Ahmed Danyal Arif, UK
Since time immemorial, monetary pressures and inequality of trade have methodically marked the path towards indebtedness of different nations to their debtors. Indeed, debt is the cornerstone of our societies today: borrowing money and repaying it has become a norm, common almost to the point of ubiquity. According to the Bank of England 97% of money in circulation is attached to some kind of debt.
Despite the fact of being banned in international law and most domestic jurisdictions, modern forms of debt bondage live on. According to a UN report of 2016, it remains the most prevalent forms of modern slavery in all regions of the world. Yet this phenomenon is still not universally understood nor recognised.
In such circumstances, we need an economic system in which our societies are no longer reduced to a rat race where the selfish desire of the few is able to offset the well-being of the many. This economic system will have to satisfy the requirements of humanity, starting with the demands of economic justice and thus freeing us from the iron cage of capitalism.
The Fabric of Indebted Nations
In our current system of credit-based capitalism, there is more than meets the eye than just rational and material exchanges within a market economy. It entails the social, moral, and affective estrangement of its subjects. Debt is a type of moral contract where the person who is contracting the loan is ‘promising’ that they will pay back the amount plus interest. But the lack of understanding and scrutinising of the way the financial system works and how money is created has reinforced a fundamental trend which places a growing number of people and countries under the supervision of banking and financial institutions.
This behoves us to think about social as well as international relations in a way that breaks with a paradigm dominating both economic analysis and some theoretical traditions – that of material, routine or symbolic exchange. The free-trade philosophy which presupposes a relative equality of the parties involved should have been opposed to a radically asymmetric perspective where the founding of social and international relationship is in fact a relationship of domination. In reality, the opposite occurs in practice where a singular form of entity is constituted – the indebted man/nation – and the relationship between the creditor and his debtor becoming the true archetype of social and international organization.
We must not deduce from this statement the disappearance or non-existence of exchange, but only that it functions from a logic which is not that of equality, but of imbalance and of the power differential. The debtor is ‘free’ as long as his actions and his room for manoeuvre take place within the frameworks defined by the debt he has contracted. This is true for the individual as well as for a population or a country. In our own society anyone can have access to a mortgage or loan. With this concept it appears to one that he or she is equal to everyone else because they have the same access to that facility. However, in reality is this is not the case. When one borrows money for some reason, interest causes him to be drawn deeper into quicksand and, as a consequence, the later generations are often burdened by debt. It is no longer the original sin that is passed on to us at birth, but the debt of previous generations. The indebted man or country is subject to a credit-debtor power relationship that accompanies him throughout life, from the cradle to the grave.
There is a plethora of examples in history about the extreme lethality of financial hubris. The European powers used debt as a means of accumulating wealth and as a powerful weapon for ensuring domination, leading to the total submission of previously independent states. From Latin America to China, Greece, Tunisia, Egypt, or the Ottoman empire, they all went down that road to hell.
During the first half of the 19th century for instance, although still under Ottoman rule, Egypt initiated a major project of industrialization and modernization. The country carried this venture without recourse to external debt and by mobilizing internal resources. But in 1839-1840, a joint military intervention by Britain and France, followed a little later by a second attack by Britain and Austria, compelled the pasha and viceroy of Egypt Muhammad Ali to give up control of Syria and Palestine, regarded as home turf by these powers. The second half of the century witnessed a radical turn, and Muhammad Ali’s successors caved into British pressure, adopted free trade, dismantling state monopolies and relying on external debt. This was the beginning of the end. The era of Egyptian debt was set in motion: the country would soon concede its infrastructure to the Western powers, European bankers and unscrupulous entrepreneurs. Unable to pay off their colossal debt, the military occupation of Egypt began in 1882 and the country was transformed into a protectorate.
The Poisoned Gift of Debt
If the domination through external debt was a significant part the imperialist policies of the major capitalist powers; it continues to plague the 21st century in new forms.
The dramatic rise of African debt is a salient example. The latter is explained by a series of exogenous as well as internal factors. Indeed, the shock wave following the financial crisis of 2007-2008 had the double effect of slowing down economic development and whetting the appetite of banks and private investors who were enticed to invest their money in the sovereign debt of the countries of the South. Indeed, the more a debt is risky, the more profitable it is thanks to high interest rates.
Internal factors are also contributing to the increase in debt without explaining its recurrence: lack of investments by governments in infrastructure, low tax revenues, speculation on domestic public debt, capital flight, corruption, etc. These dysfunctions of the so-called democratic regimes are not the prerogative of African countries. They reflect the very character of the global economic system dominated by international financial institutions (World Bank, International Monetary Fund, etc.) and informal groups (G7, G8, Club of Paris, Institute of International Finance, etc.). As such they are at least partly responsible for the levels of development and indebtedness of countries of the South.
Well aware about the current situation, the Fifth Caliph and Worldwide Head of the Ahmadiyya Muslim Community, Hazrat Mirza Masroor Ahmad (aba) said:
“In today’s world, physical slavery no longer exists, but it has been replaced by economic bondage and servitude, wherein the relationship between the most powerful nations on earth and weaker countries has become akin to the relationship of a master and a slave. For example, loans disguised as ‘aid-packages’ are given by rich countries to weaker nations who have no option but to accept whatever strings are attached. Invariably, the crippling levels of interest mean that the short-term loans lead to long-term misery and liability. The end result is that the defaulting country has no choice but to bend to the will of the dominant nation. Such slavery is utterly immoral.”
Through the simple mechanism of interest, colossal sums are transferred from people, businesses and states to creditors. However, economists almost never bring themselves to propose its abolition. Its presence in the popular imagination is marginalized by a mainstream economic paradigm which progressively frees the economic debate of any moral arguments. The issue of interest has always been considered a moral issue, since the time of the Greeks at the very least. Aristotle was opposed to it and states that:
‘The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of a mode of getting wealth this is the most unnatural.’
The teaching of the Holy Qur’an on the subject of interest is very clear. From the onset of Islam until this day, interest has been equated by Muslims with usury and every economic evil which is the creature of interest has been made an economic crime:
‘Those who devour interest do not rise except as rises one whom Satan has smitten with insanity. That is because they say, ‘Trade also is like interest’, whereas Allah has made trade lawful and has made interest unlawful.’
According to the Second Caliph, Hazrat Mirza Bashir-ud-Din Mahmud Ahmad(ra):
‘[Interest] is prohibited in Islam because it tends to draw wealth into the hands of a small circle, and thereby adversely affects its equitable distribution. It promotes idleness in the moneylenders and kills in them all incentive to help others and chokes all springs of sympathetic behaviour. The moneylender takes advantage of and makes profit from the need and distress of others. While on the one hand, [interest] causes the lender to exploit other people’s wants, it creates in the debtor a tendency to do things carelessly and in haste, incurring debt regardless of his capacity to pay back, thus doing irreparable moral injury to himself and the lender.’
On closer scrutiny, we observe that interest is the opposite of welfare. Welfare is based on sympathy, kind-heartedness and generosity, whereas the basis of interest is selfishness, miserliness and exploitation of others’ distresses. It introduces a debt trap mechanism which leaves the debtor little chance of leaving, and countries affected by it can only get out of this vicious cycle by declaring bankruptcy or waiting for the unlikely debt cancellation from the money-lenders.
The Debt Forgiveness Issue
As COVID-19 exacerbates the pressure on vulnerable public health systems in poor countries, their economic outlook is also becoming increasingly unstable. Anticipating the upcoming turbulence, some statesmen called in April 2020 for debt relief of the African continent to encourage post-coronavirus economic recovery. But unilateral proposals would be ineffective because if a country like France possesses less than 3 percent of the continent external debt, China is widely regarded as the largest creditor to Africa with around 20 percent of all African debt.
So even with this massive debt relief by so many players in the international community, without the participation of all nations, multilateral institutions and private lenders in this endeavour, African and less-developed countries still stand to suffer. All this points to the importance of joint actions by the international community, especially donor/lender consultation and coordination. Given the complex factors with African debt, the international community must be realistic, putting resources and attention toward mutual consultation and coordination toward collective decisions and burden-sharing.
According to Islam, the wealth and resources of rich countries have all been bestowed by God and so they must utilize to fulfil the rights of His Creation. Rich countries are thus expected to display a true spirit of sacrifice and help the weaker nations of the world in order to build solid foundations:
‘And if any debtor be in straitened circumstances, then grant him respite till a time of ease. And that you remit it as charity shall be better for you, if only you knew.’
In fact, a whole chapter (Ash-Shura) of the Holy Qur’an derives its title from a verse where Muslims are enjoined to decide all affairs of States and other matters of national importance by mutual consultation:
‘(…) and whose affairs are decided by mutual consultation, and who spend out of what We have provided for them.’
It is true that, to an extent, poor nations are shooting themselves in the foot by borrowing and not using the money fairly. Whereas any country’s long-term growth and development is almost exclusively a function of its domestic productivity. In other words, all wealth comes from human labour and there is not wealth but men. If poor countries can build up their own economies and infrastructures, their people will have more opportunities in their homeland and far less reason to migrate overseas. If their nations are stable and prosperous, it would naturally follow at the regional level and the wider world will benefit.
The prevailing prerequisite on both ends has to be founded on honesty, integrity and justice. In this regard, the Fifth Caliph and Worldwide Head of the Ahmadiyya Muslim Community, Hazrat Mirza Masroor Ahmad (aba) says:
“In today’s world, it is not only in the less developed world that people are struggling, but even in the developed world, people have suffered as a result of the financial a crisis that has arisen over the past few years. This is because the countries have not used their vast means and resources in the right way. Instead of utilizing their wealth for essential necessities to benefit all people, much has been frittered away on unnecessary luxuries and extravagances. (…) On the other hand, those requesting for help have made unreasonable demands, whilst on the other side, the wealthier nations have been willing to make necessary sacrifices for greater good. (…) Islam, however, counsels that the best state of affairs, which are of peace and harmony, can only be established when both sides work together for the greater good. (…) Most regrettably, such ideals are not being implemented in the Muslim world today, to whom those teachings were given, and nor are they being practiced in the non-Muslim world, whop make huge claims of fulfilling the rights of people.”
Throughout history, domination via external debt was a significant part of the policies of the major capitalist powers. Indeed, the most corrosive method of gaining personal wealth, from the ancient world to today, is interest-bearing debt that mounts up with compound interest. The inability to pay has led number of populations to lose their property and ultimately their liberty as they become bond servants to pay their debts.
The debt issue is global and requires global solutions. We urgently need creative and scalable solutions that harness the positive power of solidarity and coordinated action to tackle this global challenge and maintain this momentum beyond times of crisis. This is the only way to break the chains of debt and change the financial architecture in its entirety.
About the Author: Ahmed Danyal Arif is a French economist by education and currently working in London. He has a Masters degree in Economics and Politics. After working for the French tax administration system, he published two books in French: Islam & Capitalism: For an Economic Justice (2016), and Economic History of the Islamic World: From Pre-Islamic Arabia to the Umayyad Dynasty (2019). He currently serves as the Editor for the Economics Section in The Review of Religions.
 Bank of England, “Money creation in the modern economy”, Quarterly Bulletin, 2014: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
 United Nations, Report on Debt Bondage, 26 September 2016: https://www.loc.gov/law/foreign-news/article/united-nations-report-on-debt-bondage/
 Maurizio Lazzarato, La fabrique de l’homme endetté: Essai sur la condition néolibérale, 2011.
 Eric Toussaint, The Debt Sytem: A History of Sovereign Debts and Their Repudiation, 2019.
 Hazrat Mirza Masroor Ahmad (aba), “Islam and Europe – A Clash of Civilisations?”, in The Review of Religions, 2nd November 2019.
 Aristote, Politics, Part X.
 The Holy Qur’an, chapter 2, verse 276.
 Hazrat Mirza Bashir-ud-Din Mahmud Ahmad (ra), in The Holy Qur’an with English Translation and Commentary, vol. 1, 2018.
 Yun Sun, “China and Africa’s debt: Yes to relief, no to blanket forgiveness”, Brookings, 2020: https://www.brookings.edu/blog/africa-in-focus/2020/04/20/china-and-africas-debt-yes-to-relief-no-to-blanket-forgiveness/
 The Holy Qur’an, chapter 2, verse 281.
 The Holy Qur’an, chapter 42, verse 39.
 Hazrat Mirza Masroor Ahmad (aba), “The Basic Economic Principles of Islam – A Keynote Address in Singapore”, in The Review of Religions, 16th January 2014.