There is a widespread belief in the Western world that improving the economic situation is the key to reducing tensions in the Middle East. However, various extremists have on occasion stated that the idea that money will sooth everything over is just an indication of how degenerate Westerners have become, and how little they understand what motivates Islamist fighters. The prescription for dealing with extremist elements may vary radically depending upon whether they truly do respond to value and economic conditions fundamentally differently than the rest of the world.
Stepping back, first let us consider whether there is an Islamic Economics that is inherently different from capitalist economics, and that might form the basis of Islamist economics. This is not to equate Islam and Islamism (the belief that Islam is a political system as well as a religion, and that its an inherently superior one at that.) Many have argued that there is, in fact, an Islamic Economics that is a distinctively different system of economic thought and behavior. Of course, a debate swirls around the degree to which the Islamic system is truly different. For example, Islamic law (Sharia) prohibits the charging of interest, and this as seen as a major point of departure between Islamic and capitalist financial institutions. However, we know that, in reality, a bank can no more operate without charging interest than a farmer can operate without collecting payment for his grain or a doctor can operate without collecting payment for her labor. Because of this, the practice of not paying interest is primarily a semantic game in which fixed charges, price mark-ups, and other payments in excess of the principal are paid in order to get around the prohibition so the letter of the law can be followed while recognizing that businesses must be able to pay their bills and have an incentive to operate.
The point of discussing the example above is to raise questions about the degree to which the Islamic view of economic matters is truly novel. If the Islamic view is fundamentally different, putting resources into increasing the standard of living in the region will not necessarily have affect the level of violence. If, however, there is a common mode of responding to incentives, then increasing standards of living might decrease terrorism. It is certainly believed that increased prosperity has led to decreased crime rates in the US at various times and places. I suspect that better economic conditions would mean less motivation to engage in terrorism, but I recognize arguments to the contrary. One potent argument reflects on the fact that most of the 9-11hijackers were not from impoverished environs, and, it is hard to imagine that improved economic conditions could have reduced the likelihood of that attack because those carrying it out were not suffering from adverse conditions.
