What is Capitalism, Growth and Evolution and other Implications of Capitalism  

Roman Empire is supposed to be the birthplace and hometown of capitalism. With the growth of the Empire, the capitalistic economy flourished too and established itself in Europe. However, with the collapse of the Empire, mercantilism was almost replaced by feudalism in Europe, while the former managed to survive in Arabia by 6th century. The 7th century brought with it advent of Islam, with which mercantilism once again expanded itself to Europe, Asia and Africa as the far off lands came under the influence of Islam very soon. Abraham L. Udovich has mentioned in his work, “Partnership and profit in Medieval Islam” that merchant capitalism was founded by Muslim/Arab traders during 9th-12th centuries. The monetary system established was based on a strong and stable currency, that is, Dinar, carrying high value. This monetary market economy introduced these concepts which are still in vogue, such as, ‘limited partnership (mudaraba), and ‘partnership’ (mufawada). The allied and relatively advanced concepts of credit, profit, capital (al-mal) and accumulated profit (Nama al-mal) were transported to medieval Europe from 13th century onwards through Arabs.[i]

what is capitalismFollowing passage asserts the same regarding the history and inter-linkage of mercantilism, capitalism and spread of Islam: “ the medieval Europeans essentially learned mercantilism from their Islamic neighbors, evidenced in large part by a number of economic terms in European languages, that are derived from Arabic, such as ‘tariff’ and ‘traffic’. From 1300’s, Europeans would begin expanding their mercantile practices, resulting in social mobility hitherto unknown in European culture as well as in pushing Europeans as it did the Muslims, to explore distant parts of the globe. The voyages of discovery were entirely driven by mercantile ambition.”[ii]

Capitalism passed through many phases and stages before reaching its present shape. All of these may not be covered here in detail due to limited space. However, these include commercialism, monopolism, industrialization and globalization. The last two bear a special significance not only for capitalism but also for the history of mankind. Industrial Revolution of 18th and 19th centuries, according to The Concise Encyclopaedia of Economics literally revolutionized the human life; it is one of the major incidents of the recorded human history. It is the ‘machine’ which has not only transformed the production but also the environment, institutions, relations, outlook, philosophy, science, culture, almost every thing under the sun. The scientific advancement brought comfort, health, long life and prosperity with it, and on the other hand it ‘gifted’ humanity with imperialism, colonial rule, new modes of slavery and subjugation, horrific wars, deadly weapons and innumerable other curses. The Industrial Revolution provided capitalism with wings, with which it invaded the entire world with unmatched speed. The inventions of post-industrial age converted the world into wonderland. The logical corollary of such scientific advancement, break through in communication and transportation is definitely globalization. Some thinkers consider globalization as prolongation of imperialism. This can be asserted that globalization which is a purely 20th century product has reduced the world to a small village with swift modes of traveling, on-line transactions and latest information technology. Globalization has brought with itself new modes of exploitation, social, cultural, political challenges and novel forms of identity crises. This we are going to discuss in the coming section that is selective influence and choice of Islam in capitalistic set-up.

However, before moving to this section it will be quite relevant to see the political off-shoots of capitalism. The political institutions in any form around us are direct outcome of capitalism. There is nothing wrong in this seemingly sweeping statement. For a long time the world has remained divided in two poles or camps along with its entire set-up, that is, capitalistic and counter capitalistic.

Capitalism, though fundamentally an economic system, has given birth to a number of liberal political movements and institutions based on individual liberty and rights including that of private property. It has been taught to us by history that economic stability is ambitious enough and always strives for political power. Political power, in turn, wishes for expansionism and assumes the role of imperialism. Actually these are economic interests which garb themselves into political outfit. This aspect we are going to study in brief before moving forward.

In fact Age of Enlightenment is marked by the rise of two phenomena, that is, capitalism and Liberalism. Some theoreticians do not see any intrinsic relation between the two and just consider it an example of a non- concomitant occurrence. However, it has been debated with strong arguments in favour that both are not only interrelated rather capitalism is a fore-runner of liberalism, as the latter insists on individual liberty, rights and opportunities. Among the most prominent thinkers and theorizers of the Age of Enlightenment, it was John Locke who first of all spoke for State of Nature, Natural Law, Social Contract, and Rights of Man including Right to Private Property. Bertrand Russell, in his famous History of Western Philosophy has written about Locke, capitalism and liberalism , “ ……………..That is to say , men should be prudent. Emphasis on prudence is characteristic of liberalism. It is connected with the rise of capitalism, for the prudent became rich while the imprudent became or remained poor”[iii].

Locke defined political power in the following words, “Political power I take to be the right of making laws, with penalty of death, and consequently all less penalties for the regulating and preserving of property, and of employing the force of community in the execution of such laws, and in the defence of the commonwealth from foreign injury, and all this only for the public good”[iv]. Property is very prominent in Locke’s Political Philosophy, and is, according to him, the chief reason for institution of civil government: “The great and chief aim of men uniting into commonwealths, and putting themselves under government, is the preservation of their property; to which in the state of nature there are many things wanting”.[v] He further asserts that, “The supreme power cannot take from any man any part of his property without his own consent”.[vi]

The related ideas of liberalism are: political freedom, individualism, laissez-faire, liberal democracy, open society, mixed economy and market economy. Besides Locke, its chief exponents include, Adam Smith, Thomas Malthus, Jeremy Bentham, John Stuart Mill, Thomas Hill Green, Alfred Marshall, John Maynard Keynes, Ludwig Von Mises, Freidrich Von Haykes, Milton Friedman, Robert Nozick and John Rawls.

Liberalism does have many shades and nuances and has been broadly sub-divided into Classical, Social and Modern. We shall, however, confine ourselves only to the last named which flourished in the Age of Enlightenment and rejected a number of in-vogue and prevalent concepts such as, i)Divine Rights of the Kings, ii) Hereditary Status of the Kings, iii) Established Religion, iv) Foundational Principles and v) Protectionism. The modern liberals advocated free market economy. The above mentioned subjects will be discussed in detail with reference to Islam in the same essay a little later.

However, all these brands of liberalism have a consensus on freedom of thought, belief, action and speech. All these principles invariably lead towards the rule of law, transparent system of government based on open and free elections with complete equality among the citizens. Perhaps we are all familiar with this system as it is called ‘Liberal Democracy’ throughout the world. The gradual evolution of liberalism from capitalism and representative dispensation from liberalism are, nonetheless, inevitable. All the rights envisaged by liberalism may be secured only through this system of government. The same has been expressed in the Oxford Manifesto of Liberal International in the following words, “These rights and conditions may be secured through true democracy. True democracy is inseparable from political liberty and is based on the conscious, free, and enlightened consent of the majority, expressed through a free and secret ballot, with due respect for the liberties and opinions of minorities”.

However, like any other system, capitalism is not without inherent flaws due to which it has been criticized in all ages by religious and non-religious circles alike. It has been considered a source of exploitation and monopoly, wars, unrest, strife and many other evils of socio-political life. Its most loathsome feature is interest or usury, condemned by all the religions, and Islam specifically. Its prominent critics include Karl Marx, Friedrich Engels, Lenin, Mao Zedong, Leon Trotsky, Pierre-Joseph Proudhon, Rosa Luxemburg and amongst the contemporary thinkers Naom Chomsky. Globalization has further added to the severe critics of capitalism. Even liberalism and democracy have their opponents and strict reviewers.

After this much introduction of modernity, capitalism, liberalism and democracy, it is high time to switch over to Islam and to see Islam’s original standpoint about all these and subsequent attitude/reaction regarding these trends and movements.

[i]Maya Shatzmiller, Labour in the Medieval Islamic World, (Leiden: Brill Publishers, 1994), 402-403.

See also:

Jarius Banaji “Islam, the Mediterranean and Rise of Capitalism”, Journal of Historical Materialism, (2007), 47-74.

Subhi Y. Labib, “Capitalism in Medieval Islam”, The Journal of Islamic History, (1969), 79-96.

[ii]The European Enlightenment Glossary, “Capitalism”.

http://www.wsu.edu./—dee/GLOSSARY/CAPITAL.HTM

[iii] Bertrand Russell, History of Western Philosophy, (London: George Allen & Unwin Ltd., 1979), 593.

[iv] Ibid, 607

[v] Ibid, 604

[vi] Ibid, 609

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