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Below is the Rodney Shakespeare Foreword to Professor Choudhury’s book to be published later in 2003.

The Islamic World System

by Professor Masudul Alam Choudhury


by Rodney Shakespeare

Events move apace and, at the time of writing, they include the apparent attempt by the USA to mould Islamic countries (and thereafter the world) in its own image. Which might not be too bad a thing if the institutions and practices of the USA were to:-

· lessen rich-poor division

· introduce economic democracy including some form of secure income

· focus financial activity on the real, productive economy

· allow everyone to own productive capital

· enable societies to control their own resources and their own destiny

· end, or at least mitigate, the practice of riba (the imposition of interest)

· end a financial system bent on putting the whole globe into debt.

Unfortunately, at the present time, it is scarcely conceivable that the USA will do any of these things. Indeed, can anybody put hand to heart and swear to the likelihood of the USA promoting an end to rich-poor division, providing a secure income, or eliminating the practice of fiat money being used to make more money? Does anyone, beyond a small caucus of myopic power wielders, really think that the USA genuinely wants to spread capital ownership, enable societies to control their own resources and destiny, end riba, and stop the financial system massively increasing global debt?

Of course not! The plain fact is that the USA does not have a strategic vision, with the necessary associated practical detail, which can be of widespread appeal. And that is why millions of people have reservations about the USA’s attempt to mould Islamic countries. That is why there is worry, mistrust and resentment.

On the other hand, millions of people, particularly the inhabitants, have reservations about the present condition of the Islamic countries. They abhor the rich-poor divisions, the oppressions and general lack of political, let alone economic, democracy. They are only too aware of the misery, unemployment and general dissatisfaction which, finding no political outlet, is turning to violence. Above all, they are aware that their societies are not independent but are controlled by others.

How, they ask, have these things come to pass? Why does the ummah (the comity of Islamic societies) so patently languish? Why cannot the ummah - with splendid achievement in the past, a massive intellectual and cultural heritage in the present, and bundles of obvious talent and resource with which to build the future - break from its lethargy and give an open, bold, exhilarating, and very necessary, lead to the world today?

The answer is - it can. The ummah can correct the unhappy present and build a magnificent future if it understands the deceptions which demean it, lower its energies, exploit it, humiliate it, control it and in all possible ways prevent it from developing its full potential.

Those deceptions relate to economics, morality and money, and their interrelation to each other. Thus the ummah is told that modern neoclassical economics is a world-encompassing science of objective process and universal value. The truth, however, is the opposite - modern neoclassical economics does not truly encompass the world, nor is it a science, nor does it possess universal value.

Secondly, the ummah is told that the present economic framework and understanding suffice to analyze and uphold the whole social fabric including morality and culture. The truth, however, is the opposite - economics, as presently conceived, bodes to undermine the social fabric and destroy morality and culture.

The ummah, thirdly, is told that the “free market” is free, fair and efficient and all its outcomes are just. The truth, however, is the opposite. The “free market” is unfree if only because most people are in practice excluded from ownership of what creates a large part of the wealth - productive capital. It is unfair because of huge rich-poor differences and an abysmal treatment of carers, including women. And it is inefficient with the basic evidence being that, despite the world having huge, undoubted technological, natural and human resource and capacity, poverty remains. As for the unfree “free market” claim that all its outcomes are just, well, anybody who believes that, will believe anything.

All of these matters then help us not to be surprised at the unfree “free market” claim that there can be an economics without ethics. We may well be horrified, but we are not surprised. We are certain, however, to be angered by the hypocrisy. Every economics or politics has values (which may, or may not, be good ones) at its core. If the unfree “free market” asserts differently, then it is blind to the values inherent in its own dogma and blind to the values which result from the implementation of its own policies and which cause the worry, mistrust and resentment.

So is there an answer to all this? Is there another way forward? Can the ummah come to give an all-important lead?

Yes, it can. And the key thinking is already developing. Such is its trenchant nature, and such are the implications that the thinking may fairly be called a new paradigm. Bringing many strands together it constitutes a fundamentally new approach to understanding reality, morality and economics and their interrelation to each other. At its heart is the work of Professor Choudhury who, in his previous book Money In Islam, noted that economics without ethics can only be destructive. Crucially, he observed that the monetary system needed to express Islam must inevitably be different from that existing in the West. That is a key matter - much needing to be said - because, in a few, simple words, it defies the arrogant Western belief that there is one, and only one, economic system of any efficacy in the world. Furthermore, it throws into doubt the brazen unfree “free market” claim that it implements an overriding social and economic justice. Most of all, it points out the nonsense of Francis Fukyama who, in The End of History (1992) dared to assert that “free market” finance capitalism had triumphed and nothing much better is possible or desirable.

Familiar with, and well known, to both the Western and Islamic academic worlds, Masudul Choudhury is of unique eminence and position and perfectly placed to be able to understand fundamental differences of views. In particular, he understands the tremendous tragedy which will result if a completely one-sided view prevails and, at the same time, he understands that something new, something big, has to be evolved if that tragedy is to be averted. In The Islamic World-System he then homes in on the key issue - the design and practices of the present monetary system - and makes the key insight that, at present, money is created (created in effect from nothing) by the banking system which then adds interest. So when money is lent, it is not other people’s money which is being lent (as is commonly believed), rather it is a new creation. At present in the West, most new money (in the United Kingdom it is an astonishing 97%;) is fiat electronic money created by the commercial banking system and issued as interest-bearing loans. Such money has an essentially fraudulent origin, tends to be inflationary, and can double or treble the cost of capital investment. Furthermore, while the payment of interest often includes payment for administrative expense, interest generally is not necessary and, in any case, is contrary to the beliefs of Islam.

All this then comes together in the form of a core understanding which can, and will, profoundly change for the better the future of the world - that the Islamic monetary system should create its own money supply and not, as largely at present, have to rely on credit creation by the commercial banking system. Put slightly differently, Islamic societies must control the money supply in their societies because, if they do not, they will be controlled by others. Thus we begin to get some comprehension of why the ummah is languishing, with feelings of inadequacy and lack of independence.

The core understanding, moreover, goes further than mere independence to a recognition that the ummah can come to have governance, control, empowerment and entitlement in a way which is, at present, totally inconceivable. Indeed, Choudhury gives the word ‘ummah’ a new, creative meaning seeing it not merely as a description of the comity of Islamic societies but rather of a new comity of proud, self-reliant societies giving a lead to a world sorely in need of such a lead. The new ummah rejects the present increasingly demeaning world order with its autocratic classes and estranged elites in the Muslim world and the malignant power of usury everywhere, and replaces them with something honourable and uplifting.

All of which is impossible to the Western mind governed as it is by a stupendous hubris. At the centre of the hubris is the thinking that says nothing, nothing at all, can be changed without making somebody, somewhere, worse off. The really mind-bending aspect of this is that it assumes that things at present are perfect, or as nearly perfect as is possible. It might be thought that Voltaire (in Candide, 1759) had destroyed that nonsense forever but, no, it flourishes today at the centre of unfree “free market” finance capitalism. Please do not think this is a mere philosophical quibble. The issue is essentially about whether or not there is any will to try to end human physical and psychological pain. Despite its rhetoric to the contrary, neoclassical economics has little, even no, will to make a proper effort to alleviate pain and misery because it makes the extraordinary assumption that improvements in one spot for some individual or group are inevitable detriments elsewhere for another individual or group. Yet every sane person knows that improvement is possible - the world undoubtedly has enough productive capacity to eliminate poverty. Moreover, the Qur’an confirms this because it states that resources are truly abundant in the universe for the sustenance of all if they are produced and consumed with God-consciousness and ecological awareness.

Thus Islamic economic thought - at present largely subservient to Western economic thought - must break new ground if it is to restore dignity to the Islamic world. It will not be able to do that, however, unless it becomes premised on the epistemology of Tawhid and has a determination to think things out for itself. Put slightly differently, it must first recognise that there is a conflict with Western thought and then take further encouragement from the fact that within Western thought there are now divisions and therefore conventional economics is no longer the supreme creature that it likes to think it is. So anybody playing a part in, and consciously developing, the new paradigmatic thinking should know that they are not be doing it completely alone.

And, if that is not encouragement enough, Islamic thinkers can look towards Malaysia which, in matters economic, financial and monetary, is quietly taking incremental and responsible initiatives and, above all, thinking for itself. A good example is the events of the 1998 financial crisis which opened with a shocking conspiracy to destroy a newly developing and responsibly administered nation. Fortunately, Prime Minister Mahathir (with but one key and very courageous adviser) defied the millions of words of advice proffered by the bankers, economists and politicians (all of which advice was to give in to the demands of the IMF and sell out Malaysia to foreigners) by doing the opposite. It was a very brave thing to do but, within two years, the IMF was grudgingly forced to admit that Malaysia had got things right.

Now Malaysia is a market society and it reminds us that markets certainly have the potential to alleviate human want. Present market societies, however, do not necessarily ask themselves if their markets work justly and fairly for the benefit of all in society instead of only a few. They do not ask if everyone has private property and a basic material security. They prefer to ignore what is wrong and so do not have to ask themselves what is right.

Masudul Choudhury, however, does the asking and, as part of his contribution towards the transformation of the ummah proposes that the issuance of money should be linked to gold (in the form of the Islamic dinar) with a 100% reserve requirement i.e., if a sum of money is issued, there must be gold of equivalent value held in reserve. There are advantages in doing this not least the creation of forces which prevent the continual debasement of the currency (as happens at present), discourage speculation, and promote investment in the real economy. The rise, transformation and Islamic control of the ummah, moreover, would be forwarded.

It should be here remarked, however, that there are other possible ways of achieving a stable currency, Islamic control of the ummah, concentration of resources on production and, in a market society, justice for everyone. One such way is set out in Seven Steps to Justice by Peter Challen and myself which first observes that rather than the banking system issuing interest-bearing loans, a State’s central bank could (via the banking system) issue interest-free loans if the loans are used for public capital investment or, (on the just market principles of binary economics), used for private capital investment which creates new owners of capital. These uses would back the currency with real productive assets and be patently non-inflationary, indeed, be counter-inflationary.

Both Muslims and Christians would welcome the benefits including secure income for all, capital ownership for all and support for small business. In a very fundamental way, poverty would be addressed, a focus made on the real, productive economy and societies enabled to control their own destiny. Above all, much progress would be made towards ending the grip of usury (interest) and the problem of debt would be addressed. Debt - individual, corporate, town, state and country - is now rocketing skywards in an exponential curve exhausting the resources of the poor and their societies. Disaster threatens if something is not done. Fortunately, in the endeavour to do something and support the work of intellectual and moral leaders like Masudul Choudhury, a Global Justice Movement is developing and it has useful information on its net website.

So let us welcome The Islamic World-system for its crucial contribution to a re-birth of the ummah. Prior to that horrendous day - 11th September, 2001 - few readers in the West, despite sharing common Biblical roots, were able or willing to absorb serious studies of the Islamic tradition and the culture it served. Happily, the situation is changing and many Western people now welcome inter-faith co-operation and the admirable lead of Masudul Choudhury towards the achievement of worldwide prosperity, peace and justice.

Rodney Shakespeare
London, UK.
March, 2003