New Islamic State Currency Worth More Than Its Weight in Gold


It looks like the Islamic State’s official currency has at last gone from design mock-up to actual minted coin.

Image via

Image via

The coin will be called the Islamic dinar, will be struck in precious metals, and will theoretically function as the currency of day-to-day exchange throughout regions controlled by IS.

Mashable quotes an analyst from Flashpoint Global Partners, a private intelligence agency, who dismisses this development with troubling glibness.

“The group could feasibly make as many gold, silver and copper coins as it wishes to, but the only value this so-called currency is going to have is the value of the precious metal itself.”

In all fairness to Flashpoint and Mashable, at least they’re thinking about the political biases of the Islamic dinar. Other sources, from the Washington Post to the BBC have offered little-to-no analysis, while one editorial circulating around SkyNews, YahooUK and elsewhere offers a few scrambled economic truisms before moving on to the admittedly more thrilling, but less informative, blah blah death cult drum-beating.

That granted, any argument for the Islamic dinar’s worthlessness is, at best, a polemical strategy. It does not reflect economic reality. And from a media-theoretical perspective, it’s absolutely incorrect.

Currency is a medium. Besides functioning as a means of barter and trade, it communicates, reinforces, and even introduces cultural values and practices. In this sense, the Islamic dinar has the potential to be highly valuable as a tool for transmitting and rewriting the cultural practices of regions controlled by IS.

The Flashpoint spokesman is absolutely correct that the Islamic dinar per se will have no value outside its region save as precious metal. But this is only a small fraction of the what currency does. What Flashpoint’s position ignores is the surplus cultural value implicit in that unexchangeability. Most local currencies are hard, if not impossible, to exchange. We can see examples of this surplus cultural value in such existing local currencies as the BerkShare, Bristol Pound or Amsterdam Makkie. And when the value implicit in local currency is applied to a region as unstable as the middle east, and a culture as totalitarian as IS would prefer, this value has the potential to increase exponentially.

The primary biases of local currencies with limited exchangeability are threefold:

1.) A local currency strengthens community identity. This point is almost self-evident. A currency that shares the name of one’s region or community, and belongs only to members of that community is both a symbol and enforcer of in-group identity.

2.) Local currency keeps wealth circulating within a proscribed region and society. It discourages hoarding, speculation and foreign extraction of wealth. As a consequence, there tends to be more opportunity for intra-community business, especially for small and medium-sized operations. Local currency therefore tends to foster the perception of an equal citizenry, while discouraging the formation (or at least the visible formation) of an economic elite.

3.) By the same token, local currency tends to foster a sense of regional isolation. When a local currency may not be exchanged for a non-local one, trade between regions and nations becomes exceedingly difficult. To use the BerkShare as an example, one may purchase locally-produced groceries in BerkShares, but not computers, copper or automobiles. The Dutch Makkie is backed by users’ volunteer hours within their community, and is thus primarily accepted as payment for other services, not goods. In Massachusetts and Amsterdam, where citizens have access to  national currencies, these local moneys are complementary. They may improve community cohesion and commerce, but always within the field of a larger national economy. In IS-controlled territory, however, such complementarity will not be an option, and regional isolation and in-group chauvinism are likely to flourish as a result.

Taken together, these biases promise to deliver exactly the cultural climate sought by the Islamic State. Facility of day-to-day trade improves infrastructure and the perception that IS is fit to govern, while the bias against hoarding supports IS’s rhetoric of (Sunni) Muslim equality in the emerging Ummah. Meanwhile, the practical impossibility of foreign trade bolsters IS’s attitude of righteous aggrievement and besieged urgency.

Since so much of IS wealth flows from Gulf-State sources, this new arrangement also has the potential to create a two-tiered monetary system—one for the citizens, and one for government. The currency of statecraft, (which alone can purchase guns and ammunition) will continue to flow to the political elite in the form of riyals, while the currency of wages will become segregated in the Islamic dinar. Upon full adoption of the dinar, it will therefore become even more difficult for any inhabitants of the Islamic State to acquire military, police, or political power without the blessing of IS leadership, thus protecting the entrenched Islamic State from local challenges to its authority.

It’s no surprise that the press sometimes comes up short in its appraisal of a phenomenon as complex as IS. As a former (small-time) journalist, I’m sympathetic to the pressure on reporters to master a complex subject in the time it takes most people to write an email. But Flashpoint is not a journalist on deadline. It’s a private intelligence adviser, presumably one with clients whose actions impact those of us living here in the West. It’s entirely possible that their quote to Mashable was strategic—or out of context—and does not represent the sum of their understanding when it comes to the Islamic dinar. I hope so, for so long as our analysis of IS remains polemical, we remain at a disadvantage, and therefore at risk. Our political goals may be motivated by ideology—liberty, suffrage, the rule of law—but the West will only begin to beat back totalitarian Islamic fundamentalism when our approach begins with actual facts rigorously organized by proven theory. Reality must always precede ideology, or else the latter is doomed.

If anyone is interested in learning more about currency as a medium, I strongly recommend Douglas Rushkoff’s doctoral dissertation, Monopoly Moneys, available online for free via Utrecht University Repository.