In Osama Bin Laden’s latest screed, one of the things he exhorts people to do is give up interest. The charging and paying of interest is forbidden in strict Islam. Known as riba (increase), it was the subject of some of Mohammed’s most vehement condemnations. One can see why with only a cursory look at history. Namely, moneylending was largely an uncontrolled practice that guaranteed a class structure that could not be broken, incurred debts that led to involuntary servitude, and was an all around nasty way to keep the serfs in the fields. Mohammed, rather than suggesting some form of regulation, vented spleen and condemned it outright. Christians, of course, had their own attitude toward it, which led to out-groups being the only ones allowed to lend money (Jews, famously, but not exclusively). The prohibition was based mainly on two Biblical passages (both Old Testament): Leviticus 25:36–37 (“Take thou no usury…”) and Ezekiel 18:13 (“He that have give forth usury, and hath taken increase: shall he live? He shall not live…”).

The Catholic Church used to excommunicate moneylenders. The law said: Quidquid sorti accedit, usura est “what exceeds the principal is usury.” (The Italian Renaissance, aside from great art and a few geniuses, also revolutionized banking. The bankers noted that this applied only to loans, not contracts, so they erected a facade behind which they could do exactly what they wanted. They made no loans. They traded in Bills of Exchange. Technically, it was a sale of one kind of money in exchange for another that could be paid at a future date. As rates of exchange varied, interest was built in automatically without there seeming to be any charged.)

Islam is not so vague, though. In this article the author explains the prohibition in no uncertain terms. Lending anything with an expectation that it will be repaid plus a profit is prohibited. Period. There are of course downsides to this, as shown in this article. What is permitted in Islam is charity—in fact, there is built in a poor tax, called a Zakat. People of sufficient means pay a percentage of their wealth for the maintenance of the poor.

Which leads us directly to the major problem with such a prohibition (and the assumptions entailed by claiming that the Zakat is just substitute): it is based almost entirely on a notion of static wealth, wealth which is not subject to any deterioration by simple, even low-level inflationary tendencies, of by the more complex medium of economic dynamism based on supply and demand and the introduction of variable factors—population growth, invention, drought and famine, excess harvests, disease, life expectancy—factors which guarantee that the value of coin, no matter how it is determined, changes, because the world in which it exists changes.

In short, there is no mechanism for the predictable increase in personal—or community—wealth. Such increases are made by conquest or accident in such a system. If it is assumed that one may not profit from one’s property other than through the price charged for product, then the system is likely to remain static at best, deteriorating at worst.

Which is what has happened to all the great empires, including the vast and impressive Islamic Empire of the 8th, 9th, and 10th centuries.

All of them accrued wealth through conquest—Greece, Rome, Egypt, the Hittites, even little Israel, which basically kicked the original owners out of Canaan and absorbed what they found. Islam spread like fire in the first couple centuries of its existence, absorbing numerous principalities, and their productive capacities and, most importantly, their latent wealth. The Greeks and Romans had the best handle on how to keep it—through complex trade systems and, in the case of the Romans, premodern banking methods that allowed for variation of local value, periodic economic fluctuations caused by anything from bad harvests to a local invader. Others didn’t really have a good handle on it. Islam continued as an Imperial force by eventually absorbing Byzantium, but even they had to get into a little bit of the borrowing game when Christendom came bashing on their door as competitor. In the transformation of systems that occurs during major wars, a kind of tax on devastation and rebuilding occurs that looks, sometimes, like growth, but really it’s a reconsolidation into smaller and ever more concentrated realms.

It was those Italian bankers that eventually, through the methods they developed and which later turned into full-blown credit systems after the Reformation, that spelled hegemonic doom for any system that couldn’t—or wouldn’t—keep up.

I do not wish to go into a long disquisition about the benefits of credit systems—or their myriad faults— but it is clear to anyone not hampered by culturally-enforced expectations that any system which does not allow for the possibility of one’s neighbor collapsing is itself doomed. Islam does not prohibit trade. Trade is great, it is necessary, it is the thing that keeps the whole show running, but it is not itself a static entity. If, say, after a century of trading commodities with your neighbor, one year a blight wipes out the crop of whatever you’ve been happily trading for. Your neighbor now has nothing to trade. You now have no one to dump your exports on, because they can’t afford to pay you. You either look for someone else to take it, or…

Or what? You now have an excess of what you had before. You can dump it by discounting it to someone who doesn’t need it as much, which threatens stability on the homefront because you’re going to take a loss. You can give it to your longtime trading partner as charity, but now you have a shortfall in what you’ve been getting from them and have to make up the difference from someone else, with whom you do not have the same arrangement. The whole edifice teeters.

Or you can set up credit arrangements and base payments to your domestic producers on what your neighbor will pay you once they’re back on their feet, which of course means you still have the expense of subsidizing those domestic producers while you wait, which is an expense you wish to recoup, so the credit you’ve extended comes with an expectation that they will pay a bit more to cover that expense (over time so it’s not a crushing payment) and gives them time to recover.

That’s called Interest, that fee, and in this scenario is helps maintain the overall stability of both systems.

But there’s a far more personal element in the prohibition against interest that is not often discussed and is more to the point.

It took a long time for the present system to evolve, but eventually what it has come to offer is the chance for the individual to obtain a modicum of independence. Our credit system allows for Joe Blow to borrow money in order to acquire the property and means to live as he or she wants, without being a serf. You can start your own business without having to be perpetually beholden to the charity of a sponsor (which is allowed in Islam—the lender basically becomes a partner with the borrower on a profit-sharing basis, which, depending on the nature of the arrangement, may make independence perpetually impossible—see the second article linked).

Without credit systems that include (regulated) interest schedules, there would be no middle class. (The pre to post Renaissance merchants were not middle class, they were just shy of the aristocracy, and were decidedly in the minority—most people were poor, to varying degrees, with no method to ever be anything else.) The middle class—threatened today because of any number of abuses to the system that permitted its existence—is a modern phenomenon which could not exist without the complex system of credit that came to fruition in the 19th century and found its place in the mid-20th century.

When you look at the Christian systems that condemned interest and at the Islamic social history that likewise forbade it, what you see is a propertied class intent on maintaining its unique power and position. A regulated banking system that served the needs of the peasantry—however one defines that—was not in their interest, because it meant those they considered their servants might one day thumb their noses at their rightful liege lords.

So when Bin Ladin and his ilk condemn capitalism and interest-based credit, you have to wonder what kind of a world they would see in its place. Certainly capitalism has problems and will no doubt be supplanted by another system, just as it supplanted mercantilism and its earlier systems all the way back to feudalism. Certainly there is abuse—look at this sub-prime lending crisis—but a devolution back to Sharia’a economics would essentially return a huge portion of the population to a condition of obligation to a charity system and return the princes—like Bin Ladin—to a status of “gracious lord” who could make points with Allah by dispensing Zakat and living like–well—a prince.