The Islamic world and the Indian subcontinent made use of various sorts of paper. Credit instruments such as checks were already in wide spread use in everyday transactions in Basra by the 10th century. At this point, money was no longer seen as a physical commodity but as a conceptual creditor arrangement, which took material form in whatever shape the political authorities desired. The critical concern was to prevent a return to the debt crises of antiquity, which would inevitably occur if the credit system spun entirely out of control. And how did that spiral out of control? The answer, of course, lies in interest, which causes debts to grow indefinitely. To combat this, the response of major world religions was to ban usury. Dr. Abdullah Shaheen, a theologian at the Markfield Institute of Higher Education, explains: > “According to Islam, interest is absolutely forbidden. There are no two ways about it. It is considered equivalent to declaring war on God. Any earnings derived from the practice of usury are completely unacceptable morally, religiously, economically. Usury is seen as a form of exploitation that distorts legitimate trade and commerce due to its exploitative nature and its harmful consequences for individuals and communities.” Charging interest on loans was also entirely outlawed in India, where it was sharply limited. In China, Confucian authorities revived the old tradition of periodic debt cancellations, while Buddhist monasteries established pawnshops to provide impoverished peasants with alternatives to predatory local moneylenders. However, the desire to protect ordinary people from debt traps did not necessarily shape religious attitudes toward commerce. Confucianists and Christians tended to be suspicious of merchants, whereas Muslim and Buddhist thinkers were more enthusiastic about them. Indeed, one of the most remarkable developments of the Middle Ages was the rise of the world’s first genuine free market populism. This emerged due to a unique alignment of social forces that accompanied mass conversions to Islam two centuries after the original Arab conquests of the 7th century A.D. Islamic law strictly forbade not only the lending of money at interest but also debt peonage, the reduction of believers into slavery due to unpaid debts. As a result, merchants became the moral pillars of their communities, which were organized around the twin poles of the bazaar and the mosque. Government itself came to be largely despised by the pious. As one proverb put it: > “The best princes are those who visit religious teachers; the worst religious teachers are those who allow themselves to be visited by princes.” A medieval Turkish story about the famous Sufi sage Mulla Nasruddin illustrates this point even more pointedly: One day, the king summoned Nasruddin to court and said, “Tell me, you are a mystic, a philosopher, a man of unconventional wisdom. I have become interested in the issue of value , an important philosophical question. I wish to establish the true worth of a person or an object. Take me, for example. If I were to ask you to estimate my value, what would you say?” Nasruddin replied, “I’d say about 200 dinars.” The emperor was flabbergasted. “What? But this belt I’m wearing alone is worth 200 dinars!” “I know,” Nasruddin said. “Actually, I was taking the value of the belt into consideration.” During this period, letters of credit could circulate from Mali to Sumatra. Far beyond the reach of any government , based entirely on personal honour. For a merchant operating without the ability to call on the state to enforce contracts, personal honour was everything. The Prophet Muhammad PBUH himself had spent much of his life as a merchant, and as a result, he exhibited a surprisingly liberal attitude toward market regulation. Dr. Abdullah Shaheen elaborates: > “This trust in the market is evident in early Islamic thought. There was a belief that the market would regulate itself naturally. As the Prophet says, God’s hand is the determinant here, guiding the market. This prophetic attitude of allowing the market to function independently is remarkable, especially when we consider that Adam Smith later expressed a similar idea with his famous concept of the ‘invisible hand,’ which he believed would tame the selfish interests of individuals and lead to the common good.” Many of Adam Smith’s theories, including some of his most famous metaphors, can now be traced back to free market theorists in medieval Islam. However, there is one dramatic difference: Unlike Smith, Islamic thinkers emphasised that the division of labour and resulting market exchanges were key to human prosperity, but they did not stress competition as the driving force. They considered competition necessary but not the essence of the market. Instead, they saw the market as an extension of the principle of mutual aid. The medieval Islamic scholar Nasir al-Din Tusi explains: > “Suppose each individual were required to provide for his own sustenance, clothing, shelter, and tools, first acquiring the skills of carpentry and smithing, then mastering sewing, reaping, grinding, kneading, spinning, and weaving. Clearly, no one could do justice to all these tasks alone. However, when people assist one another, each specializing in a particular trade beyond the limits of his own capacity and observe the law of justice in transactions by giving fairly and receiving in exchange for the labor of others, then the means of livelihood are secured, and both individual success and the survival of society are ensured.” As a result, Tusi argues, Divine Providence has arranged for people to have different abilities, desires, and inclinations. The market is simply one manifestation of this broader principle of mutual aid , the matching of abilities (supply) with needs (demand). This idea is significant because, whatever the origins of money and market systems and as we’ve seen, they were entangled in war and violence , once freed from state coercion, markets took on an entirely different character. To put it starkly: One cannot have cutthroat competition where no one is actually stopping people from cutting each other’s throats. Merchants could seek profit, but ultimately, a reputation for honour and integrity, both in paying debts and considering the means of the other party , was the key to success in the global trading economy shaped by medieval Islam. The entire economic system of this era was based primarily on credit. However, after around 1450, the pendulum began to swing back toward a system based on physical money. Enormous amounts of gold and silver bullion soon began flowing across the Atlantic and Pacific, laying the foundations for what we now call the world economy. This entire process was driven by debt. While we often think of these developments as beginning with Columbus’s voyages and the Spanish conquest of the Americas, the chain of events that led to the rise of the bullion based world system actually began in China under the Ming Dynasty in the 14th century.

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