63: This Is How Monetary Policy Works in The Islamic State

Joe Weisenthal (0:08)

Hello, and welcome to another edition of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:14)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

So Tracy, we're doing one of our first series of the Odd Lots Podcast, one of our first sort of sub-series, where we're going to do a string of thematic episodes.

Tracy Alloway (0:27)

Wait, I mean, it is the first, right? It's our very first series.

Joe Weisenthal (0:31)

I don't know why I said one of the first. I think this is our first thematic episode.

Tracy Alloway (0:34)

You need to play it up more, Joe. This is a momentous occasion.

Joe Weisenthal (0:38)

Exactly. This huge new endeavor we're taking on, a three-part series on money, markets and crime.

Tracy Alloway (0:45)

Ooh, pause for effect. Okay, I'm excited.

Joe Weisenthal (0:50)

Me too. So normally we talk about markets and finance and money in the sort of the legal world, the regulated world, but of course all of these same phenomena exist in the illegal world and off of exchanges and outside of official industries.

Tracy Alloway (1:08)

Well, more than that, right? Because you could argue that in the absence of legitimacy, money is kind of the thing that drives crime and makes it happen and makes the criminal world go round, so to speak, right?

Joe Weisenthal (1:24)

You could probably argue that. For our first episode, we're going to talk about what may be the, what might be considered to be the largest criminal entity in the world right now, and that is ISIS or the Islamic State.

Tracy Alloway (1:39)

Ah, okay. Well, I mean, this is a topic that's pretty close to home for me right now, which is Abu Dhabi, and obviously a topic of great concern.

It's interesting to come at it from a monetary angle. What exactly are we going to be talking about there?

Joe Weisenthal (1:56)

Well, I mean, so they've established this new geopolitical entity. It's a few years old by now, but I've always been curious how money really works, because any new geospatial entity, just like any other nation state, has to have a currency and taxes and all that kind of stuff. And so, I think we should talk about how it all really works.

So with us today in studio here is Graham Wood. He is a lecturer at Yale. He is at The Atlantic, and he has a new book out titled The Way of the Strangers, Encounters with the Islamic State. I recently read it, and it was phenomenal, so I wanted to bring Graham in. So Graham, thanks for joining us.

Graeme Wood (2:51)

Good to be here, Joe and Tracy.

Joe Weisenthal (2:53)

So your book is, now just to be clear, your book is not even really about the operations of the Islamic State, specifically.

What you did is you went around the world. Well, describe what your book is.

Graeme Wood (3:07)

My book is an exploration into the mental world of the Islamic State, and there's physical territory that they control. And then beyond that, they have this network of supporters that's worldwide, that's in the Caliphate itself, Syria and Iraq, but that's also in places like Tokyo, Melbourne, the United States, Western Europe. And it's a whole vision of what the universe is, what the best way to organize a human society is.

And this, of course, includes how to actually administer a state, and that includes aspects of finance and economic policy that people were willing to describe to me in pretty great detail.

Tracy Alloway (3:41)

So one thing I've learned from living in the Middle East is the Islamic faith is open to significant interpretation. And while a lot of it is based on the Quran, a lot of it also revolves around people trying to interpret the Quran and figure out how to apply it to modern life.

So I guess my question is, if you think that the Islamic state is fundamentalist when it comes to Islam, how are they interpreting Islamic treatment of monetary systems?

Graeme Wood (4:14)

Well, in some ways, the Islamic state's view of finance, of economic policy is pretty orthodox within Islam.

You have a burgeoning Islamic finance industry that tries to get around, for example, the charging of interest, which is called riba in Islam and traditionally has not been permitted. And the Islamic state, of course, outlaws that. It falls into line with orthodox readings of what's permitted as tools or instruments of economic policy. So that's part of what you see there. You also see, though, a much broader adoption of some of the early practices of Islam as the Islamic state reads it. And that includes things like getting rid of fiat currency, getting rid of a whole range of other economic instruments that exist and that are used in a place like even Abu Dhabi, but that the Islamic state, because of their pretensions to purity, has tried to get rid of.