One of the nice things about the pre-internet world was that the foolishness of teenagers and young adults was usually restricted to small audiences. But now we have Gen Z social media influencers. Canyon Mimbs is a 22-year-old convert to Islam who wants to tell the world what he knows–or thinks he knows.
Theology is not my bailiwick. Like Elizabeth I, I do not seek to make windows into men’s souls. But economics is another matter.
Young Mr. Mimbs advocates for shariah law in the USA. Well, why not? Half of Gen Z is joining the DSA, if you believe the internet. There are any number of reasons why shariah law would be incompatible with our American system, but in this post, I’ll focus on one: shariah’s prohibition on interest.
In a recent Facebook Reel, Mr. Mimbs tells us that shariah would save the US economy, as it would do away with our interest-based banking system.
With the blithe smugness that is only possible at age 22, he tells the viewer to “do your own research”.
Mr. Mimbs might want to “do his own research” on Economics 101. The “interest-based banking system” is one of the pillars of a modern economy.
There would be minimal incentives to loan money for home purchases, business startups, or anything else, without being able to charge interest.
And no, the Islamic financial alternatives to interest would not be functional substitutes in an advanced economy. The transaction costs for these mechanisms are simply too high. Interest is wholly fungible, which is why it serves as a universal means of financial exchange.
This is one of the reasons why Saudi Arabia has a smaller GDP than Spain, even with its oil.
To be fair, the Catholic Church initially wanted to ban interest-based banking, too. But that foolishness didn’t take hold in the West. It was a bad idea in the Middle Ages, and it’s a bad idea now.
-ET