Our modern financial system is underpinned by a largely materialistic value
system. The acquisition of wealth has become an objective of life, and ‘success’
is defined in largely monetary terms. For example, modern economists tend to see
a happy-but-poor society as being less well off than a rich-but-unhappy society,
because happiness is not accounted for in measures of GDP.
In Islam, we believe that God created humanity for the single purpose of
worshipping Him. Among the rules that we are given to help achieve that purpose
is a prohibition on charging for a loan of money. Although this usury
prohibition is found in Judaism, Christianity and Islam, all three traditions
have diluted or abandoned it over time.
In ages past, the usurer could only lend what money he already had in his
possession. A sophisticated fraud called fractional reserve banking removed this
critical failsafe by allowing banks to create money out of nothing. This was
first achieved through the issuance of paper receipts, then by means of ledger
entries. As new volumes of money were loaned into circulation, society fell ever
more deeply into debt and inflation become a permanent feature of economic life.
The consequences of the usury-based financial system have been disastrous.
Many African countries are spending more on debt service than on healthcare with
the result, according to the UN, that up to five million children are dying
needlessly every year. The fastest deforesting countries are among the world’s
most indebted trees don’t stand much chance against foreign creditors. And in
the West, corporations and people alike are suffering bankruptcy and stress
under a mountain of debt.
Regrettably, this flawed system is protected by powerful vested interests.
Banks make money from people being in debt, not out of debt.
Modern forms of financial regulation are no answer to this problem. We must
build a new paradigm in which internal values, as well as externally imposed
rules, do the regulating.
The Islamic finance system I believe in has financiers sharing their profits
with business entrepreneurs. When finance is advanced on an interest-bearing
basis, financiers tend to lend to those who have collateral.
When financial returns come from profits, a poor man with a good business
proposition has just as much chance of obtaining finance.
For over a thousand years, the Muslim world enjoyed universities, free
healthcare, roads, a welfare system and international trade whilst firmly
applying the usury prohibition. We see this as proof that interest-bearing debt
is not a pre-requisite for economic advancement.
Tarek El Diwany is a partner with Zest Advisory LLP, London
There is a Jewish teaching that the first question one is asked at the gates
of heaven is ‘were you honest in your business dealings?’ Great importance is
attached to ethical behaviour in business, and there are a set of laws in the
Torah (Bible) dealing with this.
To the extent that the markets drive the creation of wealth, Judaism
approves. While Judaism does not endorse one economic model or another, it
appreciates the need for economic growth for the flourishing of individuals and
The turbulence in financial markets has been unprecedented and clearly there
is something rotten in the system.
While the construction of a new regulatory framework must be sought by a
number of specialists, Judaism and the other religions have some broad themes to
contribute to the contemporary debate.
First, while Judaism may not take a view on whether principles-based or
rules-based regulation is superior, it understands that the regulation is
necessary to guide moral behaviour and often to guarantee freedom. In part, the
financial crisis was driven by human excess.
It reminds us of a teaching of the ancient Rabbis that happiness lies in
wanting what you have, not having what you want.
Second, there has been too much short-termism. Rather than obsessing about
today’s share price, religion focuses on the timeless. In Judaism, the Torah
offers a code of ethics and principles for life. We need to think more about the
long-term and combat today’s impulse for instant gratification.
Third, Judaism reminds us of the importance of things that cannot be measured
family, friendship, community whereas business drives us towards the
measurables and deliverables.
So while finance can help us earn a living, it does not provide us with a
sense of meaning that religion can. Markets were created for humans, not the
other way round.
The banking crisis has been the catalyst for an economic recession and much
associated human misery, the true extent of which, we have yet to appreciate.
Clearly all faith communities will have a key role to play in helping those
who have been adversely affected, not only by their innate tendency towards
charity, both material and emotional, but also by their ethics, which the
business world seems to have lost sight of.
Zaki Cooper is a trustee of the Council of Christians and Jews, a
consultant to the Cambridge University Inter-Faith Programme and the director of
Business for New Europe
When Jesus was asked whether or not it was lawful to pay taxes to Caesar, he
was living in a world we have long forgotten. Jesus could ask: ‘Whose image and
inscription is on this coin?’ and know he was talking about the sole, authorised
source of money.
Today, we have moved away from that to the point where we have delegated to
the banks not just the job of organising the money that actually exists, but the
job of making money itself. The tokens we carry with the queen’s head on, and
with the signature of the Bank of England Chief Cashier, are now illusions. The
vast majority of money is now created by banks in hugely esoteric forms of
transaction which it turns out many of them didn’t understand, let alone the
rest of us.
Finance has become more and more remote from the sovereign authority of the
government. When it comes to issuing currency, we have got to the state (as
Bishop David Jenkins used to say) where people are making money out of people
making money out of people making what? This remoteness needs to be arrested
as a matter of urgency, and it can only be arrested by withdrawing the right of
banks to create money, as it was in the nineteenth century. And this needs to be
done in this global environment by international agreement. We don’t allow
people to create private armies; we should not allow people to create private
We need to see some signs of institutional and social repentance, not least
because the fundamentally flawed beliefs that have led us to this current
financial crisis are, on the world stage, beliefs that have led to instances of
violence, death and oppression.
We also need reform to begin to undo the damage money has done to our
relationships with those of other faiths. Issues concerning money have inflicted
the deepest wounds retaining the greatest scars for Jewish and Muslim people.
Think for instance of Jews in Europe, lending money because Christians at the
time could not, and the resulting anti-Semitism.
I believe this financial crisis has cut straight to the heart of the
character of money, highlighting a defective economy that isn’t just
incidentally leading to a lot of debt, but that is actually based on debt. The
cure is a system that ensures only sovereign authorities can be creators of
money, not bankers.
Dr Peter Selby is a former Bishop of Worcester and visiting professor in
the Department of Theology and Religious Studies, King’s College, London.
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