Fall Of Capitalism and Rise of Islam by Mohammad Malkawi

The second major principle of capitalism is the principle which defines the value of the product. The value of the product is the degree of its importance, relative to a particular person or relative to another thing. When the value is used relative to a person, it is called “the value of the benefit,” or simply the “benefit.” When measured against another thing, it is called the “value of exchange” or simply the “value.” Under capitalism, the value of the benefit of a thing is evaluated by its marginal benefit. The marginal benefit of a unit is that benefit which satisfies the weakest need. This is known as “the diminishing marginal utility” theory38. According to this theory, the benefit is not evaluated from the viewpoint of the producer and the costs of production only; this would only consider supply but not demand. Nor is it evaluated from the viewpoint of the consumer alone (benefit, desirability, and relative availability or shortage); this would imply the consideration of demand without supply. The benefit value should be observed and evaluated from the viewpoint of both supply and demand.

Marginal utility states that the benefit of a thing should be assessed at the least or minimum point of satisfaction. For example, the value of a loaf of bread should be assessed at the least point of hunger and should not be assessed when everybody is hungry or when the one who needs the bread is too hungry. In other words, the benefit value of the bread is measured at a time when bread is abundant in the market, not at a time when there is a shortage of bread. The law of diminishing marginal utility does not always hold as we shall see later; this could very well be one of the sources of defects and dormant faults in the foundation of capitalism.

The exchange value is an attribute which makes a thing suitable for exchange with other products. The strength of exchange of a thing is measured relative to another thing. For example, the value of exchange of wheat relative to corn is estimated by the number of units of corn which should be conceded to obtain one unit of wheat.

Exchange occurs between two commodities or services which are similar or close in their values. The study of the exchange value is necessary for economists because it is the basis for the exchange of products. It is a utility which can be measured; it also serves as a scale with which commodities and services are measured and by which the productivity of actions can be measured.

Production is defined as the work invested for creating benefit or increasing benefit in a thing. In order to identify whether a work is productive or not or to determine which work has greater productivity, there must be an accurate scale by which productivity can be measured. This scale is the societal value of the various products and services. In other words, it is the collective evaluation of the work spent and the service provided. Such an evaluation is necessary because in the modern time, production for the purpose of exchange has dominated and almost replaced production for consumption. In today’s economy, virtually every person exchanges his/her production with other people’s production. The proper way of exchanging products and services is through compensation. In order to estimate the amount of compensation for a product or service, the value of exchange needs to be estimated. Hence, the knowledge and definition of the “value” is an essential factor in production and consumption; it is essential for all the studies leading to the satisfaction of the needs.

In modern history, this value of exchange has been dominated by one type of exchange, the exchange of a product or service for money. The exchange value of a commodity or a service for money is called the “price.” The price, therefore, is the amount of exchange of a commodity or a service relative to money. The difference between the value of exchange and the price is that the value of exchange is the exchange ratio of one thing related to (any) other thing, while the price is the exchange ratio of one thing related to money. It is perceivable that the prices of all goods rise or fall at the same time. It is impossible, however, for the exchange values of all commodities relative to each other to rise or fall at the same time. It is also possible for the prices of commodities to change without resulting in a change in their value of exchange or value of benefit. The price of a commodity is only one of its values; it is the value of a commodity relative to money. Naturally, the price has become the de facto scale for deciding whether a thing is beneficial or not and for defining the degree of benefit of that thing. The commodity or the service is considered productive or beneficial if the society puts a high price for this commodity or service. The degree of benefit of this commodity or service is measured by the price which the majority of the consumers agree to pay for possessing or utilizing it. Products and services evaluated by a price can be any commodity or service: agricultural or industrial product; the service is that of a trader or transportation company, doctor or engineer.

he value of a commodity under capitalism is a relative (virtual) one and not absolute. The value of a loaf of bread, for example, is its marginal benefit assuming that the bread is abundant in the market; this is based on the diminishing marginal utility concept. When the loaf of bread is offered to one who is hungry and the bread is scarce, the value of the bread is too high. The value diminishes until it settles down when the people demanding the bread are no longer hungry and there is enough bread for those who want to acquire it. So the value (which is the benefit of the product) needs to be estimated at the time when the demand for the product is the lowest and the supply of the product is plentiful.

The product also has another value, which is the exchange value. The exchange value is the quantity of commodities and efforts that could be exchanged in return for the loaf of the bread. The value becomes a price if what is obtained for the loaf of the bread is money. These two values, under capitalism, are separate, and have two distinct names, benefit and the value of exchange or money.

This definition of value is inaccurate. Note that in both views of the value (benefit and the price), the estimator is measuring the value relative to the consumer. This view does not provide any measure of the benefit of the product itself. In case of the loaf of bread, the definition of value does not refer to the inherent benefit in the bread in the sense that bread has a property of satisfying the hunger. In reality, the value of the bread is the quantity of benefit in it. When this quantity is measured, the element of scarcity should be taken into consideration, but it should not define the value. This view of the value (quantity of benefit embedded in the product) holds whether the product is possessed through hunting, manufacturing, farming, selling, or buying. The benefit remains the same whether this was related to the person or related to another thing, whether the product is plentiful or scarce. Indeed, value is a name for a specific thing which has a specific reality; it is not a name for a relative thing, which varies over time and from one condition to another. In other words, the value should be an objective measurement of benefit and not a relative one.

The capitalist definition of value is a major flaw and it is fundamental to the political economy of capitalism. This view has led to the creation of a virtual economy which gives the illusion that the economy is far greater in size than what the real economy is or should be. The phenomenon of virtual economy will be further discussed in subsequent sections.

The marginal utility value is an estimation which is used to help regulate production on the basis of the worst-case scenario of distributing the commodities. Thus the value of a commodity is estimated based on the lowest limit of its consumption so that production proceeds on a guaranteed basis. The marginal utility is not really the value of the commodity; it is the market estimation of the need for that product, so it is a measure of the demand for the product rather than a measure of the benefit of the product, which is the real value. The value (benefit) of a product would not drop if its price decreases, nor would it rise if its price increases; that is because the value should be estimated at the time of evaluating the product’s value.

The capitalist definition of the value according to the diminishing marginal utility creates the illusion that the value of a product increases as its price increases and conversely, it decreases when its prices decreases. This illusion has helped create a category of customers willing to pay high prices for products under the assumption that the value of the products is high. Therefore, the marginal utility theory should be viewed as a theory for price rather than a theory for value. Advocates of capitalism recognize the difference between price and value, although they claim that price is just another type of value. The estimation of price is governed by the abundance of demand together with the shortage of supply or the abundance of supply together with the shortage of demand; thus price is related to the level of production of a commodity. However, the value of a product should be defined and estimated by the quantity of benefit present in the commodity at the time of evaluation, bearing in mind the element of scarcity; so supply and demand do not utterly affect the value; rather they affect the price.

As such, the subject of value as discussed in the political economy of capitalism is flawed at the level of its definition. Any subject based on this definition will be flawed as well since the basic concept is false.

Note that the benefit of a product can be measured in terms of the benefit of another product or effort; such an evaluation would be correct and would lead to much greater stability over the short term. If the value is estimated by the price, then the evaluation would be relative, not real, and may fluctuate over time according to the market. What fluctuates is the price only, not the value of the product. The use of the price is a means to obtain money according to the market and not according to the benefit inherent in the product.

The capitalists as well as communist scholars claim that benefits are the result of the labor which man exerts. This view is also incorrect because it totally ignores the initial benefit inherent in the raw materials. Raw materials such as oil, gas, gold, silver, and many others have inherent benefits which distinguish their values from other materials irrespective of the human efforts. A jeweler spends the same effort making rings out of silver and gold. The value of the gold ring and the silver ring are different; the benefit of the gold and the silver rings is estimated collectively by the society. Obviously, the effort of the jeweler is not a factor in the process of estimation.

Rivers, forests, oceans, wind (for wind energy), sun (for solar energy) all carry benefit which can be recognized and evaluated by the people in the society. The ability of wind to produce energy is a benefit that has been recognized and utilized for centuries. Human did not contribute to this benefit. The same applies for the energy internally present in the sun heat. All of these are examples where the real value of things is inherently built in the objects as they were created by God. The Quran depicts this inherent benefits in certain things allowing them to be of a certain value for people (Quran14:32):

Allah is He Who created the heavens and the earth, and caused water to descend from the sky, thereby producing fruits as food for you,

and made the ships to be of service unto you, that they may run upon the sea at His command, and hath made of service unto you the rivers