Turkey’s Islamists and Interest Rates
Turkish President Recep Tayyip Erdoğan’s unorthodox view that interest rates are the cause of inflation rather than its remedy goes against the thinking of almost all economists.
But many domestic and foreign pundits think Erdoğan has a naïve idea of the economy and predict he will gradually correct his stance on interest rates and adopt an orthodox approach.
In fact, those pundits underestimate Islamists’ economic opinions including on interest rates.
Yet, there is a wider illusion of seeing Islamists as if their sole aim was a social transformation, such as in the wearing of headscarves or banning alcohol. Many miss that Islamism in Turkey also aims at a radical economic transformation.
The Islamist agenda is never limited to social transformation. Since the beginning, the Islamisation of economy has been a major agenda item.
As part of this Islamisation strategy, the dream of Turkey’s Islamists is to create an alternative economic system where there is no interest and an interest-free credit market is to be the new rule.
Therefore, the Islamists’ approach to interest in the economy should be understood within a wider historical framework.
The Islamists’ liberal economic policies have mistakenly created a false affinity with economic liberalism. Islamists adopted liberal policies as a tactic against the Kemalism, which was mainly a state-oriented order. Pushing liberal reforms were preferable since they was significant leverage in creating opportunities for Islamists.
But once they feel secure, the Islamists are also poised to push for their model in the economy. Erdoğan’s unorthodox views on interest rates should be seen as an early signal that Islamists now feel capable and secure enough to introduce their real economic model.
All Islamic groups in Turkey vehemently oppose interest as part of their beliefs and as part of an alternative economic model differing from both capitalism and socialism. To them, capitalism and socialism are wrong and it is a religious duty to challenge them.
Turkish Islamists have traditionally attached to the radical-populist religious view on interest. According to this approach, Muslims should immediately ban all forms of interest.
The less popular moderate-elitist Muslim view sees interest as bad, but should be challenged through efficient economic policies rather than by bans.
The radical-popular view says interest should be banned no matter its economic results, but that doing so would be good for economy.
The historical reason in explaining the prevalence of the radical-populist view in Turkey is the educational background of Islamic movement’s founding fathers such as Said Nursi, Fethullah Gülen, M. Zahid Kotku or S. Hilmi Tunahan. None of these founding fathers had a formal education on Islamic economics or the economic history of Muslim societies.
Instead, these founding fathers imagined Muslims had, throughout the history, had economic systems without interest.
Inheriting the intellectual impact of these founding fathers, the present day Turkish Islamic groups label interest as a highly demonic concept akin to adultery or murder. So, they champion the radical view on interest, and argue that its immediate prohibition is essentially good for the economy and society.
To emphasise how interest is religiously forbidden, Fethullah Gülen for example narrated a tradition in which the prophet says interest is equal to adultery with one’s mother. Esad Coşan, the late leader of the Turkish Naqshibandi order, opposed modernist approaches to interest. O. Nuri Topbaş, the leader of the Erenköy Group, well respected by the current government, for example, argued that people who work with a system of interest system would either lose their property or their faith.
The moderate-elitist view considers various factors like inflation in approaching the issue. Yet, its view of Islamic history is quite different. Unlike the radical approach, proponents of the moderate-elitist view argue that Muslim societies in the past had different models that could be evaluated as interest-friendly models.
The gist of the moderate-elitist view is simple: Interest is economically harmful however Muslims should deal with it in a more complicated and careful way in line with economic realities.
Comparatively, the moderate stance could be compared to contemporary economic approaches such as in Germany where the interest rate is kept low by successful economic policies.
But in Turkey, where the radical-popular view holds sway, Erdoğan has already signalled a tough line on interest.
“My belief is that interest rates are the mother of all evils. Interest rates are the cause of inflation. Inflation is a result, not a cause. Anyone who tries for the opposite would find me challenging them,” Erdoğan said in a recent speech.
Erdoğan’s words are a good summary of the radical-populist view of interest in the Islamic tradition. In the same speech, Erdoğan has signalled his intention to put his words into action.
“We will fix this problem. Sooner or later we will fix it. Our education requires doing this. We do not act according to what George or Hans tells,” he said, referring to his view that the Islamic economic model is authentic, unlike the Western liberal model.