Modern Islamic Banking

CHAPTER 2Economic Principles

With the development of early civilisations in Mesopotamia around 3500 bc came the development of cities, empires and monumental buildings. A form of writing based on pictograms was developed and initially mainly used to exchange information about different crops such as the quality and quantity delivered to a temple for safe keeping and any deductions thereof. Taxes were introduced and early economic thought started to develop.

2.1 Early Economic Thought

In ancient times commercial activities were generally not public enterprises but were actively run by the rulers and other parts of the elite such as the officials of the temples and palaces. The profits did not belong to the public but were typically kept by the elite to enhance their own financial position.

The officials of temples and palaces were in any case best placed to be the main entrepreneurs of the era. They not only were closely associated with the royals of the time, but also had good access to information on economic opportunities in local and distant markets, which they obtained from their extensive networks. Most importantly, however, they had access to the capital required to invest in trade and enterprise.

This is not to say that all entrepreneurs of the time were rulers or temple or palace officials. There is evidence of the existence of independent merchants who would act either on their own behalf or as agents for king or temple. The latter gave rise to a very early form of ...