Studies into Islamic economic practices have highlighted the discord between Western economic values and other, more nonorthodox, systems. A main point revealed by the study is that the informal banking practice of Hawala is mistrusted by Western channels, as it is possible to circumvent taxes, and is difficult to regulate as it depends mostly on person-to-person interaction, rather than between banks. Such an outlook emphasises the contradiction between what is deemed ‘trustworthy’ by these two parties: the article stresses in fact that the practice of Hawala is based on trustworthiness and reputation of individuals, rather than on formal contracts. Although the systems do not differ as much as claimed, due to the affirmation of common morality and the nature of embeddedness, this morality does not seem to translate over cultures. In the end, while the Western system skews towards more of a sense of equality, Hawala values justice, which in the end does not invalidate it as an economic model.
An embedded economy, as posited by William Booth, is an embedded system, indistinguishable from social practices and relying on social relations to exist. On the other hand, a disembedded economy is an “autonomous sphere with institutions, motives and laws that are specifically economic”. The disembedded economy is a product of modernity, thus causing previous systems to be considered invalid or dated; these days, the separation of market from society is perceived to be as normalised as church from state. The primary economic model in place in the West today is based on neoliberalism, centralising the rational self-interested individual with subjective preferences and the primary goal of liberty, whom free markets allow the greatest satisfaction of both. The practices of privatisation, deregulation and marketization all identify as specifically economic laws and motives, viewing states and markets as separate, distinct entities. In this way it could be seen as a disembedded model. Despite this, as Damien Cahill explores, the form of neoliberalism known today does not quite meet the standards of free markets as they are still often regulated and subsidised by the government, and put into place by the state itself; it is this state of being ‘always embedded’, which presumably Cahill means as normalized, that shows that neoliberal economic systems are actually linked with the social and political. This shows that despite best efforts, the economy is not inherently separate from the state or society – and in some instances, it is actually discouraged (for full argument see Cahill). In the end, the two systems are not as polar opposites between embedded and disembedded as could be claimed, which brings into question again what it is exactly that creates such a conflict between the two.
The difference between Hawala and Western systems does not only lie in being either bureaucratic or informal, but rather also in the fact that Hawala is deeply rooted within social practices. It involves the securing of livelihood that has no separateness from society’s institutions and values – in this way, one could say that the conflict is cultural. Roger Waldinger did some interesting research on the “economic embeddedness” of ethnic networks this by exploring the difference between migrant- and American-owned construction companies in the United States as a case study. Waldinger argued that ethnic ties could create automatic trust between two parties and facilitate cooperation with more ease than between parties of differing ethnicities. This would explain the mistrust Western parties hold, as they would be inevitably excluded from the practice on the grounds of culture. However, this is not merely an issue of ethnicity, but also of what is considered modern and justifiable.
As discussed, it is not as easy to define the divergent economic systems of Western and non-Western as polar opposites, as both systems share many perceptions and logics. Although both claim to uphold trustworthiness and clarity, the main difference between the two is that Hawala, as a moral, embedded economy, follows the principles of justice, whereas liberalism, the modern economy, heralds equality. Booth’s article states, “Neutrality and an egalitarian pluralism are the hallmarks of [a radical] deficiency, yet they are institutionally enshrined as the virtues of the market and democracy.” This model is therefore not without fault, and although many suffer at the hands of neoliberalism, the prospect of exploring alternative systems such Hawala seems unlikely.
Although the Hawala system differs to the Western model in practice, further scrutiny reveals both to be founded on values of trust and morality, and to have a relationship with society and its values. The cultural difference leads not only to a sense of exclusion and therefore mistrust, but also fundamental discord in what morality, trust and other societal values mean to each group. Hawala is criticised by Western channels, but although values of equality are considered the modern answer to many of today’s breaches of human rights, it can also lead to the ruthless dehumanisation of some aspects of society, and end up ironically devoid of morality.