Capitalist System: Some Deficiencies

How has all this happened? It is my humble submission that there is nothing wrong with the original institutions of private property and freedom of enterprise; they have always been there. They are not a new phenomenon and they are not a product or gift of Capitalism, as is often claimed. What is unique about Capitalism is not its reliance on private property, profit motive and freedom of enterprise; it is the overarching philosophy of uncontrolled self interest and unsubstantiated postulate that human beings are motivated by financial, pecuniary and profit-seeking motives only. That man, is only an ‘economic man’, i.e. one who is exclusively and perpetually engaged in the calculation of profit and loss; that decision making is solely on the criteria of personal gain, that state has to be neutral; and that in economic matters, market is sovereign. In a nutshell, the hedonistic philosophy that economics is to be value-free and that the only driving force in the economy is maximization of profits, motivated by personal gain and pleasure. These have been decisive factors that go to fashion the life of an individual and of the economy and society under capitalism. In this process of economic transformation, ‘capital’ plays the most important, a dominant and piloting role. Those who have capital are the real masters of the system. As capital formation depends on savings, the class that can save most, the profit earning class, are the premium mobile of the society, the real princes of the system. Wage earners are at best instruments in the process and not real generators of wealth and its beneficiaries. They are only grains to the mill. It is this shift from man to money, from values to profit and wealth maximization and from physical generation of goods and services to almost unlimited expansion of money and virtual money that has changed the focus of economic life and activity. That is the main character and true spirit, the elan of the Capitalist System. Originally, money was only a medium of exchange to facilitate economic activity. This has been described by economists in the form of a formula CMC – ‘Commodity changes into Money again into Commodity’. In this system money facilitates production and exchange of commodities and services, things that are going to make life better. In Capitalism this was reversed so as to become MCM – ‘Money, Commodity again for Money’. With the result that focus shifted from production, services and physical wherewithal as the main objectives of the economy to monetary gain and monetary expansion, as the ultimate objective. Money was no longer a medium and a facilitator; it became a commodity desired in its own right. But that was not enough. A new transformation has taken place in the present stage of Capitalism. The money-centrism is now approaching its final culmination leading to a new formulation which may be described as M-M-M – that is when money produces money almost without physical asset creation. This leads to the bubble economy we are witnessing in the world of derivations. This is the ultimate shape of capitalism. But this also has in its bosom the seeds of instability and non-sustainability that may herald the final collapse of the system. Let us see where the system is driving humanity.

Source: Contemporary Economic Challenges and Islam, Khurshid Ahmed. Republished with permission.