

Any Brits want take this up?

Posted by: Eastview at February 20, 2008 2:16 AM

Gordon Brown wasn't even elected as Prime Minister by the people. His constituency is in Scotland, so no one in England - where 84% of the UK's population live - voted for him.

The New Labour Marxists assumed power based on the support of only 21.6% of the electorate.

Brown even had the audacity to decline calling a General Election last year, because he has a "vision for change".

Would that be a vision for change to a Britain where the black flag of Islam flies over number 10?

It is becoming clearer by the day that we are living in a dictatorship.

Posted by: watling at February 20, 2008 8:15 AM

Any Brits want take this up?

There was an article the Telegraph a couple of days back, that predicted a dramatic decline in real estate in the coming year or two. London could be the exception though.

Posted by: DP111 at February 20, 2008 10:05 AM

Almost misread the article. Dear me. So used to seeing the word "bombs", that just for a minute it caught me out completely.

If this is what the UK government are planning, it makes Rowan Williams look positively enlightened by comparison.

Posted by: Kev at February 22, 2008 12:53 PM