Islamic objections to Islamic finance

There are some fundamental objections to Islamic finance, which are very relevant in the present geo-political scenario. We are seeing a resurgence and renaissance of Islam ever since the Afghan Jihad of 1980. The imperialists fear the re-emergence of Islam as a world civilisation. Islam is seen as a threat, as something which has replaced communism as a rival to the West and which must be suppressed, contained and destroyed. The development of Islamic finance is a means to contain this threat. To understand why this is it so is essential to understand capitalism.

The capitalist way of life was established after the overthrow of religion. Capitalism has many ideologies such as liberalism, nationalism, socialism and social democracy. However, all these are only ideologies. The way of life as a whole is what we call the capitalist way of life. The capitalist way of life became established by overthrowing religion. It established itself by overthrowing Christianity. That is why the challenge to capitalism is posed by not by one of ideologies, not by nationalism, or socialism or social democracy or communism. The fundamental challenge to capitalism is posed by religion.

What is capitalism?

The central values of capitalism are two - accumulation and competition. Christianity was opposed to both these values. Islam calls accumulation, hirs. We call competition, hasad. Christianity called them avarice and covetousness. Capitalism exists by universalising both these values. This is accomplished by establishing the dominance of financial markets as value determinants in society. Such a market-dominated society is called a "civil society" as apposed to religious society where value is determined with reference to the will of God. In civil society value is determined in the money market and the capital market. Value is determined on the basis of the capacity of a product and an economic activity to produce surplus. For example, when the stock market evaluates a particular share, it never evaluates the purpose of the business that the share represents. It is only concerned with the profit produced by that business. So, accumulation becomes an end in itself. Based on this principle, the product markets have developed a relationship with the financial markets, which is in essence the relationship of the master and the slave. Finance is the master in capitalism and production and exchange serve this master.

This market-dominated system produces a society dominated by lust and greed. This is the social dominance of viciousness. The United States of America established itself by slaughtering fifteen million Red Indians over two centuries. America continues to slaughter people in Palestine, Vietnam, Iraq and Afghanistan. The fundamental expression of capitalist society is the universalisation of sexual vice. You cannot name a capitalist society, which has maintained the virtue of chastity. This master-slave relationship between the financial and product markets overthrows religion in the sense that God becomes irrelevant in the day-to-day lives of the people. Man seeks pleasure for its own sake and values are assigned to products and activities without reference to God’s will.

Islamic capitalism

Unfortunately, we have been subjects to Western governance for three centuries and because of the failure of the Jihad movements a trend has developed particularly among the ulema to seek reconciliation with capitalism and to carve out for themselves a niche where Islam can be protected, while the system as a whole becomes and remains capitalist; That attitude has become common among the contemporary scholars of Islam including many groups of ulema.

This reconciliation tendency has manifested itself in two ways, Islamic Democracy and Islamic Finance. Islamic Democracy is an effort to seek a niche within the capitalist liberal political framework. Islamic Finance is an effort to submerge Islam into the capitalist economic order. Capitalism has been accepted as a technical response to modern problems. For example, a very important book has been written by Maulana Taqi Usmani ‘Islam aur jadeed maishat aur tijarat’ in the early 1990s. It is widely used in India and Pakistan. It argues that the laws of demand and supply are natural laws although mathematical chaos theory has proved that that is not the case. There is no law of demand operating in non-capitalist societies. For example, Agleitta’s research on 17th century France shows that the law of demand depends on the prior existence of capitalist property. Laws of demand and supply are specific to capitalism and are not general technical rules that exist in all societies all times. The same book argues that corporate personhood and limited liability are natural and technical concepts. But of course corporate ownership has no existence outside capitalist property. Capitalist property’s main characteristic is that it separates ownership from control. Control is vested in the hands of those people who know how to accumulate. In that particular sense, capitalism also abolishes private property like socialism. There is no private property in capitalism. Nobody can do anything with his money except entrust it to someone who has the ability to accumulate it for the sake of accumulation alone. That is what the bank and capital market institutions do.

Islamic finance

Corporate personality and limited liability are social and legal instruments to universalise capitalism. Islamic finance argues, like Islamic democracy, that we can carve out a niche where we can practice Islamic financial transactions within capitalism. This legitimises capitalism. Islamic finance considers a few things that capitalism allows as haram and the list is getting shorter, for example Malaysia and the UAE. The number of transactions that Islam forbids is getting shorter by the day in Islamic financial markets. In essence Islamic banks and Islamic economists are saying that there are some technical problems with the existing system but capitalist rationality is fully endorsed by them. That is the reason why existing Islamic finance practitioners never raise the question of the relationship between transactions and morality. It is this conception of the value-neutrality of transaction forms that has allowed ABN Amro and Citibank, the World Bank and the IMF to applaud Islamic finance. Why do they applaud Islamic finance? Why do Citibank, ABN Amro and the international banks practice Islamic banking with the help of Muslim ulema? It is because Islamic banking is seen as a niche within the capitalist market. It is seen as an activity, which can be, practiced whatever the religious and moral orientation of the practitioners. The acceptance of Islamic banking by the international banks shows the secular nature of Islamic banking.

A fundamental question must be asked. Is reconciliation necessary? Is it necessary that we accept Western conceptions and institutions as the only rational standard to govern our life? Or is an alternative possible? There have been attempts at creating Islamic financial frameworks outside capitalist financial markets. The most successful are three Islamic organisations — Dar-ul-Arqam Malaysia, Hezbollah of Lebanon and Hamas of Palestine. Definitely the West has no acceptance towards these attempts and they are called terrorist finance. Hamas is practicing terrorist finance. Hezboolah is practicing terrorist finance. The financial systems that they have created cannot be integrated into capitalist financial markets and they therefore represent a threat to the capitalist way of life.

Fundamentally, we reject the Islamic finance movement because it subordinates Islam to capitalism and legitimates the quest for pleasure maximisation within civil society.

from here