Islamic Economics:  Cause or Cure for Global Terrrorism

Islamic Economics:  Cause or Cure for Global Terrrorism

by Dr. Robert D. Crane  

  Is there such a thing as Islamic Economics?  Certainly not in practice, but is there even a coherent theory to justify the term?  Within this alleged field of study, non-Muslim professionals, feeding off the tit of “Islamic banks,” are making hay by touting even an Islamic system of accounting.

  Islamic accounting is generally defined as “an alternative accounting system which aims to provide users with information enabling them to operate businesses and organizations according to Shariah, or Islamic law,” , October 6, 2006.

  “To professional accountants who have been brought-up on the idea of accounting as an ‘objective’, technical and value-free discipline, the idea of attaching a religious adjective to accounting may seem embarrassing, unprofessional and even dangerous,” says Dr. Shahul Hameed bin Mohamed Ibrahim in Islamic Accounting – A Primer.

  The key definition of Islamic economics is best expressed in the statement, “It should also be noted that Islamic orthodoxy, expressed as the desire to implement Shariah as the sole legal foundation of a nation, is actually associated with progressive economic principles, including increasing government for the poor, reducing income inequality, and increasing government ownership of industries and industries, especially in the poorer nations of the Muslim world.”  “While it is common to associate traditional religious beliefs with conservative political stances on a wide range of issues, this is only partly true,” said Robert V. Robinson, Chancellor’s Professor and chair of Indiana University’s Department of Sociology. “The Islamic orthodox are more conservative on issues having to do with gender, sexuality, and the family, but more liberal or left on economic issues.”

  Islamic accounting was first developed thirty years ago, while I was the Principal Economic and Budget Adviser to the Finance Minister of the Kingdom of Bahrain (then the State of Bahrain), by a friend of mine who taught the first university course on it in Egypt and then moved to Al ‘Ain university in the United Arab Emirates.  One major purpose, as he taught it, was to counter the pervasive corruption in private industry that had made it impracticable to operate an Islamic system of money and banking. 

  This system, as developed in Pakistan twenty-five years ago but never implemented, established a three tier system, whereby the lowest tier provided money in the form of pure credit to individual enterprises and discounted it by a set percentage of the profits (which was necessarily a variable and therefore not technically interest).  The middle level of regional banks provided credit to the first tier banks and took its own cut (discount), and the central bank did the same for the regional banks.  By regulating this “discount rate” the central bank determined the amount of money available for circulation. 

  This system operated somewhat like the real bills doctrine so that enough money would be available for productive purposes and no more, thus avoiding the fluctuations and inefficiencies of Western economies.  This system of money creation was supported by a system of bank insurance so that any individual bank failures would not trigger a financial collapse, though it would undermine the otherwise perfect balance between money supply and demand.

  This whole system was never implemented because corruption was never seriously addressed in the real world, much less surmounted.  If the individual enterprise accounting was bogus the entire system of money and banking would be a sham.  The accounting at the individual enterprise level was the same as in Western economics, which is notoriously subject to corruption, except that a set percentage of assets had to be deducted for Zakat or “poor due.”

  The gross fallacy of practically the entire system of “Islamic economics” was its reliance on government ownership of productive assets allegedly in order to reduce the gap between the rich and the poor.  In other words, it was nothing more than a poor copy of Western economic socialism.  Furthermore, in many Muslim countries the family or families that control the government were in fact the real owners of the entire economy and thus were able to divert normal investment funds into Swiss banks and conspicuous consumption in the form of palaces and airplanes (national airlines)  For example, de facto, the Assad family in Syria owned the entire oil sector, as did the Al Saud family in Saudi Arabia, and the Al Khalifa family in Bahrain owned Gulf Airlines (together with the other four ruling families in the emirates of the Gulf). 

  This institutionalized concentration of wealth assured that the mixed economy of capitalism and socialism would defeat every effort to change the real operating system, which was designed to concentrate wealth ever further in a primitive replica of what goes on in the rest of the world.

  In my view, most so-called Islamic economists, including in the field of accounting, have been merely hired guns for the vested interests in assuring that the stated goal of Islamic economics, namely, justice,  would never be achieved.  Furthermore, “Islamic economics,” as it is taught by practically all Muslim theoreticians in fact is dangerous because inspiring goals without practical means of implementation are a cruel fraud and merely spawn institutionalized terrorism.

  The means to surmount capitalist and socialist utopias as causes of global terrorism are available and have been outlined in great detail in books and position papers, including a seminal piece delivered at the Center for the Study of Islam and Democracy by Norman Kurland, with whom I was a co-founder twenty-two years ago of the Center for Economic and Social Justice in response to President Ronald Reagan’s request for a Presidential Task Force on Economic Justice.  Unfortunately, since then no American president has ever even mentioned justice as a goal of American foreign policy.  This CSID position paper is available at and is augmented by a wealth of other CESJ links, including .

  The fraudulent nature of Islamic economics and of its counter-part in official Washington is why the counter-terrorists and the terrorists have so much in common.  Each follows a similar fraudulent path, respectively of “democratic capitalism” and “democratic socialism,” to counter the other and thereby assure that they both thrive in a master work of mutually creative destruction.