From its genesis, capitalism has had near universal acceptance as being inextricably linked with all economic activity: good or bad. This impulsive position continues unabated, despite the tumult of the past few years. Even its detractors have found themselves wanting when trying to expunge the term from their collective psyche; as the fervent critic Ha Joon Chang says, “capitalism is the worst economic system except for all the other forms.” [1]

Invariably, people have found themselves conjoined with the term, unable to articulate their view without reference to capital. It somehow affords legitimacy to any new economic deliberation and any approach or theory without alignment to this term (and there have not been many) is instantly robbed of potency and credibility.

The use of the word “capitalism,” now affords a position as the gauge for all economic theories: an unvoiced yet seminal fact. So is pervasive capitalism a fundamental truth? Characterizing it as such implies that the functioning of society is not possible without adherence to its foundational tenets. One way of summarizing these core beliefs is as follows:

· Supply and Demand – This may be a neat inherent value derived from core liberal principles such as freedom of choice, however it can be, and is problematic. An illustration of this has been the societal emergency that has resulted from the COVID epidemic, where the Global North has usurped vaccine supply simply because it can afford to do so. This phenomenon was famously explained by Amartya Sen when he evaluated the Bengal famine and found that grain was being exported out of Bengal at the time of the famine, to the highest bidder. [2]

· Property Rights – The ability to own and dispose of property at will is a much cherished and non-negotiable principle that is understood as a necessity for business to function. Yet capitalism places no limit or moral structure on these rights, and in effect, they trump all other rights. There is simply no compunction, moral, legal or otherwise that would compel someone to release their property for the benefit of society.

· Growth (of Capital and Wealth) – Growth is rooted in the flawed assumption of “unlimited wants” that man ,supposedly, intrinsically possesses. After all, “Economics is the study of Unlimited Wants and Limited Resources,” is a definition still much vaunted in every economics textbook. [3] This statement is at the very epicenter of why there is a dearth of alternatives. It is at once the main rationale and the main failing in the capitalist project.

In drafting an alternative to capitalism, we should ask ourselves: has a society void of capitalism ever existed? Admittedly competing economic philosophies (Mercantilism and Socialism) were not steeped in altruism and benevolence, but they did endure. So, why the collective amnesia about alternative ideas? One explanation may lie in the fall of communism and Fukuyama’s influential essay “The End of History and the Last Man.” [4] Fukuyama postulated that all competing ideas (i.e. communism) were vanquished. All that remained were mere fluctuations of the central belief of Neo Liberalism and by extension Neo Capitalism. Every possible foe had been eliminated: past, present and future. The experiment with an alternative had failed and been finally put to rest, leaving capitalism the uncontested victor.

 The Evolution of Capital

So what does it actually mean to be a capitalist? In its most unsullied form, it stands to reason that to be a capitalist is to pursue capital which follows from the teleology of the term, or what it is trying to achieve. Hence Capitalism pursues Capital, Socialism pursues Society, Liberalism pursues liberty and so on.

Capitalism reached its apotheosis during The Roaring 20’s. After a euphoric rise, the stock market crash of 1929 and The Great Depression brought home a stark reality, but inadvertently instigated more sinister plans to save capitalism from itself. Thus the “New Deal,” as espoused by F.D. Roosevelt (J.M. Keynes being its chief architect), was perhaps the biggest sustenance that capitalism would ever receive as it was the engendering of a softer, more compassionate view of capitalism. The New Deal and Keynesian economics created the notional basis upon which new variants of capitalism breed today. Capitalism took credit for the postwar “Good Times.” But the “Good Times” inevitably brought about the “Bad Times” of the 70’s and 80’s, precipitating the rise of Neo Classical Economics – a return to its more ignoble ideals. Capitalism no longer needed to live in the shadows. The trend was unquestionably upwards, buoyed by increased deregulation of the financial industry and the over financialization of society (aspects which were not benign nor incidental). That is until 2008 when Subprime Mortgages, Junk Bonds and Credit Default Swaps shattered that perception almost overnight. This was where the point of inflection could have and should have been.

The Occupy movement that arose after the Great Financial Crash was the catalyst that could have dealt the crucial blow. It did not subsume itself in the capitalist paradigm, yet pristine as these demands were, the movement lacked permanence and endurance. As Adam Curtis states, “it merely fizzled away.” Overcoming the “Real Change” demanded by the Occupy movement, had paradoxically given capitalism renewed energy. [5] Instead, the godfathers of capitalism introduced a collection of policies and processes that circumvented any meaningful change, disguising them as supposed learnings from the Great Financial Crash.

Is Trade the Same as Capitalism?

Somehow during the evolution of capitalism from the 18^th century, trade and capitalism have morphed into a singularity, unnervingly implying that trade is an impossibility without being guided by capital. Although this generalization is rarely voiced, it is prevalent just the same. However, trade and capitalism are different: capitalism is a view on the creation and ownership of wealth while trade is an exchange of wealth. 

As for capital, it is surely inescapable, or is it? Undoubtedly it has its purpose – every business, government and household relies on capital to function and grow, but this definition of capital does not equate to capitalism. The “ism” is the fulfilment and pursuit of capital for its own sake. Best exemplified by Milton Friedman when he stated, “shareholder value is the only objective of business, ” suggesting that capitalism is not just a means but an end in itself. [6]

On the other hand, trade has been around far longer and served its purpose for over a thousand years. The exchange of goods or services for comparable value (i.e. bartering) or for an intermediary concern (i.e. money) is a practice as old as time itself. Found in every culture, the practice of trade binds society together, forming a common language for man to pursue his needs. It does not necessitate or covet a dependent idea whether that be capitalistic, socialist or even Islamic. Instead, it relies on trust and the fulfilment of the human spirit. So it becomes truly baffling, when the exchange of goods and services (trade) is conflated with an ideology such as capitalism without any hint of protest.

Mutations of Capitalism

Any proposed economic reform such as “Stakeholder Capitalism,” “State Capitalism,” “Environmental Capitalism” and even contrasting views like “Disaster Capitalism” and “Surveillance Capitalism” always seem to find the term priced in. The currency of any proposed change must be measured in terms of “Capital.” It is the ubiquitous nature of financialization, in particular, that stops the proponents of a new idea from establishing its persuasiveness. Questions are asked, “How will it be paid for?” “What will happen to the debt?” “Where will you sell to?” and finally “Who will provide the capital?” The last being the most instructive and damning of them all. Saddled with these questions, advocates of any new conception feel compelled to provide a riposte. All too quickly the lucidity of the original idea is then left diluted and obscured.

Stakeholder Capitalism

Take Stakeholder capitalism, where the purpose is to address wider values and not just to maximize profit. This is perhaps the most legitimate heir to rampant Shareholder capitalism, with its insidious goal of maximising profit at all cost. Advocates argue that widening the participant base (i.e. stakeholders), will eventually facilitate a long term structural view and eradicate short term profit and rent seeking. Moreover, they argue that this was the default position of capitalist economies before Hayek and Milton Friedman subsumed the debate. A return to stakeholder capitalism would be a return to the normal. In 2019, the statement on the purpose of an organization was changed to reflect this new found morality.

Wider stakeholder concerns have now become commonly accepted, at least in name, by many of the fortune 500 companies. This idea in particular has become the standard of how reform should work, without upsetting the general flow of capital and markets. It is intended that wider stakeholders from community, environmental and social concerns will now be consulted and may even get seats on boards to express their concerns and tackle these “Negative Externalities.” However, these damaging activities still get converted to a dollar value, resulting in corporations simply paying for bad behavior, such as carbon offsets, without necessarily stopping it.

State Capitalism

State Capitalism positions itself on the spectrum between total state planning and free markets. Variants of this phenomenon differ in the degree to which the State drives its agenda onto the corporation.

The Communist Party of China, in particular after the Global Financial Crash of 2008, has found a sweet spot in identifying and pursuing its goals of unprecedented growth through State Capitalism. While this pivot towards state capitalism has undoubtedly been successful, could it have done so without riding on the back of the Free market model? In essence, the only aspect curtailed from unadulterated Neo Liberal free markets policies is interference with existing political and power structures. As Mark Fisher writes,

“The coexistence of franchised coffee shops and internment camps are by no means incompatible.” [7]

This is a prescient view given the developments in Xinjiang, China. Paradoxically the Chinese Communist Party still maintains that recent economic developments are part of the primary stages of the Socialist project.

But China is not the only country that purports to identify itself with State Capitalism. The Singaporean state has a large holding of companies which help define the State’s outlook. Surprisingly Norway with its burgeoning wealth fund derived from oil, also conforms to State Capitalism. The Norwegian state owns 35% of the Oslo stock market. [8] Although Singapore and Norway are perhaps on the more acceptable side of state capitalism, it is justifiably difficult to find any big ideas in these landscapes.

Is Iqtesaad a credible alternative?

The term for Islamic Economics is sometimes contended, since it has no set Arabic definition. However, it is most frequently referred to as “Iqtesaad.” One may ask, why this social science has been underrepresented in its own right throughout the rich tapestry of Islamic knowledge, it has in fact been intrinsically blended into Islamic subconsciousness and governance. The omission of these contours around Islamic economics has counterintuitively given it fortitude through the Islamic era.

Ibn Khuldun sums up the inter disciplinarian model and framework when he states the following in Muqaddamah:

“The strength of the Sovereign (al-Mulk) does not become consumed except by implementation of the Shari’ah; 

The Shari’ah cannot be implemented except by a Sovereign (al-Mulk); 

The sovereign cannot gain strength except through the people (al-Rijal); 

The people cannot be sustained except by wealth (al-Mal); 

Wealth cannot be acquired except through development (al-‘Imaran); 

Development cannot be attained except through Justice (al-‘Adl); 

Justice is the criterion (al-mizan) by which God will evaluate mankind; and The sovereign is charged with the responsibility of actualising justice” [9]

Iqtesaad has often been positioned midway along the spectrum of a planned (Socialist) economy and a free market economy. Locating Iqtesaad on this spectrum, while seemingly harmless, is unhelpful and needlessly assigns it a value in reference to the two ends of the spectrum. Strong advocates such as Umer Chapra amongst others have been lured into this convenient representation. [10] Such positioning and comparison unfairly traps Iqtesaad into a compartmentalized view of its economic model.

All economic models are value laden, yet capitalism has the unique distinction of trying to present itself as being “value free.” Iqtesaad does not cloak itself deceptively in being value free, in fact it makes a point to stand firm in its Islamic values without feigned claims of neutrality or contrition. Similarly, it does not defend itself as a receptacle within which anything and everything can reside. To external observers, the demarcations within Iqtesaad may seem quite abrupt, such as the prohibition of usury. However, this abruptness also impedes it from morphing into an ever expanding vessel. This seeming rigidity does not have to be seen as undesirable because it ensures that the sanctity of interwoven associations between moral values and economic models is inherently preserved.

For the Muslim world does this then form the next “Big Idea?” Albeit one that is 1400 years old. The cloak of capitalism is not necessary to frame the discussion around Iqtesaad as capital simply becomes meaningless in the pursuit of wider objectives. Iqtesaad needs to be considered devoid of these restrictions and its value need not be trapped by the considerations that have befallen other variants of capitalism.

Although the idea of Iqtesad is steeped in the Islamic faith, its relevance to the world today is pertinent. It can provide uniqueness to a realm of study that has been oscillating for far too long between free markets and state planning, between the invisible hand and the visible hand. The Muslim world constitutes more than a fifth of the world’s population and growing. The question that needs to arise is why this major constituency should be subject to an economy that is not in line with their values and beliefs. The non-Muslim world may choose to pass on this initiative considering it too close to a set of principles that is not suited to their disposition. But before they do so, they should be reminded that modern economics, especially in the last 30 years, has been afflicted by a confusion of purpose. The stoic and stringent axioms of rationality have been breached, and behavioral economics (i.e. irrationality of human nature) has now burgeoned as a field of study. The search for happiness and the safekeeping of the environment are now paramount and have as much to do with economics as the maximization of wealth, a fact that Iqtesaad recognized some centuries ago. And, it was precisely because Iqtesaad, unlike capitalism, wasn’t so boxed in, that it could pursue such an array of objectives.

Works Cited

[1] Ha Joon Chang, 23 things they don’t tell you about capitalism, 2010

[2] Amartya Sen, Poverty and Famines

[3] Lionel Robbins, 1935

[4] Fukuyama. The end of History and the last man

[5] Adam Curtis, “Can’t get you out of my head” documentary

[6] Milton Friedman, New York Times Essay, 1970

[7] Mark Fisher, Capitalism Realism, 2009

[8] Norwegian Ministry of Trade and Industry, 2005

[9] Ibn Kahldun, Muqaddammah, 1958

[10] Umer Chapra, Islam and the Economic Challenge 1992

Photo Credit: Photo by Adam Nir on Unsplash

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About the Author: Riaz Hassan is a writer and a co-host on The Thinking Muslim podcast with a particular focus on Economics. He has previously written on China, Capitalism, Artificial Intelligence and Short Selling from an Islamic perspective. He has worked in a senior capacity for over 20 years in consultancy and innovation. He has a Bachelors degree from The University of Warwick and a Masters from University College London. You can find him on Twitter here.

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