Islam's Response to Contemporary Issues — Page 178
178 islam’s response to contemporary issues Prohibition of Interest The Islamic economic system runs on the total absence of the interest factor. Yet there is no historical nor current evidence to suggest that as a result of no interest, the demon of inflation went amok, and set the prices spiralling up beyond control. In the contemporary times, we have a very interesting opportunity to draw comparisons with regard to the influence of interest rates, or its absence, on inflation. The government of China under Mao Tse Tsung’s era made many experiments with the economy. Some faltered. Some produced excellent results. But during the entire reign of Mao Tse Tsung, interest was not allowed to play any part, either domestically or internationally. Yet, throughout this period, there was no prominent increase in inflation. In fact, when ultimately the overall production level increased, prices began to register a fall. As compared to this, in the State of Israel, perhaps the world’s most capitalist country, the rate of inflation has been amongst the highest recorded anywhere in the world, except, of course, in Latin American countries and the post-war exceptional phenomenon of inflation in Europe, particularly in Germany. But then those were not normal days. Other things being equal, the role of interest in any economy cannot be described as anything other than inflationary. High Interest Rates in Britain The current hot debate in Great Britain regarding the pros and cons of high interest rates offers an interesting example for study. For a long time now, the Conservative government has kept interest rates