George Osborne, the UK chancellor of the exchequer, in an recent op ed in the Financial Times took pride in the fact that last month more than 1,000 investors from more than 100 countries and 15 global leaders congregated in London for the ninth World Islamic Forum. Osborne stated,
“Just look at the mathematics. Islamic finance is growing 50 percent faster than the traditional banking sector, and it has huge growth potential. A quarter of the world’s population is Muslim but only one 1 percent of the world’s financial assets are sharia compliant. Across the Middle East and North Africa, less than 20 percent of adults have a formal bank account. The gap presents a huge economic opportunity for the UK. We are building on existing strengths. London, with $19bn of reported assets, is already a major home to Islamic finance outside the Islamic world.”
Continuing on the same topic, Gillian Tett, a notable Financial Times correspondent, quoted a conversation she had a few years ago with Sheikh Muhammad Taqi Usmani, a Pakistani scholar who is also a leading expert in Islamic finance. This meeting in 2009, during the height of the credit bubble, occurred at a time when few people expressed “strong criticisms” of how Western finance worked. According to Tett, Usmani was “scathing” he bewailed the tendency of American and European banks to create money untethered from any real assets; to spin “derivatives our of more derivates.” [put quote here from notebook regarding paper money eventually becoming worthless] To Mr. Usmani it seemed as if western finance was almost akin to a giant ball of candyfloss: a bubble of sticky froth from which a few “real” assets or economic activities had been spun and respun to support numerous ephemeral financial deals, much in the way a tiny piece of sugar can be used to concoct a giant sweet. Tett recalls that Usmani told her “Western banks create money from money.” He contrasted this with the world of Islamic finance, where “Money is always backed by assets” and relies on “equity financing not debt.” Tett advocates that if Islamic British bonds ever appear, Finance might just be one area where religions could learn from each other.
Another interesting insight in the Financial Times, proffered Ian Bostridge, a scholar-turned-tenor in an interview the Financial Times, is worth noting. According to him,
“The reason western economies are not working, he says, is that income distribution has been skewed. ‘The Labour party won’t say this but we need strong trade unions. Too much money is going to capital and not enough to labour. If capitalism is moderated [by even distribution of wealth], it works, it’s good for everybody. But when it doesn’t – Marx analysed this brilliantly in Das Kapital – you get crises of demand, so you end up with a super-elite and the rest of us.’ Bostridge expresses his views not as a war cry but with gentle passion. ‘There’s huge anxiety in middle-class London,’ he continues. ‘I don’t see how my children are going to be able to afford to live here. Four of five generations of m family have lived in London. I love London’.”