NationStates Jolt Archive

http://www.spiegel.de/img/0,1020,757773,00.jpg

Some of you may know that the Abrahamaic religions don't like the concept of interest. While Judaism and Christianity has had theologians reinterpreting the scriptures in such a way that interest as a part of the workings of the economy can work, Islam is still strictly opposed to the concept of interest.

In Middle Eastern countries, they have therefore thought of all sorts of ways (http://en.wikipedia.org/wiki/Islamic_finance) of getting around that restriction but still have a workable finance system.

Deutsche Bank has now announced that they'll offer the same sort of thing (http://www.spiegel.de/international/0,1518,454018,00.html). Citigroup, UBS and HSBC already have it.

So, considering the considerable effort by these big banks...do you think the Islamic economies have a future?

I always think that the whole "it's all oil money" is a bit of an oversimplification. It depends on what they do with that money. Dubai for example may have made its original funds from oil, but it's logistics, finance and construction that fuel its economy today.

So do you follow the philosophy of 'once their oil runs out, they'll have nothing', or do you see the region make it (and on the way perhaps eliminating a lot of that unhappiness which causes so many other problems)? What do you think has to happen for the Middle East to become economically powerful and people's wealth there to increase significantly?

I would have to say that if the rest of the Middle East follows the example of the United Arab Emirates then the region will be very prosperous for years to come. They've managed to wean themselves off of oil unlike Saudi Arabia and created a new ever expansive economy through, as the OP stated, construction and finance. Tourism to that country is also becoming a major contributor to their economy. European citizens are buying up property in Dubai like no ones business.

Iran however is becoming more and more reclusive and isolationist in my opinion. i.e. forcing tourists to have their fingerprint taken, refusing Visa's to Israelis etc. They are only taking up these petty measures in response to US policy.

A good first step is to stop blowing themselves up in other countries.

Then maybe allowing equality for women.

Then after that, they can find a new export or band together to form a similar EU type super state, merging their economies and buying powers. After that, I think the Arab states will have a good enough economy to participate on a much more meaningful level then the 'oil money' idea.

I suppose some will do okay after the oil runs out, and the majority won't. The thing is they have the petro-dollars now and should be investing them in education and developing a talent pool for after the natural resources run out. Countries like Saudi don't seem to be doing that. They still seem to rely on foreign expertise for nearly everything.

I'm not sure how well these work arounds will work for a modern economy. How will islamic countries issue bonds, have fully developed capital markets &c? (No short trading?, no margin?). Also when their governments no longer have huge revenues from oil concessions, are they going to have balanced budgets every year?

I can see it from a consumer standpoint, but wouldn't it make life rather difficult for corporations and governments based in the middle east to integrate with the global marketplace?

I can see it from a consumer standpoint, but wouldn't it make life rather difficult for corporations and governments based in the middle east to integrate with the global marketplace?
It's a bit different, and I can't say I really know what I'm talking about, but corporate deals and joint ventures run heavily through partnerships. Rather than a guy lending you money, you two get together and start the business as a team.

It seems to work in those countries now, they haven't collapsed yet. For the most part, anyways.

EDIT:
http://en.wikipedia.org/wiki/Islamic_banking
http://en.wikipedia.org/wiki/Sukuk

The 2 economic systems are like 2 Operating Systems and a kind of API needs to established to make transactions between them.

Deutsche Bank, you fucking wankers.

It's a bit different, and I can't say I really know what I'm talking about, but corporate deals and joint ventures run heavily through partnerships. Rather than a guy lending you money, you two get together and start the business as a team.

It seems to work in those countries now, they haven't collapsed yet. For the most part, anyways.

EDIT:
http://en.wikipedia.org/wiki/Islamic_banking
http://en.wikipedia.org/wiki/Sukuk

I suppose I assumed since they were cash rich from oil now, they didn't really need to borrow money so it wasn't an issue as yet. I'm more wondering how they'll manage when they have to transistion to becoming more mature economies.

In any event, it seems like there is some wiggle room on the interest issue. Apparently it's more about avoiding excessive debt, amongst other things, than a complete prohibition borrowing or lending.

link (http://www.banknet360.com/news/NewsAbstract.do?na_id=6513&service_id=1&bi_id=)

Deutsche Bank, you fucking wankers.
God forbid they try to earn money. :rolleyes:

Muslims would like me then because I have absolutely no interest. :D

A good first step is to stop blowing themselves up in other countries.

Then maybe allowing equality for women.

Then after that, they can find a new export or band together to form a similar EU type super state, merging their economies and buying powers. After that, I think the Arab states will have a good enough economy to participate on a much more meaningful level then the 'oil money' idea.

blowing themselves up in other countries? considering about 1/6 people on this planet is muslim, I can assure you the number of suicide bombers is an *extremely* small fraction of the actual muslim population. and the western media doesn't publicise it when women are actually treated fairly in muslim nations, because that doesn't get the same ratings boost as demonising the entire religion.

It's a bit different, and I can't say I really know what I'm talking about, but corporate deals and joint ventures run heavily through partnerships. Rather than a guy lending you money, you two get together and start the business as a team.

It seems to work in those countries now, they haven't collapsed yet. For the most part, anyways.

EDIT:
http://en.wikipedia.org/wiki/Islamic_banking
http://en.wikipedia.org/wiki/Sukuk

these wiki links are actually extremely interesting. some thoughts:

america is rediculously in debt, both the government and the individual people. this is a major problem...and modern banks are not helping. being constantly encouraged to mortgage my house to buy a speedboat is annoying. and it's downright unethical the way some modern western-style financial institutions expand. I've heard of banks (Citigroup, for one) agressively advertising loans to people in places like rural mississippi where property values are about to spike, getting the more or less ignorant locals to feel comfortable living beyond their means after mortgaging property, and then finishing it up by bankrupting the poor fools after robbing them blind.

to charge interest, one has to assume the economy is constantly expanding. in theory currency represents concrete assets, of which there is are a finite ammount, globally. in a world where there existed only $100, and each dollar stood for 1% of the finite resources of said world, you could not loan someone $5 and expect for him to give you $6 back, unless someone else was swindled, or the world suddenly got 1% bigger. this system works fine in an expanding economy with open wilderness to rape for support it, but eventually the bubble has to pop. maybe this is an ignorant understanding of economics...I know theoretically we *create* resources, making previously worthless things valuable, but how long can that continue? it still seems to me like we eventually have to run out, and the interest-based system has to collapse.

that said, might not islamic economics be more environmentally sound? Haram (http://en.wikipedia.org/wiki/Haram) and Hima (http://en.wikipedia.org/wiki/Hima) seem like pretty damn good ideas to me. they carefully regulate resources, and to quote the article, they seem to have discovered the idea of Carrying Capacity (http://en.wikipedia.org/wiki/Carrying_capacity)a long time before europeans did...a very long time, considering we westerners, particularly americans, *still* live like there will always be a replacement for anything we use. "growth for the sake of growth is the ideology of a cancer cell", I've heard said, and I think the same is true of anything...we're going to have to embrace economic sustainability soon, or we'll all just be fucked.

Islam is an ideology that originated in a desert region, but one of the titles of Muhammed (pbuh) is "Al Amin" - the trustworthy, a nick-name he earned as a merchant. in the light of modern environmental concerns, maybe we have something to learn here?

also, the economy of the various muslim nations in the middle ages was one of the most successful in the world at a time when these laws were rigidly observed. when I think of rich, materially successful cultures, the Umayyid Caliphate and Mughal India stand out in the history of the entire world. 1000 years ago Baghdad and Cordoba made Paris and London look pretty pathetic by comparison. the question here is not "can an economy thrive under Islamic rule" but how.

Interesting point that.

Might Islamic Economics be a more sustainable system for the future?

Also Bump.

I thought some Dutch banks were planning to do this too. Interesting development. I know too little about economics to debate this, though. I just believe it is great the banks make themselves suitable for all individuals.