Islamic economics

Chris Burford cburford at gn.apc.org
Wed Aug 26 23:11:35 PDT 1998


At 03:56 PM 8/26/98 -0400, Barkley wrote:
> Sorry. In the buyback arrangements in Islamic banks
>the resale is for more, not less. The borrower must buy
>back the assets for more than they were sold to the lender.
>Surprise, surprise, the agreement generally involves the
>difference between the two prices, the net which the
>borrower must pay to the lender, to be paid out in fixed
>amounts over a specified time period. Gosh, and what does
>this resemble awfully closely?

That there are echoes whereby essential functions have to be carried out under a different name is not surprising. But I was struck by hearing how much the fundamentalists in Turkey are supported by a network of islamic banking. This might be scorned by neo-classicals but the point here seems to me the one made by green economists, that ultimately the right to be a banker is essentially a right conferred by and endorsed by the society or the community. Thus local communities, coops, building societies, christmas savings clubs, local area trading schemes, can all build up a degree of strength and social approval for some financial functions. The crunch comes when they go bankrupt whether the society will underwrite them.

The essence of islamic economics on banking seems to me that its roots are in some of the primitive communism of islam and the modern national bourgeois character of fundamentalist resistance to US neo-liberalism. It *can* work to a degree because it is underwritten by social trust.

If neo-liberalism turns out to look very dented, it will be interesting to see how the islamic countries pull together to keep their economies going. Perhaps there will be four not three, major financial groupings in the Orwellian world of the 21st century.

Chris Burford

London.



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