One of the winners of the Abraaj Group Art Prize unveiled at the Art Dubai fair this week is Vartan Avakian. A Very Short History of Tall Men is a collection of portraits of would-be dictators, not-so-strong men who lasted only a few days or weeks and were quickly forgotten. He has cast detailed miniature gold statues of the men and suspended them in globes of synthetic glass, like insects in amber.
Three judges (including myself) – gathered together in May this year at a posh Edwardian hotel on Bloomsbury Street to argue over a book prize – would emerge at different times to stroll about the area. All of us had glanced at our neighbour, the Socialist Bookshop, but Jane Smiley, the tallest (in every sense) among us, had noticed an air of quiet celebration in its window-displays. The effects of the crash were still reverberating in the Western world (though India had recovered more quickly than expected); and a new complex of emotions seemed to have surfaced in the bourgeois of almost every political persuasion – a mix of panic; rage; a strange, sweet schadenfreude; a nostalgia for erstwhile simplicity; a sudden premonition of the inevitable. In Calcutta, however (where I’ve been spending most of each year since the turn of the century), socialism had never gone away.
Dubai’s latest moment of turmoil is being talked up as a test of ‘Islamic finance’. But is it really? The problem: in 2006 Nakheel Development Ltd issued bonds to the value of three and a half billion dollars, and can’t pay out when they mature next week. The issue in question is ‘sharia-compliant’. This kind of bond, known as a ‘sak’ (plural ‘sukuk’) has seen huge growth in the Islamic and non-Islamic world over the last ten years. I’ve explained how sukuk work in the LRB and how state borrowers and corporations in the West are getting keen on them: The UK Treasury had been planning an issue but it went on hold after the banking meltdown; last month General Electric issued $500 million of sukuk with Middle Eastern investors in view. Very roughly, a bond is Islamic when there’s a tangible underlying asset on which the issue is based – for instance real estate – and when there are no guarantees saying the investor can’t lose: risk has to be shared between borrower and lender. The rapid convergence of Islamic and conventional finance plus the high-level collaboration between intellectuals and product-engineers in both camps have done wonders for sharia-compliant instruments, but there are pitfalls. One is the preference of conventional investors for a guarantee on some kind of return. That’s not permissible in Islamic finance, though if you’re an investment banker or corporate fundraiser you might find a sharia expert who could see a way around the difficulty and put his imprimatur on your product to make it attractive. Looking for a friendly scholarly opinion on a product is known as ‘fatwa shopping’.