The relative scarcity principle establishes a relation between the needs and the desires of people on one hand and the means necessary to satisfy these needs and desires on the other hand. The scarcity principle asserts that man has certain needs, which require satisfaction, and there must be some means to satisfy these needs in order for man to survive. The needs recognized by capitalism are the materialistic ones, such as the need for food, clothing, medicine, education, and security. The moral needs and values such as pride, honour, and social responsibility, or spiritual needs such as the sanctification of God’s will, are not acknowledged by the capitalist system. Nonmaterialistic needs are disregarded and have no place in the economic studies. Milton Friedman confirms this view when he says, “Making money is the only social responsibility for an economic entity”37.

The relationship between commodities and services on one hand and the needs on the other hand is straightforward. Commodities and services embody within them certain benefits. The benefit is what makes something desirable; because the benefit inherent in a product is what enables that product to satisfy a human need. Therefore, a product (anything) is considered beneficial from the economic perspective if some people have a desire for the product, because it satisfies some of their needs. An economically beneficial product can be essential or marginal, useful or harmful. The only criterion for a commodity or service to have an economic value is the benefit embedded within the commodity or service which enables them to satisfy one or more of the human materialistic needs. Thus wine, tobacco, drugs, guns, and apples are considered to be beneficial because there are people who desire them. Stocks, derivatives, interest (usury) are also beneficial as long as there is someone who would benefit from their use. Electric cars carry great benefits to the society in terms of energy saving and environment friendliness. However, the economic benefit of these products is far less than the economic benefit of petroleum-based vehicles; hence, electric cars may become economically feasible only when the price of oil soars so high.

The capitalist looks at the means of satisfaction, that is, the commodities and services, from the viewpoint that they satisfy a need, without taking any other factor into consideration. Capitalism considers wine a beneficial product with economic value because it satisfies the needs of some people. The winemaker is perceived as one who provides a service with an economic value because he satisfies the need of some people.

Capitalism, as such, does not concern itself with the nature of society, but rather with the economic material resources (economic commodities and services), as means of satisfying human materialistic needs. This view in essence defines the primary function of the capitalist economic system: supply commodities and services to satisfy man’s needs, irrespective of any other consideration. Note that the moral factor is absent from the core foundation of capitalism.

Capitalism believes that the commodities and services are limited relative to the human needs. The human needs are thought to be unlimited and constantly growing. Capitalism also believes that besides the basic and primary needs, which must be satisfied, there are other non-essential needs and desires which continue to increase as man proceeds to a higher level of urbanization. Satisfying all these needs which continue to multiply and increase is a goal that cannot be completely fulfilled, no matter how much commodities and services are produced. In other words, the commodities and services will always be scarce relative to the needs which require these commodities and services.

This principle provides the basis for defining the main objective of the capitalist political economy and it formulates the main problem addressed by capitalism. In particular, this problem is defined by the following question: how to satisfy ever-growing human needs using insufficient resources and means of satisfaction? This is the essence of the principle of “relative scarcity of products” (34, 35). Scarcity of means to satisfy ends of varying importance is an almost ubiquitous condition of human behavior46.

From this perspective, the society faces an economic problem, which is the relative shortage of commodities and services. The inevitable result of this shortage is that some needs are either partially satisfied or not satisfied at all. If the means are scarce, they cannot all be achieved, and according to the scarcity of means and their relative importance, the achievement of some ends has to be relinquished46. In this case, it is necessary that the members of society agree on rules that decide which needs have to be satisfied and which needs are to be deprived. In other words, it is necessary to set a rule that decides the manner of distributing the limited resources over the unlimited needs. These rules are further defined by the other two principles, namely, the value of the product and the price mechanism.

Note that the main problem addressed by capitalism is the needs and resources in general and not the specific needs of a man or human. The problem is to make resources available to satisfy the needs, but not necessarily the needs of John or Hasan. The natural and straightforward solution for this problem is to achieve the highest level of production, in order to supply the highest level of goods and services to the nation as a whole. This does not mean the supply of resources to individuals per se.

The problem of distributing the goods and services is closely connected to the problem of production. The objective of economic studies and research is to increase the supply of goods and services which are consumed by the society. Under capitalism, the economic health indicators include the gross domestic or national product (GDP, GNP) and stock market indexes which measure the rate of production in a society. Thus the problem of increasing the national production is one of the most important studies related to the economic problem under capitalism: “the scarcity of the commodities and services in relation to the needs.” In short, the relative scarcity defines the problem and dictates the solution. Needs and desires are growing. Resources are not sufficient. Produce more and more of the resources. This is the solution to the economic problems of the society including the problem of poverty and deprivation. The principle of relative scarcity has several defects, which are bound to cause serious errors in the societies living under capitalism and could eventually cause the collapse of the system.

The main objective of the capitalist economic system is to increase the country’s wealth as a whole, and it strives to achieve that through the highest possible level of production. This is a direct result of the theory of “relative scarcity of products.” To compensate for the shortage of products, it is required to maximize the production of products (commodities and services). The highest level of satisfaction of the needs of the people results from increasing the national income, or the gross national product. This is achieved by raising the level of production in the country, and by enabling individuals to acquire the wealth as they are left free to work and produce. It is not the objective of the economy to satisfy the needs of the individuals or to facilitate the satisfaction of every individual in the community; rather capitalism concentrates on satisfying the needs of the community as a whole by raising the level of production and increasing the national income of the country. The distribution of income among the members of society occurs by means of freedom of possession and freedom of work and by the utility of the “price mechanism”. It is left to the individuals to acquire whatever wealth they can get from the total sum of the national wealth. Everyone strives to get his/her share of the wealth using whatever means, skills, or tools he/she can afford. Whether the individual is or is not able to satisfy his/her needs is not of concern to the economy, as long as the production of goods continues to grow, and the wealth continues to grow.

Consequently, the poverty of the individuals is not considered a problem for the economic system to resolve. This view of poverty is inherently wrong because it does not improve the life of individuals, and does not fulfil the basic needs of every individual. In fact, the very definition of relative scarcity opens the door wide open for the poverty of individuals. Since it is recognized that the resources that exist in a society are not enough to satisfy the needs of all, it is only natural for the ones who have faster and more access to wealth to acquire more of it. There will always be a segment of the society which will lag behind, acquire less, and consume less, and eventually fall below poverty lines.

The relative scarcity view does not lead to the resolution of people’s poverty, despite the massive increase in the production of goods and services. The hard fact is that the needs, which require satisfaction, are needs of individuals. They are the needs of particular people such as George, Maria, Hassan, Omar, and the like. The fact that the needs of George are satisfied does not make Maria any better, unless her needs are also taken care of. The needs (materialistic and nonmaterialistic) are needs of individual people; they are not needs of a group of individuals, a group of nations, or a group of people. It is true that capitalism addresses the hunger as a need and food as a means of satisfying the hunger. But capitalism estimates the total amount of food to be produced in a given society and provides the incentives to produce it. Once the estimated amount of food is produced, capitalism does not ensure that George or Maria has obtained their share to elimiate their hunger. In fact, it is very likely that George acquires much more resources than he needs, thus leaving nothing for Maria. Over time, it is natural to see the wealth accumulation moves in the direction of a fewer number of people who have managed to surpass others in the process of wealth accumulation. We will later show how the increase in production had not helped the elimination or even the reduction of poverty rates in capitalist societies.

The economic system addresses the needs of people and the means of satisfying these needs. The production of commodities and services, which are the means of satisfying the needs, together with the distribution of these commodities and services, are treated by capitalism as one subject, inseparable from each other. The subject matter of the distribution of commodities and services is embedded within the subject of the production of commodities and services. Capitalism as a system does not distinguish between production on one hand and possession of products on the other hand. Consequently, the capitalists integrate the economic science and the economic system within the scope of one subject without differentiating between both.

In reality, though, there should be a clear difference between the economic system and economic science. The economic system (its principles, laws, regulations) deals with the issues of wealth possession, expenditure, and distribution. Possession, spending, and distribution of wealth vary according to the viewpoint about life or ideology. Islam, for example, differs from socialism/communism and capitalism in issues related to possession, ownership, spending, and distribution. Each of these systems has its own ideological viewpoint of life. For example, each ideology treats the issue of ownership in a different manner. While capitalism emphasizes private ownership, socialism/ communism utilizes public ownership, and Islam uses both private and public ownership.

Economic science deals with production, product improvement, invention, and the means of production. Economic science, like any other sciences, is universal to all nations and is not particular to any one ideology. The improvement of production, for instance, is a technical scientific issue and can be adopted by people irrespective of their ideology or life view. For example, automation as a means of product improvement can be used by capitalists, socialists, or Muslims without any ideological barriers.

The integration between the production of the economic resources and the manner of their acquisition and distribution is a fundamental fault in the capitalist system which is bound to cause errors and potential failure in the economy of capitalism. When capitalists face the issue of poverty, they resort to produce more products instead of focusing on distributing the ones which they already have and might be more than enough to feed the hungry and house the homeless and treat the ill.

Capitalism views the materialistic needs as the only ones which need to be satisfied. This is a serious flaw in Capitalism because it violates the natural composition of a human being which exhibits both materialistic and non-materialistic needs. Besides the material needs, humans have instincts, emotions, feelings, intellect, and mind. Each of these units requires satisfaction and/or organization. Hunger is an example of a material need which requires food for its satisfaction. Fear is an example of nonmaterial needs which is a manifestation of the survival instinct. Greed is another manifestation of the instinct of survival. Both needs should be addressed and taken care of. It is almost unanimous that greed and fear had the greatest impact on the most recent financial crisis. Ignoring the nonmaterialistic needs can easily allow traits such as greed to dominate the production and acquisition practices. As a result, poverty becomes irresolvable problem with epidemic proprtions. The nonmaterialistic needs also include the needs to worship and sanctify a God, the needs of love and hate, the needs of pride and patriotism, and may many more.

Failure to address these needs or considering them irrelevant at the time of production and consumption of products create a great disparity in the society. It has become widely known under capitalism that the only role of a stakeholder in a company is to make money. Social responsibility of corporates is known to be a problem with epidemic scale. The absence of moral values in the market (production and consumption) has serious impacts on the overall well-being of the society, which invariably affects the well-being of the economy. As discussed earlier, moral crisis had been widely acknowledged to be a major factor behind the financial crisis which led to the collapse of major financial institutions. The decay of moral values over time is a natural and expected consequence of the fact that capitalism focuses and concentrates only on materialistic needs during the cycle of production and consumption.

Discrimination in the workplace based on gender, race, color, and ethnicity is a direct result of such separation between material and nonmaterial needs. Until the government intervened in 1963, corporations under capitalism in the United States were able to pay women less than what they paid men for the same job. The Equal Pay Act43 was signed in 1963 by former president J. F. Kennedy, making it illegal for employers to pay unequal wages to men and women who hold the same job and do the same work. In 1963, a woman earned fifty-nine cents for each dollar a man earned; and in 2009, a woman still earns seventy-eight cents for each dollar a man earns. African American women and Hispanic women continue to be paid much less than white men and white women (sixty-four cents and fifty-four cents on the dollar respectively).

Perhaps patriotism provides the most interesting paradox when it comes to nonmaterialistic needs. The defense of a land or nation needs to be translated into measurable materialistic needs under capitalism. The problem becomes more visible and serious when a higher price is offered for a counterobjective, which could amount to treason. This is exactly how treason is committed by those who sell off the patriotism of their nation in favor of a higher price. Patriotism is a nonmaterialistic need. It is a genuine feeling that normal people carry within their own self which motivates them to stand up in defense of the land they live on. Compensation paid to soldiers should not be looked at as a compensation for patriotism; it is a compensation for the time spent in duty which prevents a soldier from earning money doing another job.

As noted above, capitalism does not give weight to any value, except to the material value of the product and the material nature of the human need. According to Milton Friedman37, the social responsibility of business is to maximize profits and any commitment to fulfilling social responsibilities other than making money is an illegitimate tax, or even theft; maximizing profits will produce the best overall consequences for society.

It is interesting to note that the study of business ethics did not emerge as a field of study in the United States until the 1970s; international business ethics emerged in the late 1990s45. This is a clear indication that the ethical aspects of the economy are not based in the core theory of capitalism. The ethical aspects in the business world emerged as a result of unethical practices, which no longer could be ignored.

The absence of the ethical and moral aspect of the business and the absolute focus on making money and profit is a major flaw in the origin of the theories of capitalism. This is bound to create a myriad of unethical practices, which adversely impacts the stability of the economy at large. According to Theodore Roosevelt Malloch24, the moral values cannot be reinstated through training sessions, course development, or executive summaries. Morality has been detached from the system the moment the nonmaterialistic needs were ignored.

Under capitalism, feeding a poor (a form of wealth distribution) may be done only if it brings a material benefit, such as tax break. But it will not happen in response to an order from God or in pursuit of God’s pleasure and satisfaction. It is not surprising that most of the effective charity organizations in the capitalist world are religion based.

Besides the absence of the moral and ethical factor in the production and consumption process, capitalism fails to recognize the fact that the society as a whole has certain needs which are different from those of the individuals. Capitalism, as discussed earlier, is based on the principle idea of separation of church and state. Further, it is built upon the freedom of ownership which emphasizes the private ownership principle. This foundation has led the capitalists to believe that the society is made only of the people who interact with each other in order to satisfy each other’s needs through the exchange of their efforts and/or products. The main component of the society in the capitalist’s view is the people. The main transactions, which occur between people, are those related to the exchange of products and efforts. The state in the society is a tool, whose main function is to guarantee the free execution of transactions. In order to accomplish its task, the state needs to be paid by the people (through taxes) in return to the services provided by the state to individuals in the society. Such view of the society is flawed.

The people alone cannot form a society until and unless permanent relations persist among them. Note that a group of individuals travelling on an aeroplane or a ship do not form a society, although the travellers may interact with each other and execute various types of transactions while on the ship or on the plane. The people in a town, city, or region would, however, form a society when the relations between them become more stable and permanent. The relations between people take place in response to their needs and desires. The needs and desires of men and women for progeny lead to relations of marriage. The needs and desires of people for safety and security lead to bonds of patriotism. The needs and desires of people for pride and identity lead to bonds of tribalism and nationalism. The needs and desires of people for sanctification lead to bonds of religion. The needs and desires of people for food, clothing, and health lead to financial and economic relations. These relations and bonds will take one form or another based on what type of ideas, concepts, and emotions the people have towards these relations and bonds.

The capitalists claim that the economic problem which faces any society is the scarcity of commodities and services. They also claim that the steadily increasing needs and the inability to satisfy all of them, i.e., the insufficiency of commodities and services to satisfy all of man’s needs completely, is the basis of the economic problem. This view is erroneous and and may well collide with the human nature. The needs which must be met are the basic needs of the individual as a human (food, shelter, health, and clothing), and not the luxurious ones, although they too should be pursued. The basic needs of humans are limited, and the resources and the efforts which they call the commodities and services are certainly sufficient to satisfy the basic human needs; it is possible to satisfy all of the basic needs of mankind completely. In other words, it is not the unavailability of the resources that creates the problem; rather it is the distribution of these resources. The economic problem should, therefore, be the distribution of the resources in a manner to enable every individual to completely satisfy their basic needs and to help them to strive for attaining their luxurious needs.

The reference to the steadily increasing needs is not accurate. The basic needs of man as a human do not increase. They are fixed and well defined. The luxurious needs may increase and vary. It is true that the advancement in various levels of urbanization increases demands for luxuries; but certainly the basic needs remain the same irrespective of urban development. The inability of a person to satisfy his luxurious non-essential needs does not cause a problem in the society; what causes a problem is the inability to satisfy the basic needs such as the needs for food, shelter, clothing, and health. Prophet Mohammad (PBUH) is reported to have said, “He who has security at his home, a healthy body, and food for his day, indeed has attained all the needs for his life”67.

Moreover, the question of the increasing luxuries is a question which is related to some people and not to all individuals in a country. This question is solved through the natural motivation of a human to satisfy his needs. This motive drives man to work towards satisfying these luxurious needs. People in a given country may meet these demands by expanding the resources of the country, working in other countries, or improving the quality of products, goods, and services. This is a matter related to the means and ways of increasing and improving the quality of production, which is an issue of economic science rather than economic system. That is different from the issue of completely satisfying the basic needs of each and every individual in society, which is a problem of the economic system rather than the economic science.

A typical example cited in the economic studies of resource scarcity is related to the scarcity of time. It is claimed that within the twenty-four hours of the night and day, we are unable to satisfy all our needs that arise within the day. This may be true in general, but when we consider hunger in particular, we must realize that the twenty-four hours’ time frame should be sufficient to feed each and every individual. Islam, for example, makes it categorically prohibited for anyone to remain hungry within the day and the night55.