The Long History Of Legal Codes

APPENDIX 1:

The Gordian Knot Of Islamic Finance

The Arabic term for usury (the charging of interest on transferred / borrowed money) is “riba”.  The antecedent Semitic term for this was “m-r-b-t”, which became “t-r-b-t”.  That was later rendered “r-b-t”…which is where the Arabic term comes from.  The Hebrew term for “taking a bite” / “taking a cut” (“neshekh”) referred more to a flat fee than to collecting interest.

The Judaic prohibition against usury stemmed from Deuteronomy 23:19; yet it was limited to FELLOW JEWS, as specified in the very next verse.  Circumvention of the prohibition against usury came to be an art-form–first in Jewish communities, then in Dar al-Islam.  Here, we’ll focus on the latter.

In the modern era especially (read: the age of BANKING), various work-arounds have been concocted, leading to the practice of so-called “halal banking” / “sharia-compliant banking”?  What are these peculiar locutions?  Such oxymoronic catch-phrases are blithely tossed around as if they made sense.  One may as well posit a Hassidic ham-and-cheese stand.

Attempts to square the circle are oftentimes laughable.  And so it goes with the attempt reconcile the fact that many contemporary instances of “riba” (variously translated as “money-lending”, “usury”, or “earning interest”) are perfectly in keeping with the Koranic passages that are clearly against it (3:129-130, 2:275-280, and 4:161).  (30:39 discourages the practice insofar as it is used to amass wealth for oneself.)  It is also said that in his fabled farewell address, the “Seal of the Prophets” stated that god had forbidden people to take interest (so all interest obligation shall henceforth be waived).

This works, according to the gambit, if one simply re-articulates the business plan as follows: If one charges 20% APR (as interest) on a loan of $100 (principal), then–in earning that $20 after the first year–one is clearly transgressing the Koranic stricture.  HOWEVER, if one instead charges $20 per year (as a flat fee) for the loan, then it can merely be considered a profit-margin (as with “sukuk”: a bond that generates proceeds); and therefore not a transgression.

The usury magically disappears in flourish of legerdemain.  If one charges the customer $20 as a FEE (for a service rendered) rather than as a percentage of the principle, then it’s fine.  Interest, of course, compounds; but one can simply structure the fee to graduate each subsequent year.  Presto!  The “haram” is rendered “halal” with a bit of linguistic prestidigitation.

The alternate version of this semantic swindle is re-conceptualizing proceeds from the banking activity as “murabaha” [typically translated as “mark-up” or “fixed return”].  The scheme by which this is done is dubbed “mudarabah” (a business strategy based on a profit-loss sharing model).  The stunt is pulled off by using an intermediary (a “mudarib”) who acts as the executor of the investment; and–of course–by not considering the proceeds “interest”.  It’s just a profit-margin, ladies and gentlemen.  Nothing to see here.

According to this logic, when someone earns commission / royalty on a financial transaction, if it is calculated as percentage, it is “haram”; but if it is simply deemed the price of doing business, it is “halal”.  So it is not about the ACT ITSELF at issue; rather it is about the kind of calculation used to charge the customer.  By simply reconceptualizing a sacrilegious deed (interest) as a flat fee, we can make it pious.  Ergo no rent-seeking or capital gains need be “fasid”.

As it turns out, exegetical shenanigans are not the only way to make Koranic passages effectively–if not actually–vanish.

Note that similar legerdemain can be used to make an inconvenient prohibition disappear…not via a radical re-interpretation of the text ITSELF, but via a re-portrayal of our behavior.  Instead of hermeneutic chicanery, we need only engage in TAXONOMIC chicanery.

Let’s unpack this.  When it comes to “riba”, we need only RE-LABEL the act in question.  We can simply call the PERCENTAGE (interest charged) a “profit margin”, and we’re good to go.  The semantic swindle becomes even more absurd once we realize that profit margin is generally conceptualized AS a percentage, even when presented as a flat fee.

There is also the double sale (“bai al-inah”) of an item, which permits the purchaser to pay interest without calling it interest.  “I’m not paying INTEREST; I’m just paying a SURCHARGE.”  Earning interest?  Nope.  Just charging a fee.

So-called “halal finance” is simply an example of people CIRCUMVENTING rules they find inconvenient…without having to admit they are in any way CONTRAVENING the rules.  This way, one can pretend the rules remain sacrosanct even as they flout them.

And so it goes: Financiers / rentiers can ply their trade to their hearts’ content whilst insisting that all their shenanigans are perfectly in keeping with the Sunnah.  Designing such work-arounds EVEN HAS ITS OWN NAME in the vernacular.  It’s known as “hiyal”, which is sometimes translated at “trickery”.

Hermeneutic chicanery is always an alternative to eisegesis (importing the desired meaning into the source-material by pretending certain chimerical subtext exists).  Instead of not admitting what the Koran says; one can openly admit what the Koran says (in this case, a laudable thing) and then refuse to admit what one is doing has anything to do with it…even as it has EVERYTHING to do with it.

The attitude is thus: SO WHAT of all the greed embodied by purportedly devout Muslims (as with Saudi oil billionaires, Gulf State investment bankers, and other Muslim speculators)?  Such blatant contravention of all the Koranic passages denouncing greed / hoarding (e.g. 89:17-20, 92:8, 100:8, and 104:1-3) can be rationalized via appeals to divine ordinance.  “If I’m super-affluent, then it must be a sign of favor (a reward).  It’s god’s will; so who are we to question it?”

We might note that Saudis are not the only oil billionaires in the Middle East who are Islamic fundamentalists.  For example, Kuwaiti oil billionaire, Hajjaj bin Fahd al-Ajmi actively funds Salafi militants.  Rent-seeking (i.e. gaming the system for financial gain) is a variation on speculation, which would certainly fall under the broader category of “riba”.  And, as it turns out, it is COMMON PRACTICE in Dar al-Islam…ESPECIALLY in fundamentalist circles.

Abracadabra: Avarice is a-okay…IF, that is, it’s all part of god’s plan.  Hence we end up with an Orwellian financial services industry. 

Another way to circumvent strictures on usury is to claim “qard al-hasan” [literally: “splendid cut”; taken to mean “benevolent lending”].  This refers to interest-free loans, which are ostensibly given as an act of beneficence [“beneficence” is a possible interpretation of “ihsan”, which technically means “splendid”].  The issue here is, again, the “strings attached” problem.  In the proposed scenario, no monetary obligation is levied as recompense; yet there are–of course–other ways for a creditor to hold a favor “over the head” of the debtor.  (Indeed, a quid pro quo can take many forms other than a strictly financial transaction.)  Such a “hasan” gesture is not a peachy-keen as it may seem at first blush.  GENUINE beneficence would be to GIVE, not loan.  And there is already a term for such a gesture: “zakat”.

It might be said that a sharia-compliant investment bank is a bit like a vegan-compliant slaughter-house.  If we simply re-conceptualize “meat”, we can eat the muscle tissue of slain animals and still fashion ourselves as kinda-sorta vegetarian.  In this Kafka-esque universe, one can swing by the vegan butcher-shop on the way to the Institute for Theocratic Secularism to discuss capital-gains-averse hedge fund managers.  This linguistic hocus-pocus is how Arabian investment bankers can still consider themselves devout Wahhabis.

It comes as little surprise, then, that there arose institutions like the IDB (Islamic Development Bank), the FIBE (Faisal Islamic Bank of Egypt), as well as a slew of IMMCs (Islamic Money Management Companies).  ALL of these were Saudi-funded (read: Wahhabi-endorsed) orgies of hyper-financialization…primarily used to subsidize fundamentalist Islamic movements around the globe.  Such overtly capitalist operations represented rent-seeking-on-steroids…yet with the pretense of being pristinely “halal”.

(NOTE: The Faisal Islamic Bank is named after the Saudi prince, not the Hashemite King.  Its establishment broke new ground in Islamic finance–replete with its official “Handbook of Islamic Banking”.  Again, it was the House of Saud that facilitated the emergence of the Islamic banking industry.)

Mohammed Bakr al-Sadr published a blueprint for sharia-compliant financial operations in 1973: “Non-Usurious Banking In Dar al-Islam”.  Another Salafi pioneer of the gimmick was the Syrian “faqih”, Monzer Kahf–who provided all the casuistry anyone would ever need to engage in rent-seeking without needing to call it “riba”.

Much of this ostensibly pious rent-seeking was done under the aegis of “infitah”–an Orwellian term meaning “open-ness”.  Indeed, “infitah” was nothing but a noble-sounding pretext for the promulgation of Neo-liberal economic policies across the Muslim world.  Ergo sacralized iniquity.  Also note the Malaysian “al-Naqiy”–an organization devoted to purportedly “halal” financial practices, yet which served as a funding mechanism for fundamentalist Islam.  (For more on this, see chapter 7 of Robert Dreyfuss’ “Devil’s Game”.)

To recapitulate: This was ALL permitted due to the legerdemain surrounding “riba” discussed earlier.  As it turns out, squaring the circle was fine so long as one has power.  Hence the House of Saud and American financier, Mohamed el-Erian (of Citi-Group, PIMCO, and Allianz fame) can pretend they are maintaining unstinting fealty to the Sunnah even as they’ve devoted their entire careers to thwarting it.

We could play this semantic game all day long.  “I didn’t rape her, I’m merely guilty of too aggressively dolling out unsolicited sperm.”  Splendid.  The human capacity to rationalize morally dubious behavior is almost infinite.  There’s always a way around inconvenient rules.  This is yet another reason that religiosity has almost nothing to do with probity.  One might even say that “religion” is little more than a game of rationalizations that has been codified…and then sanctified.

In the end, a Salafi financing operation makes about as much sense as a Quaker Inquisition.  Certain practices endorsed by devout religionists are inimical to the strictures laid out in their own sacred texts.  (There’s a reason we’ve never had to worry about Jain war-mongers.)  Nevertheless, just as we often encounter Christians who regularly pass judgement on others’ salvation (who are not only unforgiving, but are eager to cast the first stone), we can point to devout Muslims throughout the world who engage in speculation.

The fact remains: Any working-class Muslim who has a 401(k) or a mutual fund is perpetrating a “harem” deed, as he is complicit in “riba” (insofar as he is garnering unearned income from financial investments).  And any Muslim working in the financial serves industry has devoted his life to usury.  Is this a problem?  If not, then who’s to say what other parts of the Koran he should be entitled to creative re-interpretation…or even outright disregard?  The possibilities are endless.

The “catch”, of course, is to not pretend the Koran says anything other than what it actually says; and to recognize the nature of what one is actually doing.  Meanwhile, so long as “halal” usury makes sense, then so too does a secular theocracy populated by vegan carnivores.

APPENDIX 2: Khadijah

The first wife of Mohammed of Mecca was Khadijah bint Khuwaylid of the Asad tribe; who–notably–owned her own business.  Due to her thriving caravan / trading enterprise, she was known in the region as “Ameerat-Quraysh” [Princess of the Queraysh].  Surely, Mohammed was aware of her before the two even met.

The tale of their first encounter–and the subsequent germination of their relationship–is relatively straight-forward.  Mohammed ingratiated himself with the wealthy widow by carrying out important business out of town–reputedly surpassing her expectations.  As the story goes: In 595, Khadijah sought a trustworthy agent for an important transaction that would take place far to the north, in Syria.  A familial confidant (commonly identified as Abu Talib ibn Abd al-Muttalib) suggested she hire her distant cousin, Mohammed, for the job–as the young man had earned a reputation around town for being a dependable employee.  So she hired him for the task; and he carried it out with aplomb.  (Note this was only possible because the Syrians spoke the same language that Mohammed would have spoken: Syriac.)  Mohammed was undoubtedly up for the challenge, and eager to please.

After witnessing the charismatic bachelor’s aptitude in conducting business, the lonely widow surely would have seen reason to offer marriage.

When the financially-well-off Khadijah (then 40+) offered the struggling Mohammed (then 24 or 25) her hand c. 595, the soon-to-be-aspiring prophet jumped at the chance.  Aside from the fact that his efforts to court other women had been in vain, the betrothal was a huge opportunity to bolster his socio-economic standing.  That boost in clout would eventually prove pivotal, augmenting Mohammed’s gravitas once he started proselytizing to the town-folk.  In other words: Khadijah offered not only financial means, but social leverage.

Meanwhile, from the point of view of a middle-aged business-woman, the arrangement would have also been somewhat of a boon.  Indeed, the aging widow would suddenly have a young, loyal companion–who had proven himself savvy–to assist her in all her affairs.  (Her previous two husbands had passed away.)  Thus she would have a dependable cohort to carry out dealings–dealings that her age was probably rendering increasingly difficult for her to handle on her own.

In sum: The union made perfect sense for both parties.

The stature of Khadijah shows that, in pre-Mohammedan Arabia, women could manage their own businesses; and enjoyed control over ALL of their property.  There is a rather perverse irony here.  Within the dominion of the Muslim world, someone like Khadijah would no longer be able to rise to a position of such prominence.  For sharia would deprive women of the rights that had enabled Mohammed’s first wife to become who she was…and thereby HELP the soon-to-be-aspiring-prophet in his endeavors.

In my series on Female Empowerment, I show that the existence of Khadijah countermands the narrative that things somehow IMPROVED for women in the advent of the Mohammedan movement.  Pursuant to the institution of the Sunnah, women would not be afforded the kind of opportunity (nor accorded the kinds of esteem) that had been the norm in Arabia (as attested by Khadijah)…or, for that matter, around much of the world.