Why a new model?
Before I say how this project is to be financed, I must honestly answer one question: why have I gone in search of a model that is unfamiliar and new to many of the people of the world?
The answer is simple: because the prevailing models have their faults. Most of the financial systems of the world today rest upon “interest” and “debt” — that is, money in exchange for money, without any necessity that real work or a real asset should stand behind it. It is this very structure that has produced the successive financial crises, the ever-widening gap between poverty and wealth, and the back-breaking debts which have taken the poorer countries in their grip.
What I propose — a model whose roots lie in the principles of Islamic finance — is built upon real participation, upon the just division of profit and loss, and upon the tying of money to genuine assets and genuine work, rather than upon interest and speculation.
And it is precisely for this reason that the model is new to many, and deserves to be introduced clearly and impartially; for it may well be the new road that a world weary of financial crises stands in need of. Its newness and unfamiliarity are not a weakness but an opportunity.
A middle way, between two extremes
To understand this model, it must be set against two familiar extremes.
On the one side stands the socialist system, which places wealth in the monopoly of the state and deprives people of free access to it. On the other stands a system which delivers all wealth into the hands of the owners of capital and turns ordinary people, little by little, into the servants of that wealth.
The model I choose is a middle way: a person is free to choose the best from among the roads before him; each receives a wage for his work or inherits his property and employs it freely in economic activity — without any restriction imposed beforehand.
But this freedom is not unbridled; a moral equilibrium holds it in place. This model honours the rights of the worker and the rights of the employer alike, and strives to establish a reasonable and fair proportion between the wage of the worker and the profit that results — such that all those engaged in an enterprise attain a prosperity befitting their work, and the distances between them are brought to a reasonable measure, close to equality.
And for those who have not the strength to work, and for the collective expenses of society, mechanisms such as endowment (waqf) and particular levies — such as zakat — are provided for. And most important of all, the final authority in this financial administration is entrusted to conscience and to ethics, and not merely to force and to outward law.
Money in the service of man, not man in the service of money
In a system founded upon interest, money itself becomes the begetter of money; he who has capital profits merely by the passage of time, without doing any work or accepting any risk, and he who has none sinks every day deeper into debt. This cycle draws wealth upwards from below and deepens the gap.
In the model I propose, this relation is reversed: wealth is spent, is injected among the people, and enters the cycle. Money grows only when it is bound to real work, to genuine production, or to a useful service. Capital is no longer an instrument of domination over others; it is an instrument for building something that will serve everyone.
This is a subtle but fundamental difference: in the one system, man is in the service of money; in this system, money is in the service of man.
An ancient wisdom in new dress
And perhaps there lies hidden here a wisdom that goes beyond economics.
These values — justice, participation, the tying of wealth to genuine work, and the upholding of the weak — are not merely the principles of one particular economic school; they are the very thing that the great religions, one after another, taught to mankind, and the very thing towards which the human heart has always inclined.
But history shows that these ideals have again and again been disregarded by the greed of wealth and the force of the powerful, and that in most times and most societies they have remained no more than a form of longing.
What I propose is in truth nothing new; it is a return to that same ancient wisdom which mankind has always believed in its heart, but has seldom been able to bring into practice. And perhaps today, in the building of something as great as a global transport network, there is a fresh opportunity to make that long-standing longing real at last. God willing.
Pray for the fulfilment of this long-standing longing, strive for it, and place your hope in the grace of God; and when it is fulfilled, give thanks to God.
Four fundamental principles
Before introducing the instruments, it is well to know the four principles upon which this whole model rests.
First, the avoidance of usury (interest).
Second, the sharing of risk, in the sense that profit and loss are divided among all parties, rather than one taking all the profit and another all the danger.
Third, the backing of assets, that is, every sum of money must be tied to a real asset or a real work.
And fourth, ethical conduct in investment.
It is these four principles which, in the judgement of researchers, make the Islamic financial system more resistant to crises and to high-risk speculation.
Why these principles make the network more secure
These four principles are not merely moral ideals; they have practical and calculable effects.
When money is tied to a real asset and to real work, financial bubbles — those false inflations which burst suddenly and lay economies waste — do not form. When risk is divided among all, no single party bends beneath the weight of one failure. And when high-risk speculation is forbidden, capital, instead of being squandered in dangerous financial games, is directed towards building and production.
It is for this reason that researchers hold this system to be resistant to financial crises. For a project that is to endure a hundred years and to hold the capital of millions of people, such stability is not a luxury but a necessity — and beyond that, it is a model that can be repeated, for those who come after and for the wandering capital of the world.
The instruments of financing
With these principles, we have in hand several practical instruments for financing a project as great as the Global Rail Network — instruments which are no fantasy and which are in use today in many countries.
The first is sukuk; investment certificates without interest, which take the place of interest-bearing bonds. The holder of sukuk, rather than being a lender who takes interest, in fact holds a share of a real asset — a portion of a rail line, say, or a station — and benefits from the income of that same asset. Sukuk has today become one of the most sought-after financial instruments in the world, and demand for it, particularly among ethically minded investors, is continually growing.
The second is musharakah; that is, genuine partnership in profit and loss. Investor and executor of the project both have a share in the outcome of the work; if there is profit, it is divided according to a proportion agreed beforehand, and if a loss occurs, each bears it in proportion to his capital. This is precisely the opposite of an interest-bearing loan, in which the lender demands his profit without any regard to the fate of the project.
The third is ijarah; a method in which an investor provides an asset — trains, say, or equipment or shops — and leases it to the operating company; in this way he both helps the work to get under way and obtains a regular income.
The fourth is istisna’; an instrument particular to projects of this kind, in which the cost of building an infrastructure is provided in advance so that construction may begin, and is repaid after completion by such means as the leasing of a station.
And the fifth is waqf, the endowment; the oldest and the most beautiful of these instruments. Waqf means the setting aside of a capital or an asset, permanently, for the public benefit. Portions of the network can be administered as endowments, such that their income is for ever spent upon the service of the people and upon the maintenance of the network itself.
And the important point is that these instruments can be combined with one another; for example, the building of one section might be financed by istisna’ and musharakah, and after completion brought into operation by ijarah.
Deferred shares: so that no country is left behind
But a fair question arises: what of a country that has today no capital with which to take part? Must it remain excluded from this global bond?
My answer is plain: never.
For this reason a model has been provided under the name of “deferred shares”. In this model, a country that has not the means of paying in cash may pay its share gradually out of the future income of that same portion of the network which is built upon its own soil. That is, instead of paying first and benefiting afterwards, it is permitted to benefit first and then to discharge its share out of the very profit which that participation creates for it.
In this way the poverty of a nation today does not prevent its sharing in the wealth of tomorrow — and the principle of justice is turned from a slogan into a working mechanism.
The financial solidarity of a hundred and ninety-five nations
And this brings us to a greater principle: solidarity.
In this model, a hundred and ninety-five countries are not rivals fighting over a larger share, but partners in a common capital. The better-provided countries can come to the aid of those of slender means — not out of pity, but because they know that the soundness of the whole network depends upon the soundness of its weakest link. If one part of this chain remains slack, all suffer loss; and if all are provided for, all profit.
This is the very logic that turns destructive rivalry into constructive mutual aid. And perhaps the greatest moral lesson hidden in this financial model is just this: that our fates are, in the end, knotted together.
A prosperity that grows along the route
A just financial model is not summed up in the division of profit among investors; this project is itself a mighty engine for the creation of work and wealth across the whole earth.
The building of hundreds of thousands of kilometres of rail and bridge and tunnel and station and power plant requires millions of hands: labourer and engineer, architect and designer, driver and technician, and the makers of steel and concrete and equipment. And this is only the beginning of the work. After construction, the operation and maintenance of the network will for ever require a great body of people — from the staff of the stations and the trains to the teams of service and technology and management.
But the beauty of it is that this prosperity does not remain concentrated at one point; it spreads along thousands of kilometres of route, from the remotest village to the greatest city. Every station that is built creates around itself a market, shops, restaurants, hotels and service centres. Every region that joins the network finds a road for its produce and its industries to the world market.
Wealth, instead of being drawn from deprived regions towards a few centres of power, flows in the opposite direction: towards those very places which until yesterday were forgotten. This project not only produces wealth, but distributes it justly — and it is this that turns it from a “profitable development scheme” into a “mechanism of economic justice”.
The true owner: the people
And now the most important principle of this model, which distinguishes it from every other project: we strive that the owner of this whole system should be the general body of the people, and we regard governments as the representatives of the people of each country.
This network is not to belong to a number of capitalists or to a few powerful states; it is to belong to the whole of humanity. The precise mechanism of this ownership, and how the profit is divided among all, is the subject of the following chapters of this part.
What has become clear in this chapter is this: the money for building this network will not be provided by way of interest and debt and the indebting and humiliation of nations, but by way of real participation, just division, and connection to genuine work and genuine assets. And this is itself a part of the great message of the book: that the world can be built upon justice, and not upon greed.