{bit.ly/Mosk2Mark} Islamic economics was born as a revolutionary project. The pioneers of the field imagined a world where economic life would be rebuilt from the Qur’an and Sunnah, offering a genuine alternative to both capitalism and communism. Yet, over the decades, much of this ambition was lost. What emerged instead was a “Shariah-compliant” version of capitalism, adopting the tools and theories of neoclassical economics and dressing them in Islamic form.
In Three Generations of Islamic Economics (SSRN), I traced this history. The first generation, emerging from the struggles for liberation in colonized Muslim lands, rejected both capitalism and socialism, calling instead for a system built on Islamic teachings to promote justice and welfare. When political revolutions failed, the second generation took a pragmatic turn: attempting to build Islamic economics within the capitalist framework. But the global financial crisis of 2007–08 exposed both the flaws of capitalism and the weakness of this second-generation compromise. Out of this came the third generation, which seeks to recover the revolutionary vision of the first, recognizing that capitalism is fundamentally incompatible with Islamic ideals and finding ways to work around the power struggles involved in creating change. {LinkedIn Version of this post}
This historical backdrop explains the urgency of the argument in Redefining Islamic Economics (SSRN), where I proposed that Islamic economics must be understood not as a neutral science of scarcity, but as a struggle to align economic life with divine guidance — at the micro, meso, and macro levels. Similarly, Reviving the Promise of Islamic Economics (SSRN) showed how the revolutionary spirit was lost when economists settled for Islamizing capitalism. The result was confusion, co-optation, and the empty slogan: Islamic Econ = Capitalism – Interest + Zakat.
If compromise is the problem, then critique is necessary. That is why I wrote Empirical Evidence Against Neoclassical Utility Theory (SSRN). This paper confronts the central assumption of neoclassical economics — utility maximization — and demonstrates empirically that it does not describe real human behavior. The supposed rigor of neoclassical economics is a mathematical illusion, unsupported by evidence. Once this foundation collapses, Islamic economists cannot treat neoclassical tools as analytically neutral or methodologically rigorous.
Rejecting neoclassical economics leads directly to another neglected dimension: power. Modern economics deliberately omits it. Neoclassical theory arose partly as a reaction against Marxism, which foregrounded class and capitalist power. But money and finance are not neutral; they are shaped by political interests and struggles over control. In The Battle for the Control of Money (SSRN), I explored how power over money creation has always been contested — between states, elites, and communities. For Islamic finance, this means we face a choice: assimilate into capitalist institutions that perpetuate inequality, or resist them and work to empower the poor and vulnerable — knowing that such resistance will provoke opposition.
These two insights — the rejection of neoclassical theory and the recognition of power — also highlight why many popular reform proposals fail. Calls for full-reserve banking, sovereign money, crypto, or central bank digital currencies (CBDCs) promise technocratic fixes for deep systemic problems. But these proposals overlook the fact that money is not just technical; it is moral and political. In Technocratic Dreams, Political Realities: Evaluating Full Reserve Banking for Pakistan (link), I argue that such reforms amount to power-sharing compromises that rarely succeed. Real change requires two things that no technocratic fix can provide: moral transformation and realignment of power configurations. Without these, technical reforms are either blocked, captured by elites, or rendered ineffective.
The challenge, then, is not only critique but construction: how do we build Islamic economic institutions that embody Qur’anic principles while acknowledging both morality and power?
One answer lies in community-based models. In Islamic Finance and Community Empowerment: A Strategic Vision for the Global Ummah (SSRN), I propose repurposing Islamic banks through a dual bottom line: serving both profit and social goals. In partnership with mosque-based community organizations (MKJs), banks can channel resources into education, healthcare, microfinance, and grassroots empowerment — shifting from serving shareholders to serving the Ummah.
But banking reform is only part of the story. In Reclaiming Economics as a Moral Science: An Islamic Approach to Monetary Reform (link), I argue for embedding morality at the very heart of monetary systems, through a triangular ethical architecture: institutions, state regulation, and moral authority. Without this balance, reforms risk elite capture or state abuse.
Finally, Monetary Imperialism and the Third-Generation Islamic Economics (link) extends this vision globally. It shows how the dollar-dominated international monetary system perpetuates dependency and inequality — and argues that resistance must begin from below, with local currencies, qard-e-hasan institutions, zakat platforms, and food sovereignty. These small but concrete steps can gradually build transnational solidarity and economic independence.
Taken together, these works argue for a coherent reorientation of Islamic economics:
Reject neoclassical economics, which is neither rigorous nor reliable.
Recognize the role of power, for finance is never neutral.
Avoid illusions of technocratic fixes; real change requires moral and political transformation.
Build grassroots institutions that embody Islamic principles and serve the Ummah.
Assimilation into global capitalism is the easy path. But if Islamic economics is to fulfill its promise, it must choose the harder path of transformation — one that begins with rejecting flawed foundations, confronting realities of power, and building new institutions that express the timeless guidance of Islam.
W.H. McNeill’s The Rise of the West offered a sweeping, triumphalist narrative of Western superiority—and became a celebrated classic. But in a rare act of intellectual humility and moral courage, McNeill revisited the book twenty-five years later and quietly disowned its core assumptions. His retrospective essay reveals the hard-won wisdom of a lifetime: a recognition that history, as it is often told, serves not just truth—but power. This post draws out the critical and unfamiliar lessons from that reflection—lessons that challenge the dominant narratives most of us absorbed through our formal education.
Gems of wisdom can be extracted from a lifetime of learning. It’s not easy to disown your most celebrated work—especially when it has brought fame, admiration, and near-canonical status. But twenty-five years after publishing The Rise of the West, W.H. McNeill did just that. In a remarkable retrospective (“The Rise of the West” after Twenty Five Years), he was able to identify the triumphalist Eurocentrism at the heart of his classic. To revise a worldview you once taught the world takes not just insight, but integrity. It means allowing new knowledge, life experience, and emerging truths to unsettle deeply held beliefs. Few are willing to do this. But those who are—like McNeill—offer us a rare gift: the chance to learn, in a few pages, what it took them a lifetime to understand.
Historical narratives are instruments of power. In his reflective essay, McNeill recognized that The Rise of the West had portrayed Europe’s global rise as the natural culmination of human progress. But with time, he saw this not as a neutral observation, but as a deep structural bias—one that framed non-Western civilizations as supporting actors in a Western drama. He came to see his book, in his own words, as “an expression of the postwar imperial mood in the United States,” shaped by a “form of intellectual imperialism” that unconsciously mirrored American hegemony. The story he once told was not merely inaccurate—it helped legitimate global domination. [see: The Deadliest Weapon: Fabricated History]
Empire does not just conquer land—it colonizes minds. Power cannot survive on coercion alone; it must persuade, moralize, and justify. Eurocentric history played this role. It taught colonized peoples to view their subjugation as progress, and taught Western publics to see conquest as benevolence. The myth of the civilizing mission masked genocide, plunder, and forced cultural erasure. These stories became the moral architecture of empire—without them, domination could not endure.[See: Creating Islamic Alternatives to Eurocentrism, Seeing Through Empire: The Lies That Blind Us ]
Orientalism is not a lens—it is a worldview born of conquest. As Edward Said argued, imperial expansion created a superiority complex in the West, which distorted its view of the East into caricature. The knowledge produced about “the Orient” was shaped not by understanding, but by the needs of control. This epistemic dominance seeped into every discipline—from history to anthropology—and made alternative ways of knowing seem backward or invalid. [See Orientalism]
Global conquest also created an inferiority complex that still haunts the colonized world. When a civilization loses control over its own narratives, it loses faith in its own voice. Even today, many societies struggle to reclaim their precolonial intellectual traditions—not because those traditions are inadequate, but because conquest has severed the psychological and cultural pathways to them. Reconnecting with these roots is not nostalgic—it is necessary for any real development.[see: A Deep Seated Inferiority Complex]
Universities are not just centers of learning—they are engines of ideological reproduction. As Julie Reuben has shown, the modern research university systematically sidelined moral and religious inquiry in favor of supposedly objective, value-neutral science. But as she writes, “By the early twentieth century, moral and religious knowledge no longer defined the highest reaches of intellectual life. Science did.” This shift made it easier for institutions to present dominant narratives as natural and apolitical—when in fact, they served the needs of empire. Those who affirmed the dominant order advanced; those who challenged it were filtered out.[see Marginalization of Morality in Modern Education]
Prominence in academia is often the reward for ideological alignment—not intellectual merit. McNeill became a celebrated figure because his narrative reinforced the self-image of the West. In contrast, brilliant historians like L.S. Stavrianos and Marshall Hodgson, who refused to glorify the West, remained marginal. Their erasure was not a scholarly judgment—it was a political one. The academy does not merely record truth; it curates legitimacy.[see: Is Science Western in Origin?
Speaking truth to power is not a performance—it is a direct challenge to power’s foundations. When we dismantle the moral stories that make exploitation seem necessary, we threaten the very structures that depend on them. That is why dissent is punished, why alternative histories are buried, and why intellectual courage is so rare.[see: History As the Mother of Social Science]
We are living in a moment when cracks in the global order are creating space for truth. McNeill’s retrospective became possible only as Western hegemony began to falter. Today, we stand at a similar threshold. As old certainties crumble, we have a rare opportunity to reexamine the narratives that built them—and to imagine something better.[see Rebuilding Islamic Societies
Reshaping the world begins with reshaping the story. In a recent post, I’ve reflected on some of the concrete steps we can take to challenge dominant narratives and recover more truthful ones: How Capitalism Shapes Our World—and How We Can Reshape It. That work is not only possible—it is urgent.
We’re often taught that Europe’s industrial age was the inevitable fruit of Enlightenment genius—a straight line from Newton’s laws to the steam engine and the modern factory. Yet this powerful narrative is a myth. Behind the stories of scientific breakthroughs lies a darker, more chaotic reality: the Industrial Revolution was shaped less by academic discovery than by social upheaval, violent transformations, and the hands-on skills of artisans who worked far from the halls of science.
The Myth of Newtonian Causation
Attribution of the Industrial Revolution to Newtonian Physics is a consequence of Eurocentric self-glorification, and conceals a more ugly reality. As economic historian Joel Mokyr bluntly observes:
“It is a misconception to believe that the Industrial Revolution was a direct offspring of Newtonian science. Few inventors of the period drew on scientific principles, and technological change ran well ahead of contemporary scientific understanding.” (Mokyr, The Lever of Riches, 1990, p. 3)
In practice, the era’s key advances sprang from the ingenuity of artisans and entrepreneurs working far outside academic circles. The systematic link between theory and invention—what we now call R&D—emerged only decades later. Early steam engines, for example, achieved practical success not because of scientific theories, but through relentless trial-and-error long before thermodynamics caught up to explain how they worked.
The Priority of Practical Knowledge
Far from emerging in the halls of academia, the Industrial Revolution was forged in workshops, mines, and ports. As Pat Hudson emphasizes:
“The Industrial Revolution was built on the cumulative skills of artisans, not the theories of scientists. Technical knowledge was often localized, informal, and transmitted through apprenticeship.” (Hudson, The Industrial Revolution, 1992, p. 23)
The often-celebrated figures of Watt, Hargreaves, and Arkwright relied primarily on empirical trial-and-error. Scientific societies existed, but were more often clubs for gentlemen than engines of innovation. Local blacksmiths and millwrights played a far larger role than professors of physics.
Science Lagged Behind Technology
The sequence—technology leading, science trailing—directly contradicts the triumphalist narrative of Western superiority. As David Edgerton notes in The Shock of the Old:
“Much of the story of industrialization is of technologies that spread and shaped the world long before the scientific understanding caught up with them.” (Edgerton, The Shock of the Old, 2006, p. xi)
Even in the late 19th century, many industrial processes still lacked rigorous scientific explanations. Advances in chemistry gradually improved dyes and steel production, but these refinements came only after the core technologies were already widespread. Steam turbines, too, were optimized through empirical tinkering, not theoretical breakthroughs.
Far from proving Europe’s unique scientific genius, the evidence shows that practical experimentation consistently outpaced formal science—and that the idea of a direct line from scientific theory to industrial power is a comforting myth. This leads us to two important questions: If science was not the driver, what did cause the Industrial Revolution? And, given that the myth has been effectively debunked by Mokyr, Edgerton, and others, why does it continue to dominate both public and intellectual discourse?
The Social Engineering of Mass Production
If science was not the driver, what was? The answer lies in brutal social transformations. To sustain industrial mass production, traditional ways of life had to be uprooted. E.P. Thompson describes how rural peasants were turned into urban workers:
“The ‘free laborer’ was created by acts of enclosure, vagrancy laws, and the calculated destruction of traditional rights; this was not progress but social violence.” (Thompson, The Making of the English Working Class, 1963, p. 213)
Enclosure of common lands pushed people off ancestral farms. Criminalization of vagrancy forced them into wage labor. Children as young as five entered textile mills, suffering horrendous conditions—graphically depicted in Dickens’ novels and thoroughly documented by early social reformers.
As Karl Polanyi argued in The Great Transformation, the rise of industrial capitalism depended on forcibly creating a market for labor by dismantling traditional social protections and communal rights. This is the dark underbelly of the Industrial Revolution, rarely mentioned in Eurocentric accounts.
Why the Myth Persists
If the Industrial Revolution was not driven by science, why does the myth endure? Kenneth Pomeranz’s The Great Divergence points to the material realities behind Europe’s rise:
“The divergence was not foreordained by European superiority but enabled by contingent access to coal and colonies.” (Pomeranz, The Great Divergence, 2000, p. 68)
Europe’s industrial takeoff was made possible by cheap energy sources and violent colonial extraction—not by intellectual virtue. Yet the myth of scientific causation reassures Western societies that their power emerged from enlightenment rather than exploitation.
As Edward Said argued in Orientalism, imperial powers could impose their own narratives, ensuring that histories were written from the perspective of the victors rather than the ground realities of the colonized. The persistence of the Industrial Revolution’s triumphalist myth reflects this same dynamic: it legitimizes past domination and obscures the social violence on which industrial capitalism was built.
Back to the Core Argument
Understanding that the Industrial Revolution emerged from new methods of organizing mass production—rooted in social engineering rather than scientific discovery—changes how we see its role in Europe’s global conquest. Mass production enabled mass armies, vast fleets, and the logistical systems to sustain warfare across continents. But none of this required the breakthroughs of Newton or the scientific revolution. It required only the ruthless reorganization of human life and labor around the imperatives of the market.
The fruits of this social engineering became tragically clear in the twentieth century: two world wars—the deadliest conflicts in human history—were waged with industrialized weaponry and logistics. Massive and still-growing economic inequality took root as industrial capitalism spread. Looming climate catastrophe, driven by fossil-fueled production, threatens the survival of countless species, including our own. Meanwhile, the breakdown of families and communities—once central to human wellbeing—reflects the social atomization unleashed by a system that prized productivity over people. These outcomes are not aberrations, but the logical consequences of an industrial order founded on coercion and exploitation.
To build a future worthy of our humanity, we must reverse the Great Transformation that turned people into mere “human resources.” We need to rediscover ways of living that value creativity, wonder, and human connection above relentless economic output—ways that let us explore our infinite potential as thinkers, artists, and spiritual beings. As Max Weber warned in his analysis of modernity’s “disenchantment of the world,” the triumph of cold rationality can strip life of meaning. Re-enchanting the world—by placing care, community, and the full depth of human experience at the center of our lives—is the first step toward undoing the social engineering that still confines us.
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Modern economics rests on a dangerous illusion: that abstract, universal laws—derived primarily from the European experience—can be applied across all societies, times, and contexts. This false assumption has allowed economists to present their theories as objective and value-neutral, masking the deeply political and historical foundations of economic life. In an earlier post Reclaiming Lost Narratives: A New Approach to Social Science., I argued that we must reject this illusion and return to the original, historically grounded and morally engaged vision of economics. This post illustrates that argument by tracing how mainstream theories about money conceal its true nature as an instrument of power.
Prologue: Rethinking Finance from the Ground Up
Nobel Laureate Paul Romer has observed that standard economic theories about money are “wildly incorrect,” and that the doctrines on which they rest are “fundamentally flawed.” This level of ignorance is astonishing, given that money serves as the lifeblood of modern economies and profoundly shapes lives around the world. Yet, textbooks teach that “money is a veil”—and that to truly understand the economy, one must look through the veil and ignore money altogether. It is this striking disconnect between economics and reality that led to the Global Financial Crisis of 2007. At the University of Minnesota, the influential economist Edward Prescott reportedly taught his graduate students that “postal economics is more central to understanding the economy than monetary economics.” This raises a deep and troubling question: why do economists go to such lengths to downplay the role of money—when, in the real world, the adage “money makes the world go round” is far closer to the truth?
The myths surrounding money are not accidental—they conceal the deeper realities of power. At the heart of the monetary system lies a critical question: Who has the authority to create money, and in whose interests is that power exercised? The links between power and money are foundational to the functioning of capitalist economies. My paper, The Battle for the Control of Money, explores this hidden architecture of monetary power. It shows how money creation is monopolized by a small elite—primarily through private banking systems—who use it to serve their own interests, deepening inequality and reinforcing structures of control. Modern myths about money serves to legitimize existing power configurations, erasing the moral and political dimensions of economic life, and shields the mechanisms of domination from critical scrutiny.
Despite its central role in shaping economies, the process by which money is created remains one of the most carefully guarded secrets of modern finance. For decades, economics textbooks taught that banks are mere intermediaries—collecting deposits from savers and lending them to borrowers. In reality, private banks create the vast majority of money in the economy simply by issuing loans. This process of money creation “out of nothing,” as even the Bank of England acknowledged in a rare moment of candor, confers immense and largely unaccountable power on financial institutions. Yet, students are trained to ignore this. The mantra that “money is a veil” teaches economists to look through it—as if who creates money, how, and for what purpose were irrelevant technicalities. In fact, these questions lie at the heart of how modern capitalism concentrates wealth and power in the hands of a few. Many authors—including Thomas Piketty, in Capital in the Twenty-First Century—have documented the astonishing rise in inequality in recent decades. But the root causes remain elusive within mainstream frameworks, largely because they fail to examine the true source: the creation and control of money.
Technocratic Dreams and the Illusion of Apolitical Reform
Proposals to reform money often focus on technical designs, like replacing fractional reserve banking with full-reserve systems, or issuing gold- or silver-backed currency. These “technocratic dreams” imagine that monetary reform is a neutral, engineering problem, solvable through clever design. But such proposals ignore the foundational reality: money is power. Who controls its creation controls the economy—and by extension, society. As argued in my paper Technocratic Dreams, Political Realities, the failure of full-reserve banking proposals lies not in their mechanics but in their neglect of the political economy. Reforming money requires challenging entrenched interests and navigating complex institutional structures. This is why textbook definitions—money as a “medium of exchange” or “store of value”—are misleading: they erase power from the equation. Among Muslims, a common response is to advocate for a return to gold and silver currencies. But this too is a technocratic illusion. The power dynamics behind fiat money would simply reassert themselves through control over gold markets and international trade systems. The problem is not the material of money, but the structures of power behind it. A more detailed exploration can be found in the Technocratic Dreams paper, but the core insight is simple: no monetary reform can succeed without addressing the politics of money creation.
Rebuilding Economics on Moral Foundations
Once we recognize the deep entanglement between money and power, another puzzle of modern economics becomes clearer: how did economics lose its moral compass? The discipline began as a branch of moral philosophy—Adam Smith himself was a moral philosopher—but today it presents itself as a value-neutral science, akin to physics. This transformation was enabled by treating money as politically neutral, a mere “veil” that can be ignored. Once power is removed from the picture, questions of justice and ethics are no longer part of the conversation—they become the invisible background. My paper on the Normative Foundations of Scarcity demonstrates how seemingly objective economic concepts conceal underlying normative foundations.
Peeling back the veil of money reveals a troubling reality. In modern economies, money is not just a medium of exchange—it becomes the ultimate measure of value. The “good society” is defined by maximum GDP, and the “good person” by maximum wealth. In such a world, those who control the creation of money wield extraordinary influence over both economic outcomes and social norms. Any serious attempt to build a just economy must begin by recognizing—and then reining in—this power.
My paper, Reclaiming Economics as a Moral Science: An Islamic Approach to Monetary Reform (2025), addresses this challenge. It argues that the separation of facts from values has crippled economics, leaving it unable to grapple with core issues like justice, power, and ethical responsibility. Rather than trying to patch moral concerns onto a broken framework, the paper calls for reconstruction of economics as a moral science. Drawing on Islamic intellectual traditions, it envisions a discipline where spiritual and ethical principles are central—not peripheral. In this paradigm, monetary reform is not a technical adjustment but a moral project: one that seeks to align economic structures with divine guidance and collective well-being. An earlier paper entitled “Islam’s Gift: An Economy of Spiritual Development” also explains how we can rebuild economics on Islamic moral and spiritual foundations.
Responding to Evolving Configurations of Monetary Power
Monetary power is not static. It shifts in response to political, institutional, and technological changes. The Great Depression exposed the dangers of unregulated bank-led money creation, prompting reforms that temporarily curtailed financial excess and redistributed economic power more equitably. Later, the collapse of British dominance and the Bretton Woods agreement transferred global monetary power to the United States, establishing the dollar as the world’s reserve currency. Today, we are witnessing a new transition—from fiat money to digital and synthetic forms—further concentrating financial power and rendering Muslim-majority societies increasingly vulnerable.
Islamic economics has also undergone transformations in its attempt to cope with the dominant power of capitalism. The first generation sought to capture state power to implement an Islamic system from the top down. The second focused on adapting Islamic finance to capitalist institutions—often compromising its ethical foundations. Learning from both, the third generation calls for building power from the ground up—constructing institutions that reflect Islamic values while remaining responsive to contemporary global configurations of power.
Two recent papers offer complementary third-generation strategies. The first, Monetary Imperialism and Third-Generation Islamic Economics, focuses on diagnosing the problem: how changes in the architecture of global money—especially the shift from physical to synthetic, unregulated money—have eroded the sovereignty of Muslim societies. It traces how modern imperialism operates not through armies, but through financial systems that dictate the terms of economic life. The paper offers a moral and intellectual framework for reclaiming economic agency, rooted in the Islamic tradition and oriented toward community-based resistance.
The second, Islamic Finance and Community Empowerment: A Strategic Vision for the Global Ummah (COMCEC), takes these insights further by proposing a pragmatic path forward. It argues that top-down state reforms are unlikely to succeed, given the entrenchment of Muslim governments within global financial structures. Instead, it proposes a grassroots strategy based on two institutional pillars: Islamic Financial Institutions (IFIs) committed to a “dual bottom line” of profit and service, and mosque-based Khidmat al-Jama‘ah Organizations (MKJs) that deliver community services grounded in Islamic ethics. By coordinating these structures and linking local efforts across borders, the paper envisions a decentralized, transnational network capable of rebuilding Islamic economic life from below.
Together, these two papers chart a coherent path: understanding how monetary imperialism works, and outlining how a morally grounded, community-based strategy can counter its effects.
The Path Forward
The papers linked above chart my progress in understanding the links between money and power over the past few decades. A longer post entitled “Countering Financial Capitalism: An Islamic Journey Through the Hidden Architecture of Money” provides a more detailed discussion of these topics. Nonetheless the most important task remains undone: how can we use this understanding to counter financial power over the Islamic world created by the monetary institutions currently dominant. Some suggestions have been made in the two papers listed in the previous section, but a lot of work remains. Once we understand that money creation confers immense power, and that we cannot isolate ourselves from the effects of this power, there seems to be only one solution: we must create our own money. Proposals to revive the gold dinar or silver dirham aim at monetary independence, but they do not recognize the links to power and the fact that most of the world’s precious metals are already held by powerful elites. Such reforms risk entrenching the very power they seek to challenge. A better alternative would be a labor-based currency, calibrated to the widespread availability of unskilled labor in many parts of the Ummah—a tragic but undeniable reality. Developing such systems requires careful analysis of local community currency models that can operate within the diverse regulatory and political contexts of the Muslim world. Also, it would be essential to link these inititiatives around the globe, so as to create the strength required to combat global capitalism. This is the focus of my current research.
Prologue: Why Money Matters Money, as the saying goes, makes the world go round—yet surprisingly few people understand how it actually works. During my Ph.D. studies at Stanford, I was taught a series of deeply misleading theories that obscured the true nature of money in modern economies. (The Education of an Economist details my experiences in unlearning what I was taught.) This post traces my intellectual journey toward understanding money over the past several decades. At its core, money is a social construct: it works because we collectively agree on a set of rules regarding its creation and use. The most critical—and most concealed—aspect of this agreement concerns who holds the power to create money, and for what purposes it is created. These arrangements, though often hidden beneath layers of technical jargon, confer immense, arbitrary, and unjust power on those who control money creation. Over time, this architecture has evolved through behind-the-scenes battles for control, yet it continues to shape our everyday lives. In the last century alone, money has undergone three major transformations, along with numerous lesser shifts.
My own understanding has also evolved and improved over time. This post documents key milestones in that journey, reflected in a series of papers and blog posts that I have written over this period. While I have made significant progress in understanding the problem, the more difficult task lies ahead: designing a monetary system that serves the public good, rather than enabling exploitation by financial elites. That is where my current efforts are focused, and I hope to share further progress in a future update. Beyond its autobiographical value, I also hope this post proves useful to others embarking on similar inquiries. The papers collected here can serve not only as a roadmap for independent researchers, but also as a resource for teachers and students of Islamic economics seeking to rethink money, finance, and reform through an Islamic lens. For those designing courses or study circles on Islamic perspectives on money and monetary policy, this compendium offers a curated and thematically coherent foundation.
Section 1: From Keynes to Chicago — The Rise of Financial Orthodoxy When I studied economics in the late 1970s, Keynesian theory was still the prevailing orthodoxy. According to this view, governments held complete control over the money supply. If too much money was created, it would lead to inflation; too little would cause unemployment. Thus, the state bore a dual responsibility: to maintain full employment while keeping inflation in check, achieved through careful monetary and fiscal management.
This view, however, was deeply opposed by the Chicago School of Economics, which rejected the idea that governments should actively manage the economy. In response, Chicago School economists mounted a theoretical counter-revolution—one that gained political momentum during the Reagan-Thatcher era and ushered in a series of neoliberal reforms. These reforms drastically reduced the role of government and elevated the free market as the sole solution to economic problems. For more details, see The Keynesian Revolution and the Monetarist Counter-Revolution.
According to the newly dominant Chicago School framework, the fluctuations of the business cycle—unemployment and booms—were driven by real structural factors, not monetary policy. More importantly, they argued that government interventions to reduce unemployment were ultimately futile: any temporary gains would be erased by rising inflation in the long run. This entire worldview was deeply at odds with empirical reality, but its policy implications were strongly aligned with the interests of the wealthy financial elites. Financial power was used to displace Keynesian theories by the now dominant neoliberal theories in academia (see Ideological Macroeconomics and Increasing Inequality for more details).
Nearly a century earlier, Keynes himself had anticipated this dogmatic inertia. He famously likened economists to Euclidean geometers working in a non-Euclidean world—scolding parallel lines for intersecting, rather than questioning the foundational assumptions of their theories. (See: Quotes Critical of Economics.)
Section 2: Uncovering the Truth About Money Creation My first real breakthrough in understanding money came when I discovered that the textbook narrative was false. Contrary to what I had been taught—that governments exercised full control over money creation—I learned that in modern economies, private banks create the vast majority of money. This insight is not new; it was widely acknowledged in the aftermath of the Great Depression, which prompted strong regulatory oversight of the banking sector. One serious proposal at the time was the nationalization of banks, aimed at removing their power to create money and vesting it exclusively in the hands of the state.
In response, the Chicago Plan emerged as a compromise: a proposal to transfer money-creation authority to the government while still preserving a limited role for private banks. Multiple versions of the plan were developed, differing in the specifics of how power would be shared between public and private actors. Despite its merits and strong theoretical backing, the plan was never implemented.
Several key insights emerge from this brief historical account. In the 1930s, it was widely understood that private banks created money, and that excessive money creation by these banks had played a central role in triggering the 1929 stock market crash and the ensuing Great Depression. However, by the 1970s, this knowledge had been systematically removed from economics textbooks. Even today, mainstream texts continue to propagate more polished but equally misleading accounts of how money works. For a discussion of how this loss of knowledge led to the Global Financial Crisis of 2007, see Completing the Circle: From GD 29 to GFC 2007. A 90m You-Tube Video provides an elementary exposition of these ideas for non-economists: Core Macroeconomic Concepts.
The first three papers listed below reflect my evolving understanding of these issues, as I began to uncover and engage with the hidden truths of monetary power that had been obscured in my formal education.
1: Zaman, A. (2020). Islamic Banking After Financial Crises: A Version of the Iceland Plan for Monetary Reform. In Khan & Sonko (Eds.), Islamic Finance as a Complex System (pp. 159–180). Lexington Books. In the wake of the 2007 Global Financial Crisis—triggered by reckless money creation by private banks—interest in the Chicago Plan resurfaced. The government of Iceland responded with a modernized version of the proposal aimed at transferring the power of money creation from private banks to the state. In this paper, I explored the dual sources of financial injustice: not only do private banks create money, but they also do so within an interest-based framework that shields them from risk while exposing borrowers to it. As noted by Mian and Sufi, this arrangement is deeply unjust, particularly because money creators are large institutions capable of absorbing risk, while borrowers are often individuals and small entities who are not. Islamic economists have long focused on eliminating interest (riba), while some Western economists have emphasized reclaiming money creation as a public function. My paper proposes combining both approaches: instituting full-reserve banking alongside interest-free finance. Such a system, I argue, would produce far more equitable economic outcomes and better reflect Islamic principles of justice and risk-sharing.
While theoretical support for the Chicago Plan remains strong—bolstered by simulations from Benes and Kumhoff The Chicago Plan Revisited, that show dramatic benefits such as full employment, reduced debt, low inflation, and economic stability—it has never been implemented. This raises a vital question: if it’s so effective, why has it been ignored? The answer lies not in economics but in political economy. Historical data on income inequality reveals a sharp pattern: in the post–Great Depression era, when private money creation was curtailed, the income share of the bottom 90% steadily rose, resulting in broad-based prosperity. After the Reagan-Thatcher counter-revolution, deregulation allowed private banks to reclaim the power to create money—and with it, income inequality surged, and the wealth of the elite soared. For a detailed discussion of the financial crisis which followed as a result, see GFC 2007: Causes and Consequences. The ability to create money is not just a technical mechanism—it is the keystone of financial power. When a tiny elite can generate money at will, while the rest of society must work for it, no complex analysis is needed to explain persistent inequality. As Piketty’s voluminous work suggests through data, and as history more plainly shows, the control of money creation is central to the concentration of wealth and power. That control is deliberately obscured: hidden in textbooks, sanitized in theory, and fiercely protected in practice. This hidden struggle—between governments and private financial institutions over who gets to wield this power—is the focus of the next paper in this intellectual journey.
This paper explores the political struggle underlying modern monetary systems. While public discourse and textbooks present money as a neutral medium of exchange, the paper reveals how the control of money creation lies at the heart of financial and political power. Drawing on historical context, it explains how the Great Depression led to a public awareness of the dangers of unregulated private money creation—awareness that was later suppressed during the neoliberal resurgence of the 1980s. The paper argues that any effort to reform the monetary system must confront the entrenched interests of financial elites who benefit from maintaining control. By tracing the shifting balance of power between governments and private banks, the paper highlights the central role of monetary sovereignty in shaping economic outcomes and social justice.
The realization that money is not simply a neutral tool of exchange—but rather a central mechanism of power—was a pivotal turning point in my understanding. Once this became clear, the traditional textbook definitions of money—as a medium of exchange, a unit of account, and a store of value—began to feel inadequate, even misleading. These technical descriptions obscure more than they reveal. Money, in practice, is deeply embedded in social structures, political struggles, historical transformations, and moral worldviews.
In grappling with this expanded view, I began to explore the multiple dimensions of money—how it is created, who benefits from its creation, how it evolves, and how it shapes relationships in society. In this exploration, I found Karl Polanyi’s The Great Transformation deeply original and insightful. Polanyi explains the historical origins of Capitalism, and discusses how money is an artificial commodity This broader investigation led to the next paper, which attempts to synthesize a wide range of insights. While the scope of the paper is ambitious and exploratory, it reflects my deepening efforts to understand money not just as an economic tool, but as a social institution infused with power and meaning.
This wide-ranging paper explores the nature of money through multiple lenses—historical, institutional, sociopolitical, and moral. It begins by challenging conventional textbook definitions and highlights the divergence between monetary theory and actual practice. The paper then investigates the money creation process, emphasizing its role in redistributing wealth and entrenching structural inequalities. It draws attention to how money interacts with power, ideology, and public perception, examining how control over narratives about money serves elite interests. While exploratory and broad in scope, the paper offers a rich foundation for understanding money as a socially constructed and contested institution. It represents a key stage in my intellectual development, bringing together disparate threads of inquiry into a more comprehensive perspective on the realities and consequences of modern monetary arrangements.
Recognizing the deep entanglement of money with power and ideology naturally led to a critical question: What can be done to reform a system so fundamentally skewed in favor of the elite? In particular, I began to explore whether Islamic teachings offered any guidance or alternatives to this structure of exploitation. This inquiry revealed a deeper philosophical divergence: capitalism emerged from a rejection of religious morality, prioritizing the pursuit of power and pleasure in this world without regard for ethical or spiritual consequences. In contrast, Islam promotes a radically different social vision—one built on cooperation, generosity, justice, and moral responsibility. Where capitalism urges the powerful to dominate and the wealthy to accumulate more, Islam exhorts the strong to protect the weak and the rich to care for the poor. These values are not just abstract ideals; they shape the very foundations of how economic institutions should operate. My book on Islamic Economics: The Polar Opposite of Capitalist Economics provides a deep exploration of the radical differences between the two economic systems. The next two papers examine how these contrasting worldviews lead to profoundly different objectives and structures for financial institutions, and why Islamic institutions that merely imitate Western forms in name or contract fall short of achieving their ethical aims.
4. Zaman, A. (2015). Objectives of Financial Institutions: Western and Islamic. Journal of Islamic Business and Management, 5(2), 43–68.
This paper explores the foundational objectives of financial institutions within two distinct paradigms: Western capitalism and Islamic economics. In the capitalist model, the central goal of financial institutions is profit maximization—often at the expense of the broader public interest. In contrast, the Islamic framework envisions financial institutions as instruments for promoting social justice, equitable distribution, and the welfare of the community. The paper critiques existing Islamic financial institutions for adopting the outward forms of Shari’ah compliance while failing to uphold its ethical and social spirit. It calls for a fundamental rethinking of institutional goals, arguing that Islamic finance must transcend formalistic mimicry and reorient itself toward its original mission: serving the public good in accordance with divine guidance.
The exploration of institutional objectives raised a deeper concern: while many so-called Islamic financial institutions adopt Islamic terminology and legal forms, they often replicate the structures and goals of their capitalist counterparts. This formal compliance without ethical substance results in institutions that may appear Islamic but fail to embody the transformative social vision of Islam. A system rooted in divine guidance cannot merely aim to mirror Western financial models while avoiding interest through legalistic loopholes. An exploration of the different conceptual foundations is given in my post on Building Genuine Islamic Financial Institutions.
This realization led me to ask what genuine Islamic financial institutions would look like—institutions that reflect not only Islamic form but also Islamic spirit and intent. What kinds of practices and structures would emerge if the commitment to justice, community welfare, and moral accountability were taken seriously? The next paper attempts to answer this question by offering a vision of what it would mean to build Islamic institutions from the ground up, based on Islamic values rather than retrofitting capitalist models with Islamic labels.
This paper addresses the gap between the formal legal structure and the ethical substance of Islamic financial institutions. It argues that many current institutions focus on surface-level Shari’ah compliance while adopting operational models that are nearly indistinguishable from conventional capitalist banks. Drawing on Islamic moral philosophy and economic principles, the paper outlines a vision for institutions that embody the spirit of Islam—emphasizing risk-sharing, mutual support, equity, and social justice. It critiques the narrow legalism that has come to dominate the field and proposes a transformative framework for institutional design. This framework prioritizes community empowerment and public welfare, offering a blueprint for building financial systems that serve both the material and spiritual needs of society.
Understanding what genuine Islamic institutions might look like in theory is only part of the challenge; the harder task lies in exploring what is practically achievable within real-world political and institutional contexts. This question came into sharp focus when I was asked to comment on a proposal advocating for full-reserve banking in Pakistan, a revival of the Chicago Plan as a potential remedy for the country’s chronic debt crises. While the proposal framed full-reserve banking as a technical fix for economic instability, my response emphasized that monetary arrangements are never purely technical—they are shaped by power structures, historical legacies, and deeply embedded social norms. Any attempt to alter these arrangements must contend with the political realities on the ground. The next paper critically evaluates the feasibility of implementing such reforms in Pakistan, while also exploring more grounded and context-sensitive pathways toward monetary improvement.
This paper critically examines the proposal for full-reserve banking in Pakistan, inspired by the Chicago Plan and recent advocacy by Qanit Khaleelullah. While the plan is presented as a purely technical solution to the country’s debt burden and financial instability, the paper argues that such a proposal cannot be meaningfully evaluated without considering the political, institutional, and social context in which it would be implemented. Drawing on historical parallels—particularly the failed nationalization of banks in Pakistan—it questions whether shifting monetary power to the state would yield the promised benefits, especially in a governance environment plagued by corruption and elite capture. The paper concludes that technical solutions divorced from political realities are unlikely to succeed, and instead urges a more context-aware, incremental approach grounded in institutional and social feasibility.
The failure of technocratic fixes to grapple with entrenched political and institutional realities highlights a deeper truth: there are no purely technical solutions to fundamentally moral, social, and political problems. Furthermore, modern nation-states are too deeply entrenched within the power configurations created by modern financial capitalism. Recognizing this prompted a shift in focus—away from centralized, state-led strategies and toward approaches grounded in community action and grassroots empowerment. This perspective shaped the next stage of my work, especially when I was invited by COMCEC to propose a strategy for Islamic financial reform. Writing with full awareness of the limitations imposed by global capitalism and the entrenchment of Muslim nation-states within it, I concluded that top-down reform was unlikely to succeed. Instead, meaningful change would require bottom-up initiatives, built on the moral vision of Islam and rooted in the lived experiences and needs of local communities. The following paper offers a strategic vision for how such a transformation might begin.
This paper argues that meaningful Islamic financial reform cannot occur through state-level policies within Muslim-majority countries that are structurally dependent on and integrated into the global capitalist order. Instead of pursuing top-down institutional transformations—which are constrained by political entanglements, global financial pressures, and entrenched elites—the paper advocates for a grassroots strategy rooted in community-level empowerment. Drawing inspiration from early Islamic models and contemporary experiments in local currencies and mutual support systems, the paper outlines a vision for building alternative financial structures from below. These structures, grounded in Islamic moral values and designed to meet the needs of local communities, can gradually develop the capacity for broader institutional transformation while sidestepping the roadblocks of centralized power and global financial hegemony.
In proposing a bottom-up, community-centered vision for financial reform, it became increasingly clear that modern economic theory is itself part of the problem. Built to conceal power, depoliticize policy, and erase moral considerations, mainstream economics is profoundly ill-suited for guiding just and equitable transformation. This is especially true in the domain of money, where the discipline’s abstraction and formalism serve to obscure the real mechanisms of exploitation and control.
From an Islamic perspective, such a framework cannot simply be patched or modified—it must be reconstructed on entirely different foundations, rooted in moral purpose, social justice, and the recognition of divine guidance. The next paper undertakes this foundational task. It reimagines economics as a moral science and lays out an Islamic approach to monetary reform that begins not with interest rates or banking regulations, but with a reorientation of what economics is for, and who it is meant to serve.
This paper critiques the foundational assumptions of modern economics from an Islamic perspective and offers a path toward reconstructing the discipline as a moral science. It argues that the mainstream economic framework is built on a deliberate separation of facts from values, which renders it incapable of addressing questions of justice, power, and ethical responsibility—especially in relation to money. Instead of working within this morally neutral paradigm, the paper proposes an Islamic alternative that integrates spiritual and ethical concerns at every level of analysis. It traces the evolution of Islamic economics and positions this work within the third generation of the discipline, which seeks to move beyond piecemeal adjustments to capitalism and toward a comprehensive, morally grounded worldview. Within this framework, monetary reform is no longer a technical fix but a transformative project aimed at aligning economic structures with divine guidance and communal well-being.
In rethinking economics from an Islamic moral perspective, it became impossible to ignore a larger truth: modern social science falsely claims to be universal, when in fact it is deeply rooted in the unique historical experience of Europe. For a deeper exploration of this false claim of universality, see The Puzzle of Western Social Science. The idea that economic, political, or social theories derived from Western contexts can be applied wholesale to the Islamic world—or anywhere else—is both analytically flawed and historically damaging. The illusion of objectivity and neutrality masks the Eurocentric foundations of these theories and serves as a tool of intellectual and cultural domination.
True transformation requires more than offering moral critiques or ethical alternatives within existing frameworks. It calls for a radical shift in how we produce knowledge itself—one that recognizes the importance of context, the diversity of human experience, and the central role of values. The next paper takes up this challenge, offering a strategic approach to monetary reform grounded in the historical trajectory of Islamic economics. It proposes a locally rooted, third-generation framework for reclaiming monetary sovereignty in the face of global financial imperialism.
9. Zaman, A. Monetary Imperialism and Third-Generation Islamic Economics: A Grassroots Strategy for Economic Sovereignty. Submitted to Journal of King Abdul Aziz University: Islamic Economics (JKAU-IE).
This paper traces three major transformations in the structure and function of money over the past century, each of which has introduced new challenges for the Islamic world. These monetary evolutions are not merely technical but reflect broader shifts in power and institutional arrangements. In parallel, the discipline of Islamic Economics has also undergone its own evolution—not in direct response to changes in the monetary system, but in response to internal debates, historical experiences, and the shifting conditions faced by Muslim societies. The paper situates itself within the emerging “third generation” of Islamic Economics, which seeks to creatively reinterpret the enduring principles of the Shari‘a in light of contemporary realities. Drawing on this approach, the paper offers innovative responses to the challenges posed by modern monetary imperialism, emphasizing grassroots strategies for restoring economic sovereignty within the framework of Islamic ethics and values.
As my understanding deepened, I came to see that one of the greatest barriers to reconstructing Islamic approaches to economics and society lies not in specific institutions or policies, but in the global dominance of Western knowledge systems; see Islamic Revival: The Central Role of Education. The disciplines of modern social science have taught us—explicitly and implicitly—that progress means becoming like Europe, and that Western societies represent the pinnacle of human development. This narrative of European superiority is not only historically inaccurate but also epistemically violent: it delegitimizes alternative ways of knowing, particularly those rooted in Islamic thought. Deconstructing this narrative is an essential step toward rebuilding Islamic societies on their own terms. To break free from imitation and intellectual dependency, we must first understand how modern Europe constructed its self-image, and how this construction was inseparable from ruthless practices of colonization, dehumanization, and moral disconnection. The final paper in this collection takes up this challenge, offering a moral history of Europe’s rise and exposing the ethical costs buried beneath its material achievements.
This paper challenges the dominant narrative of European exceptionalism by offering a moral history of Europe’s rise to global dominance. Rather than attributing Western progress to scientific brilliance, rational governance, or cultural superiority, it highlights the violent, exploitative, and dehumanizing foundations of modern European power. The paper argues that modernity was not a neutral or inevitable development, but rather the outcome of specific historical choices that prioritized power and material gain over justice, ethics, and human dignity. In uncovering the moral costs of Europe’s ascent—slavery, colonialism, genocide, and environmental devastation—it questions the legitimacy of using Western civilization as the benchmark for all others. By exposing this buried history, the paper opens space for imagining alternative futures, including Islamic models of development and knowledge, grounded in spiritual, ethical, and communal values rather than conquest and domination. For a blog post which provides a detailed discussion of the ideas contained in the academic paper, see: Seeing Through Empire: The Lies That Blind Us
Closing Reflections: The Journey Ahead
This compendium reflects not a destination, but a path in progress—a journey of learning, unlearning, and reimagining. Understanding the hidden architecture of money, its ties to power, and its role in sustaining global injustice has been a central thread throughout my work. But the more difficult task lies ahead: how to create alternative systems—rooted in Islamic principles—that are just, ethical, and feasible in our current political context.
What I’ve come to realize is that transformation does not begin with revolutions, declarations, or theoretical blueprints. It begins with small, meaningful actions taken within the constraints of the existing world. While utopian visions may inspire, they often paralyze us by suggesting that unless we can change everything, we should do nothing. The truth is quite the opposite: real change grows from the ground up, through incremental, morally informed innovations that gradually shift the terrain of what is possible.
This also means embracing a learning-by-doing approach. We will not arrive at the ideal system through abstract theorizing alone. New models must be tested, refined, and revised through practical engagement and community-level implementation. Some of these innovations will fail—and that, too, is part of the process. But others may evolve into viable alternatives that chip away at the hegemony of capitalism—not by confronting it head-on, but by building parallel structures that operate according to different values.
One helpful concept is that of “disruptive innovations”—initiatives that do not merely reproduce the logic of capitalism under Islamic branding, but instead reconfigure its underlying assumptions. In contrast to Islamic banks that often operate within and reinforce capitalist structures, we need institutions that subvert them—financial mechanisms, community currencies, mutual aid networks, and cooperative enterprises that embody both the spirit and substance of Islamic teachings. For a more detailed discussion of how we can create social change, see Lecture 6: Drivers of Social Change.
Fortunately, this transformation is not merely aspirational—it is already underway. Across the Islamic world, there exist countless institutions that defy the logic of profit maximization and operate instead to serve the public good. The Akhuwat Foundation has disbursed billions of rupees in zero-interest loans to millions of borrowers. The Indus Hospital delivers high-quality medical care free of charge. The Edhi Foundation runs an expansive, grassroots network of humanitarian services. These are only the most prominent examples. On a smaller scale, innumerable individuals and communities are already engaged in acts of service that cultivate values of cooperation, generosity, and social responsibility—values that stand in stark opposition to the competition, greed, and hedonism at the heart of capitalism.
There is no straight path to the destination we seek. But the journey has already begun—and it is being walked every day by those who act on faith, guided by the enduring moral compass of Islam.
Social science claims to describe the world as it is. Its theories, models, and graphs appear neutral, objective, and value-free — offering tools to understand, not to judge. But what if this objectivity is a mask? What if the theories that claim to reflect reality are actually reshaping it — guiding us, quietly but powerfully, toward a deeply flawed vision of what society should be?
Modern economic and social theory does not merely analyze human behavior; it idealizes a specific kind of human being — competitive, selfish, atomized — and then builds a blueprint for society around this creature. The result is not civilization, but something more akin to a jungle: a system where ferocious competition is glorified, moral values are dismissed as unscientific, and cooperation is treated as irrational.
This post explores how this transformation happened — how violence was hidden, how greed became virtue, and how theories that pretend to be passive observers are in fact active architects of the world we inhabit. Beneath the mask of objectivity lies a powerful ideology — one we must confront if we hope to build a more humane future.
Section I: Introduction — The Hidden Architecture of Power
Modernity teaches us to see the rise of Europe as a triumph of reason, science, and moral advancement. But what if this story is a carefully constructed illusion? The argument laid out in Economics After Empire: Rebuilding the Discipline on Moral Foundations turns this narrative on its head: Europe’s global dominance was not the result of superior intellect or values, but of a comparative advantage in financial innovation and organized violence. Through tools like central banking and secular morality, Europe transformed conquest into commerce, and greed into virtue — without ever admitting the cost.
This blog post serves as a roadmap to the argument and its many supporting threads. Woven into the narrative are links to articles, essays, and books that explore different facets of this thesis: how modern economics abandoned its moral roots; how secularism sanitized empire; how theories masquerading as neutral truths conceal class interests; and how history itself is rewritten by the victors.
Crucially, this is also a project of intellectual reconstruction. Economics was once a branch of moral philosophy, concerned not merely with wealth but with justice, virtue, and the good life. Today, it presents itself as a technical science divorced from ethics — a transformation that demands scrutiny.
As an alternative, we present Uloom ul Umran, the science of society pioneered by Ibn Khaldun. This methodology rejects universal laws and deterministic thinking; instead, it calls for grounding social theory in historical context, moral clarity, and the lived realities of communities. For an introduction to this framework and its broader implications, see our post: Reclaiming Lost Narratives: A New Approach to Social Science.
This post is both a narrative guide and an invitation — to look deeper, to question more, and to reclaim the moral imagination buried beneath the myths of modernity.
Section II: Social Theories in Context — A New Way to See the World
Social theories do not fall from the sky. They are born in moments of crisis, shaped by particular social groups, and crafted to serve specific interests. Yet modern education presents them as timeless truths: value-neutral frameworks for understanding society. This illusion of objectivity blinds us to the deeper truth: social theories are tools of power, not merely instruments of knowledge.
Uloom ul Umran, the science of civilization articulated by Ibn Khaldun, begins from a radically different premise. Societies evolve through distinct stages, and with them, so do the ideas used to explain and manage change. A theory that made sense in 18th-century Britain may become irrelevant — or dangerous — when transplanted into 21st-century Pakistan. Understanding the historical context that gave rise to a theory is essential to understanding its meaning, its purpose, and its limitations.
As shown Chapter 1: Methodology, the rise of secular capitalism was not the inevitable result of reason’s march, but a deliberate response to specific conflicts in European society. Theories that succeeded in Europe did so not because they were true — but because they aligned with the interests of powerful classes and were embedded in dominant worldviews.
This becomes clearer when we compare Marxist and capitalist economic theories. Each offers a description of society shaped by its political commitments. Marxism identifies exploitation and calls for revolution; capitalism naturalizes inequality and justifies profit. Both claim neutrality. Each reflects a class perspective.
Mainstream economics ignores this entirely. It teaches students that economic theories are value-free and universally valid — while concealing the social histories that birthed them. For a deeper critique of this ahistorical, Eurocentric mindset, see: Uloom ul Umran vs Eurocentric Social Science.
To decolonize our minds, we must learn to see ideas historically, not worship them as universal laws. Only then can we begin to craft social theories that serve our societies, rather than those who rule them.
Section III: Ruthless Modernity — The Moral Illusions of Empire
The myth of European superiority claims that the West conquered the world because of science, rationality, and moral progress. But this narrative hides a darker truth: Europe’s global dominance was built on violence, disguised as virtue. This is the central thesis of Ruthless Modernity — that power was cloaked in moral language, and conquest rebranded as commerce.
The real advantage Europe possessed was not truth or justice, but financial innovation paired with organized brutality. Institutions like the Bank of England were designed not to promote trade or welfare, but to fund endless war. Through accounting tricks and clever abstractions, the raw machinery of conquest was rendered invisible. Debt became development. Profit became progress. Empire became order.
This sanitized violence was made palatable by redefining morality itself. Where religion once taught that greed was a sin, modernity reclassified it as efficiency. Secularism, far from being neutral, served as an ideological tool to moralize empire. As William Corbeil argues in Empire and Progress, Enlightenment ideals were weaponized to erase indigenous worldviews and justify European dominance. What appeared as reason was often a refined form of domination.
To understand the modern world, we must begin by unlearning the stories we have been taught. Europe did not civilize the world — it redefined conquest as civilization.
Section IV: The Transformation of Morality — Greed as Virtue
How does a deadly sin become a civic virtue? Or, more pointedly: how did Ebenezer Scrooge — the miserly villain of Dickensian morality — morph into Scrooge McDuck, the clever and lovable symbol of entrepreneurial success? This moral reversal is not accidental. It reflects a deeper transformation in how society came to understand wealth, work, and virtue.
R.H. Tawney, in his classic Religion and the Rise of Capitalism, explores this transition. He shows how early Protestant theology — especially Calvinism — redefined the moral status of wealth. Where medieval Christianity had regarded avarice as a spiritual danger, Protestant thinkers came to view economic success as a sign of divine favor. Greed was not just tolerated — it was sanctified.
This transformation was essential to the rise of capitalism. A new moral vocabulary was required to justify a system that rewarded accumulation over compassion, and self-interest over sacrifice. As wealth became detached from moral obligation, it was no longer judged by how it was used, but simply by how much of it one could acquire. The pursuit of profit became not only permissible — but righteous.
These ideas still shape our world today. Neoliberalism builds on this moral inversion to portray inequality as the reward for merit and efficiency. Modern economics textbooks continue the tradition, teaching students to think about policy in terms of optimization and growth — while sidelining justice, dignity, and the public good.
Section V: Beyond True and False — The Positivist Trap
Modern economics encourages us to think in binary terms: policies are either true or false, effective or ineffective. If Inflation Targeting works in one setting, it should work everywhere. But this mindset — borrowed from the natural sciences — distorts the nature of social theories.
Take Job Guarantees. While widely debated, they’ve never been fully implemented. On the other hand, Communist regimes like the Soviet Union did guarantee employment for all workers. What can we learn from those experiences? Would such a policy “work” in Pakistan today? Answers to such questions depend not on abstract models, but on who will champion it, who will resist it, and whether it fits the local political and institutional realities.
Social theories are not equations — they are historical responses to crisis. Keynesianism, for example, was a solution to mass unemployment in post-Depression Britain. It succeeded not just because it was effective, but because it had elite backing, popular support, and fit the moral logic of its time.
As explained in Chapter 1: Methodology, success is always context-bound. A theory that thrives in one culture may fail in another. Attempts to apply Islamic finance using Western banking infrastructure have often produced shallow results — not because the ideas are flawed, but because they lack institutional alignment and cultural traction.
To evaluate a theory, we must move beyond positivist binary of true and false. Instead, we should ask: Who created it, for what purpose, and under what conditions can it succeed?
Section VI: Embracing the Normative to Rebuild Social Science
Seeing Through Empire: The Lies That Blind Us exposes the moral illusions that shaped the modern world. The next step is to imagine a better way to study — and shape — our societies.
Modern social science, built on the foundation of positivism, treats human beings like particles and societies like machines. It assumes we can discover laws of human behavior in the same way physicists discover laws of motion. But human beings are not reducible to formulas. We live by ideals, make moral choices, and imagine different futures. To treat society as a value-neutral system is to fundamentally misunderstand what it means to be human.
Economic theories idealize life in the jungle of ferocious competition, devoid of social responsibility. The consequences are all around us: climate catastrophe, permanent war, collapsing families and fraying communities. These outcomes are the product of a worldview that elevates efficiency, competition, and consumption while dismissing justice, compassion, and meaning.
A more grounded approach treats the study of society as a moral project. It involves a three-dimensional methodology:
Normative: a vision of the kind of world we want to build;
Positive: a clear understanding of current reality;
This approach is inspired by the Islamic intellectual tradition, particularly the work of scholars like Ibn Khaldun. But its relevance is universal. Every society, religious or secular, must ask: What kind of world are we trying to create?
Even modern economics follows this structure — just covertly. Its normative ideal is “perfect competition,” a marketplace of atomized, self-interested individuals. It recognizes distortions — monopolies, externalities, inequality — but seeks to “correct” them only to bring us closer to this highly questionable ideal. As shown in Building Humane Alternatives to Homo Economicus, what is taught as “rationality” is a thin disguise for sociopathic behavior.
The tragedy is not so much that economics has perverse ideals. The tragedy is that it pretends not to, leaving students blind to the moral conditioning embedded in their education. We need a better way. A methodology that embraces moral clarity, respects cultural context, and empowers us to shape a more humane future. For more details, see my post on Uloom ul Umran.
Section VI: Reclaiming Our Narrative — A Human-Centered Alternative to Positivism
Studying the economic theories of capitalism, as in The Golden Spell: Capitalism and the Sorcery of Power, exposes the moral illusions that shaped the modern world. The next step is to imagine a better way to study — and shape — our societies.
Modern social science treats human beings like particles and societies like machines. It assumes there are laws of human behavior similar to the laws of universal gravitation. But human behavior is not reducible to formulas. We live by ideals, make moral choices, and make sacrifices for visionary goals for the future. Economic theory derives policies for the real world by studying a hypothetical society of robots, subject to mathematical laws.
A more realistic approach treats society as a moral project. It involves a three-dimensional methodology:
Normative: a vision of the kind of world we want to build;
Positive: a clear understanding of current reality;
This approach is inspired by the Islamic intellectual tradition, particularly the work of scholars like Ibn Khaldun. But its relevance is universal. Every society, religious or secular, must ask: What kind of world are we trying to create?
Even modern economics follows this structure — just covertly. Its normative ideal is “perfect competition,” a marketplace of atomized, self-interested individuals. It recognizes distortions — monopolies, externalities, inequality — but seeks to “correct” them only to bring us closer to this highly questionable ideal. As shown in Building Humane Alternatives to Homo Economicus, what is taught as “rationality” is often a thin disguise for sociopathic behavior.
The tragedy is not that economics has ideals. The tragedy is that it pretends not to, leaving students blind to the moral conditioning embedded in their education. The outcomes of this moral blindness are in front of us in the form of a climate catastrophe, continuous wars, increasing inequality, and breakup of families and communities. Understanding the power of social science to shape society places the responsibility upon our should to find a better way: a methodology that embraces moral clarity, respects cultural context, and empowers us to shape a more humane future. For an overview of this broader project, see: Reclaiming Lost Narratives: A New Approach to Social Science
{bit.ly/AZMammon} Three books stand out as essential for understanding how modernity emerged from the ruins of a religious world: Karl Polanyi’s The Great Transformation, R. H. Tawney’s Religion and the Rise of Capitalism, and Eugene McCarrahar’s The Enchantments of Mammon. All three chart the upheaval that occurred as economic logic displaced moral reasoning, and as societies once guided by theology were reorganized around markets, money, and abstract power.
Polanyi’s work, which I’ve summarized in The Great Transformation in European Thought, tells the story of how society was reshaped to serve the economy. I have also summarized McCarrahar’s contributions in The Golden Spell: Capitalism and the Sorcery of Power. This post explores the third book in this trilogy: Tawney’s forgotten classic, which shows how religion itself was transformed—and ultimately replaced—by economic ideology.
Tawney reveals that the rise of capitalism was not a triumph of science over superstition, but the outcome of a long moral and theological struggle. The gospel of Christ gave way to the gospel of Mammon, and modern secularism emerged not by rejecting religion but by inventing a new one. His insights are essential for anyone trying to understand how we came to treat greed as virtue, and why restoring moral history is key to reclaiming our future.
I. The Great Revaluation: How Capitalism Reshaped Virtue
The modern world tells a triumphant story: that humanity emerged from the darkness of religious superstition into the light of secular reason and scientific progress. But R. H. Tawney’s Religion and the Rise of Capitalism offers a very different perspective. Writing in the aftermath of the First World War, Tawney traced how economic ideas, values, and institutions evolved hand-in-hand with shifting religious commitments in early modern Europe. Far from being a marginal concern, religion was the central arena where the meaning of social life, morality, and human purpose were contested. The rise of capitalism, Tawney argues, was not a clean break from religion, but the result of a long, bitter theological struggle over how Christianity should relate to wealth, work, and worldly power.
This blog post builds on Tawney’s insights to tell a broader story: that secular modernity did not end religion—it became a new religion. What was once a world guided by theology became a world governed by economic abstractions, moralized markets, and technocratic elites. Tawney helps us see the lost moral history of this transformation—and why reclaiming it is essential for understanding the present.
In Religion and the Rise of Capitalism, Tawney shows how the moral order of medieval Christian society was slowly overturned by a new ethic that sacralized private gain. For centuries, Christian thought had subordinated economic activity to ethical and communal ends. Usury was condemned, excessive profit frowned upon, and property was seen as a trust, not an absolute right.
But this world began to fracture in the 16th century. The Reformation shattered religious unity and opened the door to competing interpretations of Christian duty. In this unstable moral landscape, market morality—once marginal—began to move to the center. As Tawney traces, Puritanism played a key role in sanctifying diligence, thrift, and individual responsibility, reinterpreting worldly success as a sign of divine favor.
Gradually, a society once governed by theological ideals became one ruled by economic ones. This was a centuries-long contest over moral and spiritual authority. For a closer look at Tawney’s argument, you can explore these summaries of each chapter:
Pre-Capitalist Christian Society This chapter outlines the medieval worldview in which economic life was subordinated to spiritual goals. Tawney explores how Christian theology framed wealth as a trust, bound by obligations to the community and constrained by moral principles.
16th Century Origins of Capitalism As the unity of Christendom broke down, new interpretations of religious duty emerged. Tawney traces how the social and political upheavals of the Reformation created space for emerging capitalist values to take root.
Market Morality Replaces Christian Ethics Economic activity, once seen as morally dangerous, was reinterpreted as virtuous. Tawney shows how profit-seeking, once stigmatized, came to be celebrated under a new moral code more compatible with emerging commercial interests.
The Puritans Puritan thought played a decisive role in moralizing economic life. Tawney analyzes how its emphasis on self-discipline, work ethic, and individual responsibility fused spiritual salvation with material success.
Pleasure, Power, and Profits In the final chapter, Tawney reflects on the long-term consequences of this moral shift. A vision of society guided by conscience was replaced by one driven by power, utility, and the pursuit of private wealth.
III. Framing Twist: What Replaced Religion?
Tawney never states outright that secular modernity became a religion—but his book all but compels us to draw this conclusion. His narrative shows how Christian theological debates once framed society’s deepest moral questions—about wealth, justice, authority, and obligation. As the grip of Christian unity weakened, these questions did not disappear. They were relocated, smuggled into the frameworks of economics, law, and “secular” reason.
The displacement of theology left a vacuum. Secular modernity filled it, not with neutrality, but with a new faith in markets, growth, and technocratic control. The very shape of religious life—rituals, priesthoods, doctrines—re-emerged in secular form. Economic theories began to function like sacred creeds, and economists like modern clergy, interpreting signs and prescribing salvation.
Tawney’s account lets us see this transformation in motion. And once we recognize it, the idea that we live in a “post-religious” age collapses. We don’t live beyond religion—we live within a new one.
This perspective is deepened in:
The Transition to Capitalist Society This post outlines how capitalism emerged not simply as an economic system, but as a new form of social order built on moral revaluation. It emphasizes that capitalist institutions displaced traditional religious values by redefining freedom, responsibility, and the good life in terms of individual gain and market efficiency.
From Commons to Capital Here, the focus shifts to the legal and political mechanisms that supported this moral transformation. It traces the enclosure of the commons as a paradigmatic shift in property rights—where communal ownership governed by religious obligation was replaced by absolute, exclusive private property justified by emerging economic theory.
Economics as Religion In his book “Economics as Religion: From Chicago to Samuelson“, Robert H. Nelson argues that modern economics has become a secular theology, offering moral narratives and metaphysical assurances under the guise of scientific objectivity. From neoclassical economics to Chicago School libertarianism, economic theory functions not merely as a tool of analysis but as a comprehensive worldview—one that promises salvation through growth, rational order through markets, and justice through competition. Economists act as modern-day priests, cloaking moral judgments in technical language and guiding public life with doctrines as rigid as any religious creed. Far from displacing religion, Nelson contends, economics has simply replaced it, structuring how societies define virtue, purpose, and destiny.
Together, these works reveal that modern secular society did not abandon religion—it reinvented it. The rituals of the market, the sanctity of property, and the priesthood of economists emerged to replace the Church, not to eliminate the sacred but to reframe it in the service of power and profit. Tawney shows us the beginning of this transformation; these essays help us understand its full consequence.
IV. Tawney and the Failure of Whig History
A key contribution of Tawney’s work is that it challenges the shallow triumphalism of Whig history—the idea that history is a linear march of reason and progress, culminating in modern liberal, secular societies. From this perspective, theological conflicts appear as irrational detours—silly quarrels between priests—best forgotten in the glow of Enlightenment.
Tawney explains how the religious struggles of early modern Europe shaped the fabric of European society. The disputes between Catholics and Protestants, between different sects and confessions, were not peripheral—they were about the very meaning of human life, social obligation, and divine justice. These were high-stakes moral battles over how society should be ordered. They mattered.
But when secularism triumphed, it buried these questions. It rewrote the past to make its own victory look inevitable. Once theology was defeated, history was re-narrated to suggest that it had never posed serious intellectual challenges in the first place. This is the central delusion of Whig history: that earlier ideas were discarded because they were false, and modern ones dominate because they are true.
This erasure is starkly visible in how we remember Isaac Newton — see Newton’s Lost Revolution: Why His Most Important Works Remains Unread?. While modernity hails him as the founder of rational science, it has buried the most radical part of his intellectual legacy: his theological project to rescue Christianity from the illogical and coercive doctrine of the Trinity. Newton believed that the root cause of Europe’s moral decay was not Christianity itself, but Trinitarian Christianity, whose contradictions could not withstand rational scrutiny. In private writings—kept secret out of real fear of persecution—he championed the older Arian Creed, which affirmed God’s unity and subordinated Christ to the Father.
Newton’s hope was that by purifying Christian doctrine and returning to a rational, monotheistic foundation, European civilization could be morally revitalized. He saw the Trinity not just as a theological error, but as the source of an authoritarian religious structure that had weaponized faith and suppressed inquiry. His project, had it succeeded, might have saved Europe from the worship of Mammon by offering a coherent moral alternative.
But the terror of enforced Trinitarian orthodoxy was so great that even Newton, with all his prestige, kept his most important religious writings hidden. Friends and colleagues of his had faced execution or imprisonment for holding similar views. His vision was silenced before it could spark a revolution. For more historical details regarding the rise of Trinitarian Christianity, and the suppression of alternatives, see: Chapter 2: Studying Social Change—From the Roman Empire to Christendom.
Newton’s vision reminds us of a path not taken. It shows that the rise of modern industrial society did not have to come at the cost of moral collapse. A rational, monotheistic Christianity grounded in the Arian tradition might have provided the ethical foundations for a very different kind of modernity—one that balanced material progress with spiritual coherence and social justice. The triumph of Mammon was not the result of intellectual superiority, but of historical accident, political suppression, and the terror of enforced orthodoxy. Just as Tawney reveals how market morality displaced Christian ethics, Newton’s lost revolution shows us that serious moral alternatives existed—and were silenced, not because they were irrational, but because power shaped the outcome.
VI. Connecting to Uloom ul Umran: A Better Way to Understand History
Tawney’s historical method aligns with the core insight of Uloom ul Umran: to understand social change, we must study the historical and moral evolution of societies, not treat them as abstract systems governed by universal laws. For more details, see: Reclaiming Lost Narratives: A New Approach to Social Science.
Modern social science, shaped by Enlightenment rationalism and positivist philosophy, seeks timeless truths. It assumes that theories like capitalism or Marxism are neutral models of reality, to be judged true or false by data. But social theories are not discovered—they are created, by specific groups facing specific problems in particular times and places. They are responses to crises, shaped by moral visions and political interests.
Tawney’s narrative illustrates this beautifully. The rise of capitalist morality was not an intellectual breakthrough—it was a social theory crafted to legitimize a new order. Just as Marxism responded to the exploitation of labor, capitalist theory emerged to justify the pursuit of profit and individual ownership, all under a veil of theological reinterpretation.
Uloom ul Umran, following Ibn Khaldun, teaches us to analyze ideas in context. Theories emerge from historical struggle, evolve with society, and lose relevance when detached from their roots. Tawney’s work restores this dimension: his economic history is moral history. And in doing so, he shows us how to study societies not with scientific detachment, but with interpretive depth—seeking the hidden forces, narratives, and worldviews that shape human destiny.
VII. Conclusion: The Restoration of Moral History
Tawney’s Religion and the Rise of Capitalism is more than a work of economic history—it is a map of a moral revolution. It shows how theological debates about justice, duty, and salvation were gradually displaced by the cold logic of markets and contracts. In this transformation, society did not become less moral—it embraced a new morality, one that treats profit as virtue and consumption as fulfillment.
This moral shift was not accidental. It was fought over—in pulpits, in parliaments, in pamphlets—and eventually forgotten. Tawney’s work helps us recover that lost memory. It reminds us that the structure of modern life rests on contested visions of the good, not on neutral facts. And it challenges us to re-engage with those moral questions, rather than leave them to the invisible hand.
To do that, we need a new kind of social science—one that understands theories as products of history, rooted in narratives and shaped by power. This is the vision offered by Uloom ul Umran. Tawney’s book, though written a century ago, stands as a powerful example of how to tell history not as a tale of progress, but as a story of moral possibility—and moral loss.
We’ve been taught that Europeans conquered the globe because they had the most advanced civilization. But what kind of civilization is built on conquests, exploitation, enslavement, and the deaths and destruction of millions around the globe?
Section 1: Introduction — Questioning the Grand Narrative
According to the standard narrative, Europe’s rise was driven by superior institutions, rational governance, and scientific advancement. Wealth, power, and modernity are seen as the natural outcomes of internal European virtues—innovation, efficiency, and discipline. Implicitly or explicitly, social sciences – economics included – are built on these foundations.
Yet this account is misleading—not because it is entirely false, but because it omits too much.
It leaves out the institutional machinery that made conquest and exploitation economically viable. It ignores the ideological work that redefined violence as civilization and plunder as progress. And most crucially, it forgets that economics itself was born within this imperial context—emerging to make sense of, and legitimize, the transformation of European society under capitalism, colonization, and industrial war. In his book entitled “How Economics Forgot History”, Geoffrey Hodgson shows that when economics cast off its historical roots in favor of timeless models and universal laws, it also forgot the very conditions that produced it.
What followed was a science unmoored from its origins—projecting European historical experience as a universal template. In “Rule of Experts”, Timothy Mitchell writes:
“The possibility of social science is based upon taking certain historical experiences of the West as the template for a universal knowledge.”
This essay is an invitation to reconsider that template. We will examine how conquest was made profitable, how its moral costs were abstracted away, and how a discipline meant to understand human welfare became complicit in its erosion. By recovering the history of the origins of economics, we may begin to imagine a morally grounded, globally relevant economics.
Section 2: Wealth as a Moral Goal — The Enlightenment Turn
Today’s economic discourse often treats the pursuit of wealth as self-evident, a natural expression of human behavior. But this framing is historically contingent. It emerged during the Enlightenment, when European thinkers sought to redefine the foundations of morality in a secular age. What replaced religion was not amorality, but a new moral logic—one that recast wealth, utility, and efficiency as virtuous ends in themselves.
Adam Smith, for example, was not the laissez-faire caricature invoked in modern textbooks. His Theory of Moral Sentiments emphasized sympathy, virtue, and the social fabric. He envisioned markets embedded within a moral order, not governed by self-interest alone. Similarly, Immanuel Kant aimed to build a universal ethics based on reason, not revelation—hoping to replace divine command with categorical imperatives.
Yet both projects faltered and ultimately failed. The emerging field of economics, especially after the Industrial Revolution, took a different turn—marginalizing moral philosophy in favor of price, preference, and incentive. Markets came to be evaluated not by whether they promoted human welfare, but by whether they increased measurable output. The concept of the good life—once central to both religious and philosophical traditions—was reduced to the maximization of consumption. But far from enhancing human flourishing, this shift undermines it: when satisfaction is pursued through material accumulation, it generates anxiety, social comparison, and ecological harm. In the name of utility, we sacrificed meaning. Tentative and hesitant efforts to restore richer notions of well-being—such as Amartya Sen’s capabilities approach or Martha Nussbaum’s work on human flourishing—have been unable to gain traction within mainstream economics, due to deep methodological commitments to positivism.
This shift from maximization of welfare to consumption laid the groundwork for instrumental rationality—a worldview where actions are judged solely by their consequences, not their ethical character. This allowed economic models to treat slavery, environmental degradation, or child labor as just another cost-benefit calculation.
What was once a search for a new moral order became a retreat from morality altogether. And in this void, wealth itself became the moral end, because it was observable and quantifiable.
Section 3: Finance, Empire, and the Business Model of War
The rise of Europe was not merely a triumph of ideas. It was also a triumph of accounting. Behind the banners of civilization and progress stood a powerful new business model: war as investment.
From the 17th century onward, European states developed what historians call the fiscal-military state—a political formation built on the capacity to borrow money to fund wars. Elites lent funds to monarchs, secured by future tax revenues or conquest spoils. Public debt markets, initially created to finance military campaigns, became sites of immense profit. Violence was no longer a cost to be absorbed—it was an asset to be monetized.
This transformation was institutionalized through a network of innovations:
Joint-stock companies, like the Dutch and British East India Companies, enabled private investors to share in the profits of empire.
Colonial banks and imperial insurance markets underwrote conquest and slavery.
Public credit systems turned war-making into a sustainable financial operation.
But this machinery of conquest did not run on economics alone—it was supported and justified by Europe’s leading philosophers. While proclaiming the ideals of liberty, reason, and universal rights, Enlightenment thinkers provided the intellectual scaffolding for empire:
John Locke, celebrated as a champion of liberty, was a shareholder in the Royal African Company, which trafficked enslaved Africans. He defended property rights over human bodies and rationalized expropriation in the Americas.
Voltaire invested in colonial companies and dismissed enslaved Africans as “animals.”
John Stuart Mill, heralded as a liberal paragon, spent his career at the British East India Company, shaping policies of control and extraction.
Even those not directly complicit helped craft the moral narrative of “civilizing the savage”—a project that turned atrocities into obligations. Philosophy, law, and economics evolved together, constructing a vision of development in which Europe’s violence was invisible, necessary, or even benevolent.
The outcomes were brutally real. In the transatlantic slave trade, finance and logistics reduced human beings to shipping units. In Leopold’s Congo, mutilation and death were bureaucratized into rubber quotas and profit margins.
These are not historical footnotes—they are the foundations of modern capitalism. What mattered was not how wealth was acquired, but that it could be measured, securitized, and multiplied.
This system also enabled moral detachment. Shareholders in the East India Company did not swing the whip; bondholders funding imperial wars never saw the blood. Profit required distance, and capitalism delivered it.
The same structure persists today: war contractors and extractive firms thrive amid chaos. In public ledgers and economic models, destruction still counts as growth.
Section 4: The Myth of Progress — Deception as Structure
To turn empire into an acceptable enterprise required more than weapons and finance—it required ideology. Violence had to be narratively transformed into virtue, and suffering reframed as the price of modernization. This was not accidental; it was a deliberate and systematic project of moral camouflage.
The Enlightenment, while championing reason and rights, also helped to construct the ideological vocabulary that made conquest palatable. Words like “progress,” “civilization,” “commerce,” and “development” became euphemisms for domination. They promised uplift while delivering exploitation. They cast indigenous ways of life as backward, non-European cultures as childlike, and European violence as benevolent intervention.
Philosophers, historians, and economists contributed to this narrative architecture. The civilizing mission was framed as a moral obligation; colonization was rationalized as a necessary step in the linear evolution of societies. In this framework, the colonized were not victims but beneficiaries—reluctant passengers on a one-way train toward Western modernity.
This ideological work was reinforced by the emerging social sciences, especially economics and political theory, which offered tools of abstraction. The messy realities of hunger, death, and dispossession were converted into charts and ratios. Colonial violence disappeared behind the veil of data.
This is what Timothy Mitchell described as the defining move of modern social science: to take a particular historical experience—Europe’s—and present it as a universal model, to which all societies would be compared and toward which they were expected to evolve. What could not be measured was dismissed; what could be quantified was naturalized.
The result was not just a myth, but a structure of deception. It normalized inequality, laundered violence through developmental rhetoric, and produced a world where the victims of empire were asked to be grateful.
And as markets came to define society, wealth became the measure of all things. “All is fair in love and war” morphed into an economic ethos: no moral constraints bind the pursuit of pleasure and power. These became the supreme values of life. It is a deeply reductive and primitive vision of human welfare—what might be called the Viking model of development—in which conquest, consumption, and dominance are taken as the hallmarks of progress.
Economists use a framework in which maximization of personal pleasure becomes the central goal of life, and moral considerations are absent. As a result, economic agents are assumed to lie, cheat, steal, and betray when it serves their interest—This the ideal of rational behavior embedded in textbook economic models. We will return to this hidden moral architecture later. For now, we turn to how it distorts even our measurements of growth and wealth.
Section 5: The Illusion of Wealth — Creative Destruction at a Global Scale
Economic growth, as measured by GDP, is often treated as a proxy for national success. But what does this metric actually capture—and what does it conceal?
It is enlightening to revisit Joseph Schumpeter’s concept of “creative destruction”: the idea that economic progress depends on the continual destruction of outdated industries to make way for innovation. Today, this logic can be expanded to justify far more: wars, displacements, ecological collapse—all become acceptable side-effects in service of growth.
At a global level, this logic leads to disturbing outcomes. Wars destroy infrastructure and lives—but then reconstruction creates jobs, generates contracts, and boosts GDP. Defense spending, even when funding senseless destruction, is counted as productive output. From the economist’s perspective, both the missile and the rebuilding of the hospital it destroyed are economic activity. The net effect on human welfare is irrelevant.
This isn’t a theoretical problem. It defines modern economic policy. In post-conflict zones, GDP often spikes—not because life is improving, but because aid flows, construction contracts, and military logistics operations flood the formal economy. Every bomb dropped and every road rebuilt adds to the bottom line. Destruction is not a disruption; it is a feature.
As Stiglitz, Sen, and Fitoussi have argued, GDP measures economic throughput, not human wellbeing. It ignores inequality, ecological harm, unpaid care work, and the erosion of public goods. A nation can become poorer in every meaningful sense—sicker, more divided, more fragile—while its GDP rises.
And yet, GDP remains our dominant scoreboard. Economists are trained to focus on efficiency, not justice; on measurable flows, not moral consequences. But if wealth includes destruction, and if growth includes suffering, we must ask: Is this really wealth? Is this really progress?
Section 6: Why Economists Stay Silent — The Positivist Trap
If the history of conquest is so central to global inequality, and if the discipline of economics itself evolved in that imperial context, why do most economists not see it?
The answer lies in a powerful methodological commitment that shapes the field: positivism. According to this framework, only observable, measurable phenomena are valid objects of scientific inquiry. Motivations, moral values, and ethical commitments—being subjective and unmeasurable—are excluded from formal models. Over time, this has led to a conception of economics as a value-free science, concerned only with “what is,” not “what ought to be.”
But this neutrality is an illusion. As philosophers like Hilary Putnam, Hausman and McPherson, and others have argued, facts and values are inextricably entangled in social science. Economic models that exclude morality do not become neutral—they simply embed a hidden moral architecture, one that often privileges wealth, efficiency, and individualism without ever naming them as values.
Economists are trained to treat human beings as pleasure-maximizing agents, motivated solely by self-interest. The rational actor in standard models is expected to betray trust, exploit others, and ignore obligations if the payoff is right. Cooperation, generosity, or loyalty appear irrational—unless they can be repackaged as “strategic behavior.”
This has profound implications for policy. Take healthcare rationing: cost-effectiveness models often assign treatments based on QALYs—a measure that calculates how many “quality” years a medical intervention can provide per dollar spent. At first glance, it appears neutral and efficient. But as Hausman and McPherson point out, this framework implicitly values the lives of the young over the old, the healthy over the disabled, and the rich (who can pay) over the poor. The moral commitments are buried in the arithmetic, rendering life-and-death decisions as “technical” problems.
This training has profound consequences:
War and violence vanish from models—These are not market activities, and not prices.
Inequality is explained, not questioned—the result of preferences, skills, or productivity, rather than systems of power.
Activism and moral critique are discouraged—as if social systems were governed by natural laws, not shaped by human decisions.
In this framework, asking whether capitalism is just, or whether GDP growth is desirable, appears unscientific. The discipline presents itself as a mirror to reality—when in fact, it is a map drawn with particular interests and assumptions in mind.
As my paper on Normative Foundations of Scarcity argues, even core concepts like scarcity are loaded with unacknowledged normative assumptions: about property, entitlement, and distribution. These assumptions are treated as facts—rendering the discipline impervious to moral critique.
This silence is not accidental. It is produced by a methodology that equates science with abstraction, and abstraction with truth. But in the process of purging values, economics has purged meaning—and with it, the tools needed to understand suffering, injustice, and the human condition.
Section 7: Toward a Global Moral Economics
If we are to move beyond a model of economics that abstracts away from ethics, violence, and global justice, we need more than critique—we need a new vision. A vision that treats human beings not as isolated calculators of utility, but as members of a shared moral community. A vision grounded not in scarcity and competition, but in cooperation, dignity, and care.
Such a vision is not utopian—it is empirically supported and increasingly urgent.
First, the assumption of inherent selfishness is no longer credible. Recent findings in evolutionary biology, anthropology, child development, and behavioral economics have shown that humans are naturally cooperative, altruistic, and socially responsible. These traits are not anomalies; they are core to our survival as a species. The model of homo economicus is not just ethically impoverished—it is biologically inaccurate.
Second, the pursuit of wealth does not lead to happiness. The Easterlin Paradox and decades of well-being research have shown that after a certain threshold, additional income has little impact on life satisfaction. Once basic needs are met, relationships, purpose, and social trust matter far more than consumption. Economies organized around endless accumulation thus misdirect human effort—producing ever more, while delivering ever less joy.
Third, capitalism’s need for excess production has generated a culture of artificial desire. To sustain profits, corporations manufacture needs—whether for sugar, tobacco, gadgets, or status symbols. People work harder to afford things that do not improve their lives. This creates a treadmill: desire → labor → production → profit, with well-being as a neglected externality. The resulting rat race creates misery for all, and is destroying the planet.
A moral economics would begin with a different premise: that the good life is simple, social, and ethical. That human welfare is grounded in character, community, and mutual care. That freedom does not mean choosing between brands, but living in a world where trust, dignity, and love are abundant.
Such an economics would not abandon rigor. It would broaden its foundations, embracing cooperation as rational, sustainability as necessary, and justice as non-negotiable.
Tentative beginnings have been made—through Sen’s capabilities approach, Martha Nussbaum’s theory of human flourishing, and other efforts to reintroduce ethics into economic thought. But these alternatives have been unable to gain traction, because the methodological straitjacket of positivism, still defines the boundaries of acceptable mainstream economic theorizing.
Section 8: Conclusion — From Analysis to Action
As the Marxist historian L.S. Stavrianos wrote in The Global Rift, the wealth of the West and the poverty of the East are opposite sides of the same coin. While generations of scholars have explained the “rise of the West” by internal virtues—rationality, innovation, individualism. The other half of this story, the fall of the East, brought about through conquest, looting, and economic subjugation offers a simple insight that has eluded more complex theories: the West became rich by making the East poor.
This truth remains absent from most accounts of global development. The rise of Europe is celebrated, while the parallel collapse of civilizations in Asia, Africa, and the Americas is treated as incidental—or worse, as evidence of cultural inferiority. For centuries, racist ideologies portrayed non-Europeans as irrational, lazy, or subhuman, casting colonial domination as benevolent uplift. These narratives have functioned as moral blinders—constructed to obscure the violence and devastation that accompanied Europe’s ascent. Once we learn to see past these self-justifying fictions, a very different picture emerges. A realistic accounting of the damage done—the lives destroyed, the cultures erased, the suffering inflicted on millions—reveals that the rise of the West came at enormous cost to the rest of the world, and to humanity as a whole.
Mainstream theories of economics played a central role in sustaining the illusion. They created the intellectual architecture that made conquest appear efficient, and exploitation appear productive. By defining rationality as self-interest, by treating markets as morally neutral, and by elevating growth above justice, the discipline became a tool of empire.
At the heart of this legacy lie two foundational errors. First, economics has remained confined to the nation-state, reducing people to participants in competing economies instead of recognizing them as members of a shared human family. Second, it has reduced the meaning of welfare to the maximization of consumption, ignoring the deeper sources of human flourishing: purpose, relationships, and dignity.
Recognizing these realities compels us to rethink the foundations of economics—and to imagine what the discipline might become if it were oriented toward justice, truth, and humanity.
Two reforms are essential.
First, economists must move beyond the nation-state as the unit of analysis. As long as models measure growth and welfare within national borders, conquest and exploitation will appear rational—because the benefits to the dominant country are never weighed against the costs to the dominated. When we begin to theorize at the level of humanity, war becomes a negative-sum game. So does environmental destruction. The global defense budget alone could provide food, education, and healthcare for every human being on the planet. Seen from this broader perspective, peace is not idealism—it is economic common sense. And it reveals a deeper truth: scarcity is not natural—it is manufactured by conflict, competition, exploitation, and oppression. Peace is the path to shared prosperity.
Second, we must redefine the meaning of human welfare. The pursuit of consumption as a proxy for happiness has proven empty. As both science and lived experience affirm, it is love, community, trust, and purpose—not material accumulation—that give life meaning. Capitalism teaches us to sacrifice families for careers, relationships for profit, integrity for advancement. But this model does not enrich us—it hollows us out. Reclaiming a richer vision of the good life is not only ethically right, it is aligned with human nature.
Together, these two shifts point to a new ethos: think globally, act locally. The systems we face are vast, but we are not powerless. Change begins with a shift in how we live, what we value, and how we treat the people around us. Every life is infinitely precious. If we truly believe that, we can no longer accept a system that treats human beings as disposable inputs in a global machine.
We cannot control the outcomes. But we can take responsibility for the process. If we struggle for justice, we may or may not succeed in transforming the world. But the struggle itself will transform us.
{bit.ly/AZrms} In the late 19th century, Belgian investors were earning steady returns on a booming new commodity: Congolese rubber. On the ground, the reality behind those profits was something else entirely—villages razed, limbs severed, quotas enforced at gunpoint.
And yet, in the financial districts of Brussels and Antwerp, there were no signs of blood. Only dividends.
This pattern—of brutality rendered invisible by distance, by bureaucracy, by financial abstraction—was not an aberration. It was part of a much larger system that powered Europe’s global ascendancy. That ascendancy is usually attributed to Enlightenment reason, scientific progress, and liberal institutions—a self-congratulatory story retold in textbooks, histories, and memoirs.
Our article on “Ruthless Modernity” offers a different account. It traces how conquest was made profitable, how stock markets fattened on a feast for crows, and how entire empires were built on the transformation of moral decisions into economic instruments.
As the African proverb says: Until the lions learn to write, tales of the hunt will glorify the hunter. For centuries, Europe has told the story of its own rise as a civilizing mission. This article gives voice to those they “civilized.” It shows how conquest was sanitized, how finance abstracted suffering into profit, and how the vocabulary of progress was used to erase the cost in human lives.
It argues that Europe’s real advantage lay not just in its technology or science, but in its ability to turn violence into a sustainable business model—and to mask that violence behind ledgers and liberalism.
One of the most powerful tools in this transformation was the partnership between governments and wealthy elites. Instead of taxing citizens to fund war, states borrowed money from financiers. In return, investors received interest payments guaranteed by future taxes. The Bank of England, bond markets, and joint-stock companies were not invented to regulate economies—they were invented to make war pay. Investors did not see corpses. They saw dividends.
And war was only part of it. Europe also pioneered a global trade soaked in violence—later sanitized in textbooks as “the triangular trade.” Human beings were bought and sold like cargo. Scientific innovation was directed toward more efficient weapons. Morality itself was repurposed to serve the new economy. Slavery became civilizing. Profit became patriotic. And financiers calculated the costs and benefits of war as if balance sheets could measure the worth of destroyed cultures, ruined ecosystems, and shattered lives. The ledgers tallied profits—but ignored the true cost borne by humans, animals, and the biosphere.
To keep this system running, capitalism required more than tools. It required stories. New narratives were crafted—ones that framed exploitation as development, and genocide as the spread of civilization. These weren’t just masks—they were lullabies. Carefully composed to soothe Europe’s conscience while the machinery of plunder kept spinning.
Our full article on Ruthless Modernity: A Moral History of the West digs deeper into this history. Not the official chronicles, but the records buried under euphemisms, profits, and power. It is not a manifesto – It’s a flashlight. It begins to uncover the hidden mechanics of modern institutions—the quiet ways in which they erased moral agency and turned mass suffering into economic efficiency.
This isn’t just about the past. It’s about the systems we still live within. It’s about student loans, stock markets, and climate change. It’s about why the poor are blamed and the powerful are praised. It’s about why horrors continue in plain sight—wars, displacements, starvation—while markets rise and pundits applaud.
Speaking truth to power is liberating. Like the rising sun, truth dispels darkness—unmasking tyrants and restoring the voices of the silenced.
My comments on Qanit Khaleelluah’s proposal for full reserve banking were presented at a video conference organized by Pakistan Economic Forum (PEF) on Sunday 23rd March 2025. I tried to cover too many topics in depth in a very limited amount of time. As a result, the main messages of my talk did not emerge clearly. I have written the blog post below to clarify what I had intended to say in the talk. The video discussing the proposal and my comments is linked below, but my intent and meaning will be clear only after reading the blog post here.
1. Introduction: Why This Conversation Matters
In recent years, growing dissatisfaction with modern monetary systems has led many Muslims to call for a return to gold and silver currencies. These calls are based on a deeply felt belief that Islam mandates the use of precious metals as money, and that the evils of our current financial system — inflation, inequality, exploitation — can be traced back to fiat currency and interest-based banking.
It was in this context that Qanit Khaleelullah presented a bold and technically sound proposal to move from a fractional reserve banking system to a full reserve system. His proposal offers a way to stabilize Pakistan’s financial system, reduce debt-based money creation, and restore some degree of justice and transparency.
I had the opportunity to comment on this proposal in a recent talk. While I praised the technical aspects of the plan, my main concern was that it ignores a central issue: money is not just a technical tool — it is a source of power. And unless we understand how money functions as a tool of power within capitalist economies, and who controls it, we cannot meaningfully reform it.
In my talk, I tried to connect many different themes: the nature of money, the history of its control, the relationship between capitalism and Islamic economics, and the broader issue of power dynamics. But with limited time, and without clear transitions in my slides, the connections were not obvious to the audience.
This blog post is an attempt to clarify the core message behind that talk. My goal is to explain:
Why the call to return to gold is understandable, but ultimately misguided in today’s context,
Why full reserve banking, though better than the current system, is not enough to solve our deeper problems,
And what kind of change is truly needed — a change in who controls money, and for what purpose.
Let us begin this journey by examining one of the most common beliefs among Muslims concerned with finance: that returning to gold will solve our problems.
2. The Gold Illusion: Why It Cannot Fix Modern Monetary Problems
Among Muslims who are deeply concerned about the injustice of modern financial systems, one solution is often repeated: we must return to gold and silver as money. This view is rooted in a sincere desire to restore what is seen as the pure and just economic system of early Islam. After all, the Quran and Hadith mention dinar and dirham, and for centuries, Muslims used gold and silver coins in daily trade. Doesn’t this prove that Islam endorses gold as the proper form of money?
This belief leads many to reject any discussion of monetary reform that does not involve abandoning fiat currencies entirely. In their view, any proposal — such as full reserve banking — that retains fiat money is simply a cosmetic fix that ignores the real source of the problem.
This concern deserves to be taken seriously. However, it is important to understand that the world we live in today is very different from the world in which gold-based money once worked successfully. The key difference lies in the nature of the economy itself.
Traditional Islamic societies were not built on the logic of profit, growth, and endless production. People’s needs were met through strong social bonds, mutual support networks, and local markets that served communities. In such economies, gold and silver could serve effectively as money, because economic activity was relatively stable, and the supply of money did not need to constantly grow.
Modern capitalist economies, by contrast, are fundamentally different. They depend on constant expansion — of production, consumption, investment, and credit. This is not optional; if growth stops, the entire system begins to collapse. And this type of system cannot function on a fixed supply of gold or silver. There simply isn’t enough of it, and it cannot be created or expanded to match the pace of economic growth.
In capitalist economies, money must be flexible and scalable — it must grow with the economy. That’s why all modern economies, including those of the Muslim world, operate on fiat currencies. Without fiat money, modern economies would grind to a halt.
So, if we truly want to return to using gold as money, we cannot just change the currency — we must change the entire economic system that depends on a different kind of money. We must first abandon capitalism and rebuild a different kind of society — one based on Islamic principles, social cooperation, and ethical governance.
This does not mean the desire to use gold is wrong. It means that before we can bring it back, we must understand the structure of the system we are trying to reform — and what would need to change for gold to become a viable option once again.
3. Capitalism, Money, and Power
To understand why gold cannot solve the problems of the modern monetary system — and why full reserve banking may not either — we need to understand something deeper: what role money plays in a capitalist economy.
In traditional societies, money was a tool — something people used to facilitate exchange. It played a supporting role in the economy, which itself was built on social relationships, shared responsibilities, and community welfare. In such a system, money served the people.
But capitalism reversed this relationship. In capitalist economies, money is no longer a servant — it has become the master. It is no longer just a medium of exchange. It has become a source of power.
Capitalist economies depend on continuous growth. Factories must keep producing, businesses must keep expanding, and consumers must keep spending. To make this possible, money must be constantly available in increasing amounts. But here is the critical point: whoever controls the creation of money controls the entire system.
In the modern world, most money is not created by governments. It is created by private banks through a process called fractional reserve banking. When a bank gives a loan, it does not hand out money it already has. Instead, it creates new money — simply by writing numbers into an account. This means that private banks have the power to create money out of nothing — and charge interest on it.
This is where money becomes power. With control over money creation, financial institutions can:
Decide who gets access to credit (and who doesn’t),
Shape the direction of economic growth,
Accumulate wealth without producing anything of real value,
Influence governments, policies, and even international relations.
This power is not accidental. It is built into the very structure of capitalism. And because of this, any reform that keeps this system intact — whether it uses fiat or gold, or adopts full or fractional reserves — will ultimately fail to address the root problem: the concentration of power in the hands of those who control money.
This is why we must not focus only on the form of money. We must look at who creates it, why, and for whose benefit.
Islamic economics offers a completely different vision — one where money serves the people, not the powerful. But to move toward this vision, we must first understand just how deeply capitalism has shaped our world — and why a technical fix is not enough.
4. Islamic Economics: A Different Vision
When Muslims confront the injustice of modern capitalism — the widening inequality, exploitation, and spiritual emptiness — many instinctively turn to Islamic teachings for guidance. But over time, different generations of Islamic economists have taken different paths in their efforts to articulate what an Islamic alternative to capitalism might look like.
4.1 The First Generation: Revolutionary Idealists (1950–1975)
The earliest generation of Islamic economists emerged in the wake of colonial liberation. Thinkers like Maulana Maudoodi, Allama Baqir Sadr, and Sayyid Qutb believed that the economic systems of the West — capitalism, socialism, communism — were all man-made and flawed. Their aim was not reform, but replacement. They sought to construct an Islamic economic system from the ground up, one that embodied the moral and spiritual teachings of Islam and promoted justice, equity, and communal welfare.
However, the dream of building Islamic societies was thwarted by the post-colonial reality: newly independent Muslim states retained the political and economic structures inherited from their colonizers. Efforts to bring about revolutionary change failed, largely because the ruling elites remained tied to global capitalist interests. As a result, the first generation’s vision — though noble — could not be implemented on a national scale.
4.2 The Second Generation: Reformers Within the System (1975–2010, and still dominant today)
Disappointed by the failure of revolution, the second generation adopted a more pragmatic approach. They aimed to “Islamize” capitalism, working within the existing economic framework to remove interest, promote zakat, and develop Islamic banking and finance. This period saw the institutional growth of Islamic finance around the world.
But this approach came with compromises. Instead of challenging the capitalist foundation, the second generation accepted many of its core assumptions — including the idea of the self-interested, utility-maximizing individual. In practice, Islamic finance often ended up mimicking conventional finance, with only surface-level differences. Critics within the field began to voice concern: had Islamic economics lost its soul in trying to fit into a system it was supposed to transform?
4.3 The Third Generation: Building from the Ground Up (2010 onward)
The 2008 Global Financial Crisis exposed the deep flaws in Western economic theories — flaws that the second generation had too often accepted as “scientific truths.” This crisis prompted a rethinking, and a return to the original revolutionary spirit — but with new strategies and more realistic goals.
The third generation recognizes that:
Capitalism and Islam are fundamentally incompatible,
Revolutions at the national level are unlikely to succeed,
And meaningful change must begin at the community level, not with state power.
Instead of seizing political control or modifying capitalism, this generation seeks to build ethical, people-centered institutions that reflect Islamic values — starting with families, communities, and local economies. The focus is on action where we already have influence, creating models of economic justice and cooperation that can grow organically and eventually offer a true alternative.
5. The Chicago Plan and Its Limitations
The proposal by Qanit Khaleelullah to adopt a full reserve banking system is not entirely new. It reflects an idea that has been considered for nearly a century — most famously in the form of the Chicago Plan, proposed by prominent American economists during the Great Depression of the 1930s.
To understand the significance — and the limitations — of such proposals, it helps to look briefly at the history behind them.
5.1 The Origins of the Chicago Plan
In the early 20th century, repeated financial crises rocked the global economy. These crises were often caused by excessive credit creation by private banks during economic booms, followed by collapses when the system could no longer sustain the debt. In response to the 1929 crash, some economists proposed a radical reform: take away the banks’ ability to create money, and make them operate only as custodians — holding 100% reserves against deposits.
This would mean that banks could no longer lend out money created “out of thin air.” All new money would have to be created by the state, which could then direct it toward the public good. The Chicago Plan was, in essence, a power-sharing formula — a way to restore balance between public interest and private profit.
5.2 Modern Revival: The Iceland Plan
After the 2008 Global Financial Crisis, the idea of full reserve banking resurfaced — this time in places like Iceland, where the private banking sector had collapsed spectacularly. The Iceland Plan built on the Chicago Plan’s ideas, arguing that money creation should be a public function, not a private business. By removing this power from banks, the state could stabilize the economy and direct money toward social needs.
Qanit’s proposal fits within this intellectual tradition. It seeks to address the dangerous consequences of private credit creation — including inflation, inequality, and financial instability — by giving the state greater control over money creation.
5.3 But Here’s the Problem
While the technical logic of the Chicago Plan is sound, it makes one huge assumption: that the government will act in the public interest.
In theory, if we give the state the exclusive right to create money, it will do so for the benefit of the people — investing in education, health, infrastructure, and welfare. But in practice, especially in countries like Pakistan, this assumption breaks down. Our experience with state-controlled banks — particularly during the nationalization era — shows that when politicians gain access to cheap money, it often leads to massive corruption, favoritism, and misuse of funds.
In other words, shifting money creation from private banks to the government does not guarantee justice. It simply shifts power from one elite group to another — both of whom may be equally unconcerned with the welfare of ordinary people.
In fact, a determined government could already achieve most of what full reserve banking promises, even within the current system, by using existing regulatory powers or nationalizing the banks. But again, the problem is not the tools — it is the will and integrity of those who wield them.
So while the Chicago Plan offers a technically viable fix, it ignores the deeper problem: money is power, and neither the state nor the financial elite can be trusted to wield that power ethically without serious structural and moral reform.
This leads us to an uncomfortable but necessary question: If we can’t trust the banks — and we can’t trust the state — then who should control the money?
We’ll explore that in the next section.
6. The Real Question: Who Should Control Money?
Once we recognize that both the government and the financial elite have used money to serve their own interests — rather than the public good — we are forced to confront a deeper question: Who should control the creation of money?
It is tempting to look for technical solutions — whether it’s the Chicago Plan, full reserve banking, or a return to gold — and assume that the problem lies in the system itself. But history shows us something sobering: The same system can produce good or evil, depending on who is in charge.
Private banks, driven by profit, create money in ways that fuel debt, speculation, and inequality. Governments, in theory, have the power to redirect money toward public welfare — but in practice, many have been captured by elites or international institutions, and have repeatedly failed to act in the public interest.
This raises a key insight:
The question is not just about how money is created — but by whom, and for what purpose.
In Pakistan, for example, the State Bank already has considerable legal authority to guide lending, enforce priorities, and even direct credit toward specific sectors. But this power is rarely used for the public good. As the historical example of Japan shows, governments can use existing institutions to plan and guide economic growth — by enforcing lending targets that support national development and welfare. Japan achieved phenomenal growth using this strategy.
So why has this not happened in Pakistan or other Muslim countries?
Because those who currently hold power — whether in banks or in government — do not see serving the people as their mission.
This brings us to the real core of the issue: If we want a just and stable financial system, we must find or create agents who are truly committed to the welfare of the people.
Until we do that, any technical fix — no matter how elegant or well-designed — will either be blocked, distorted, or co-opted by those in power. And if those in power are corrupt, no reform can succeed.
So instead of asking only how to reform money, we must ask: Who should we entrust with the power to create it? And how can we make sure they serve the people — not themselves?
That’s the question we turn to next.
7. A New Strategy: Building Islamic Banks for the People
If neither the state nor the financial elite can be trusted to create money for the public good, then what is the alternative?
The answer begins with a shift in strategy — from seeking top-down reform to building bottom-up institutions that are rooted in Islamic values and committed to serving the people.
This is the essence of the third generation of Islamic economics: Instead of trying to Islamize capitalism, or capture political power through revolution, we must build ethical financial institutions within the existing system — institutions that embody Islamic principles and empower communities from the ground up.
7.1 Rethinking Islamic Banks
Today, most so-called Islamic banks operate on the same logic as conventional banks. Their primary goal is profit, not public service. They may avoid riba (interest) on paper, but their deeper structures often reflect the same priorities and behaviors as capitalist institutions.
What we need is a new vision for Islamic banking — one that redefines what it means to be truly “Islamic.”
At the heart of this new vision is a simple but radical idea:
An Islamic bank must exist to serve the people — not to profit from them.
To make this happen, we must:
Shift the motive of Islamic banks from profit maximization to public welfare,
Involve Ulema and scholars in setting ethical standards — so that the label “Islamic” is not just a legal technicality, but a meaningful commitment,
Develop dual bottom lines: one measuring financial performance, the other measuring impact on the community — and make both publicly visible.
This is not just idealism. It’s a transitional strategy — a way to move gradually toward a more just economic system, using tools we already have.
7.2 A Three-Way Partnership
One powerful model for Islamic money creation could look like this:
Communities identify real needs — housing, small businesses, education, local services.
Islamic banks provide interest-free credit, guided by ethical principles.
The State Bank and government support this ecosystem with regulation, liquidity, and infrastructure.
This is not about confrontation with the global system. It is about building an alternative, step by step, in the spaces where we already have room to act — in our families, neighborhoods, mosques, and local institutions.
This vision may seem small compared to grand national plans. But history shows that big changes often begin in small places, with committed people doing quiet but transformative work.
And that’s where the final part of our journey takes us: reclaiming power by building where the powerful cannot reach.
8. Conclusion: Reclaiming Power, Gently
Throughout this journey, we’ve explored many layers of the modern monetary system — from gold and fiat currency to full reserve banking and Islamic alternatives. But at the heart of it all lies one simple truth:
Money is power. And if we want justice, we must ask: who holds that power — and for what purpose?
The failure of both capitalist banks and corrupt governments to serve the people is not just a technical flaw in the system — it is a failure of ethics, purpose, and responsibility. That’s why technical reforms, however well-designed, cannot succeed on their own. Without a transformation in values and vision, they will be blocked, co-opted, or turned into new tools of exploitation.
But this realization is not cause for despair. It is the beginning of a different path — one that does not wait for permission from above, or rely on revolutions from below.
It begins where we already have agency:
In our families and homes, where economic choices can reflect Islamic values,
In our communities, where we can support ethical finance, local enterprise, and mutual aid,
In our institutions, where we can demand that “Islamic” banking actually serves the public good.
This is the spirit of Third Generation Islamic Economics: not confrontation, not compromise, but construction. It is about building ethical alternatives within the space that remains, reclaiming control over money not through force, but through service, sincerity, and community.
We don’t need to change the world all at once. We need to start creating small models that reflect our values — and then allow them to grow. Real power does not come from controlling others. It comes from serving with integrity, from aligning our actions with our beliefs, and from placing our trust in Allah.
As the Quran promises:
“And those who strive in Our cause — We will certainly guide them to Our paths.” (29:69)
May Allah guide us to paths of justice, wisdom, and mercy — and help us rebuild our economic lives in a way that reflects His light.
POSTSCRIPT: Slides for the talk can be downloaded from: https://tinyurl.com/IslamicMoney The slides provides links to books, articles, and posts which support the claims made in the talk, and in the article above. One paper which is especially relevant is:
Zaman, Asad, Islamic Finance and Community Empowerment: A Strategic Vision for the Global Ummah (November 01, 2024). COMCEC 40th Anniversary Special Edition, Nov 2024, p182-192, Available at SSRN: https://ssrn.com/abstract=5087689
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