Financial Capital Vs. Real Wealth

Many people assume, particularly related with Islamic Finance, that modern form of money is similar to the traditional type, but a closer look suggest something else. Capital as it is called in the modern capitalistic world, is quite different from the traditional form of money, however it still can help you in your daily transactions, but its creation, circulation, maintenance and protection requires a wholly new kind of a setup which has never existed in the entire Islamic history. The point of concern are the political implications which emerges with the use of this form of medium of exchange, and only reviewing the matter from the perspective of Islamic finance or trade would not allow one to comprehend issue with its entirety. Here is a comparison, and the purpose to highlight is to allow some food for thought for the concerned. 

S.No.	Financial Capital	Real Wealth
1	Capital exists within institutions (banks, money market etc), it cannot outside it, it doesn't have a form or shape, it’s a ghost	Wealth has a form, occupies some space, its tangible
2	No Intrinsic value: Its value depends on the trustworthiness of the institution public (Central Bank) or private (Private Bank) in the eyes of the public	Intrinsic Value: it doesn't need institutional protection for its value
3	Created out of debt with a stroke of a pen	Exists naturally or is produced or extracted with hard work
4	Only its right to usage is passed to debtor, and destroyed on return	can be physically owned, delivered, doesn’t gets destroyed unless it has a shelf life
5	If everyone demands, cannot be converted into Physical cash (despite insurance, central bank bring the lender of last resort accounted for)	It’s already in the ownership of the some individual or exists in nature
6	Its value depreciates & quantity increases constantly...	Value depends on shelf life, quantity only increases gradually with hard work
7	Public doesn't owns it, rather Capital owns the public (the flow of capital isn't in control of public, but public is dependent on its flow)	Vice versa
8	Infinite accumulation is possible	Infinite accumulation not possible
9	By virtue of its debt base, it transfers the ownership of real wealth to the issuing institution (hypothecation can also be termed so) – it creates an illusion of ownership	The ownership is real when one own an asset
10	International financial capital moves in an out of a state without state consents	Movement in and out of country can be controlled
11	Monopoly of financial institutions on its movement; Control of capital gives the state unprecedented power to the state over its subjects	No such monopoly exists, unless its production is controlled by private or state monopoly, but once created and owned, its free
12	Can only be stolen and is stolen constantly by the state (money creation, debasement, hidden tax, theft), labeled as inflation	Can be stolen by a thief, but the owner knows it when its gone, and he can get it back as well
13	Its value is recognized internationally to the extent of the political influence of the state in geo-political affairs, every one excepts a dollar, but hardly anyone would accept Rupee globally	Value is universally recognizable, like that of gold or silver

Food for thought for students of Islamic Economics and Finance: 

The discussion on nature of money and its production etc. is fundamentally a political discussion, or at least is of the domain of political economy, and any discussion on monetary economics should be preceded by a theory of politics and political economy… This view of financial capital also allows us to see capitalism in new light, the definition of capitalism would therefore go like: Capitalism is the name of a system formed by interdependent institutions including state, market, civil society, law enforcement, judiciary etc. which regulates and manages the creation & movement of capital across the society to enable public to maximize its freedom to maximize pleasure... 

It should be asked:

• Does political theory of Islam or Islamic political economic theory accommodate usage of capital, if yes then how, if no then what should be done?
• If let’s suppose government provides free of charge bank account to every citizen irrespective of its financial condition, then can a poor fellow receive zakat through transfer of money into his account?
• Should bait-ul-mal assets be stored in the form of financial capital?
• Is it possible to achieve the ideal of equitable distribution of wealth in an economy driven on financial capital?
• What would be the role of financial capital In a society where the majority doesn't believe in capitalistic ideals of wealth maximization, rather focus more on welfare of common man?
• In presence of financial capital, can we ever create an economy where real market dominates financial market? If not then can we ever create a society free from poverty and economic discrimination under the dominance of financial markets?
• If Islamic Finance claims to be driven by real economy not financial economy, then would the conventional interest based financial system would ever allow Islamic Finance to supersede and dominate the financial system in any country? If not then how the goals and ideals of Islamic Economics will ever be achieved anywhere in the world? How a compromise on Islamic ideals can be perceived? 
• Etc. 

The students of Islamic Finance and Economics must ponder on these issues to come up with possible answers in the light of true spirit of Islam, as otherwise the core purpose of Islamic finance and economics would go in wane...