The War on Islamic Banking?

Some considerations:

1. It’s pretty clear that the War Party in the U.S.—represented in both the Republican and Democratic parties—has been eyeing Iran for years. (See here.) They have been inventing and repeating claims about how dangerous Iran is almost non-stop. It’s not clear what the long-term goal is, but there must be some purpose served.

2. If one believes that the purpose of the American security apparatus is the protect the territorial integrity of the United States and the lives of its citizens, its behavior is frequently puzzling. However if one believes that its purpose is the protection and promotion of “American interests”, i.e. banks, oil companies, military contractors, the military brass, other multinationals, etc., this confusion disappears.

(I want to point out here that though this seems like a left-wing position, I am as firm a believer in private property and free markets as can be found anywhere. To right-wing critics I would ask if government promotion of these groups can really be counted as free-market activity in any intellectually honest sense.)

3. The theory and practice of Islamic banking dates far back in history, but its modern incarnation is a relatively recent phenomenon, dating (as I understand) from around the middle of the 20th century. Islamic banking is largely concentrated in Iran. (Link here.)

I’m no scholar of Islamic banking, but religious factors make it different from Western banking, mainly forbidding the taking of interest. Economic principles would tell us that it can’t be drastically different from Western banking if economic laws truly are universal, as I believe they are. The question is if Islamic banking is sufficiently different to be seen as a threat to Western banking.

Add to this that Islamic banking is a growing phenomenon. If it were contained to some island in Indonesia, “American interests” could probably ignore it. However it appears to be growing, and growing in an economically and geopolitically important area, the Middle East.

These three factors put together indicate that if “American interests” see Islamic banking as a threat, it could help explain the hostility towards Iran and the slow but dire buildup to war. As President Obama says, let me be clear: I believe the government of Iran is disrespectful of the liberty of its citizens, and I hope it disappears sooner rather than later. I’m not sticking up for it. But it is not developing nuclear weapons, and even if it were, that would hardly be grounds for attacking it. It is promoting Islamic banking institutions. To me this is also not grounds for attacking it, but I don’t make policy.

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Author: rfmcelroyiii

Student and instructor of economics.

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