One of the main factors in the global economy, including Malaysian
economy, that causes it to face uncertainty and not resilient is due to the
existence of virtual economy/paper economy/financial economy. Virtual
economy has a very strong relationship with the financial market that allows
the economy to appear much larger than its real size.
This scenario is contributed by many factors, including the existence
of capital market that allows virtual economy to grow much bigger than the real
economy. Transaction within capital market that moves rapidly as compared to
the activities in real economy has resulted in the wealth generated by the
capital market to become bigger than those generated by the real economy.
Moreover, the capital market can also be used as the basis to produce another
financial instrument, namely the derivatives, to generate more wealth.
As a result, the size of the economy appears bigger, even though there
is no growth in real economic activity.
This phenomenon would eventually lead to financial crisis that causes
negative impact to the economy, when the financial market collapses. The collapse
of the financial market is a ‘natural’ scenario that would inevitably occur in
the capitalist economic cycle, when the resulting ‘bubble’ economy systemically
expand and finally ‘burst’. Consequently, that burst would eventually leads to
financial crisis.
The virtual economy is also encouraged by the printed money system,
which allows money to be printed without being backed up with valuable commodities
such as gold and silver. This allows money to be printed simply based on
confidence (fiat money). Since the money that we use today is backed up with
nothing, it is also possible for the money to grow more rapidly at higher rates
than the growth of the economy. The currency system today is not only weak but
also allows the currency traders to gain profit out of thin air to the extent
that they could result in the economic collapse like the 1997/98 Asian
financial crisis.
Besides that, the development of the virtual economy is also driven
by generating credit based on interest (riba) by the financial industry such as
banks. This scenario occurred when money generated in the form of credit and
interest through the banking system using method known as fractional reserve
banking. This allows money in the form of credit to be circulated in the
economic cycle more than the real value of money.
All in all, the size of virtual economy, which is an important
method in capitalism system to stimulate the economy, became bigger than the
size of the real economy. This phenomenon caused the current economy to be
prone to the economy problems such as inflation and recession, because both
problems are the eventual consequences of economic activities in capitalism. In
other words, inflation and recession are natural part of the capitalism that
cannot be separated from the system.
The current situation of the capitalist system can be likened to a
person who has a variety of diseases and very much dependent on medicine to
survive. In the year 1997/98, he was diagnosed with diabetes, which required
him to take diabetic medicine. After that, in the year 2008 he developed high
blood pressure and hypercholesterolemia, and by the year 2020 developed kidney
problem over the course of the disease and as the complications of too much
dependence on medicine to survive. Consequently, instead of continuing taking
medication, the commitment is increasing due to the need for regular dialysis.
Even though the capitalist economy may still survive with
medication and undergoing treatments that require high commitment in terms of
time, energy and money, but the truth is the body’s vitality has been much
reduced, and the ability to do work is not like before. These conditions render
the body susceptible to infections such as COVID-19 which can be fatal.Therefore, as long as capitalism that is inseparable from the
virtual economy being embraced as the system to manage and expand the economy,
there will be no hope for the economic problems to be solved and eventually
bring the true wellbeing to humankind. The economic problems may appear to be
successfully solved through all sorts of economic stimuli packages, yet the
truth is that they were just the medicine to make the body to barely survive while
depending on them while at the same time, the body system has already weakened.
In conclusion, to develop resilience and a competitive economy, the
virtual economy must be abolished. The true resilient and competitive economy
is an economy that grows only in real economic activities, with no virtual
economy. Capitalism cannot survive without the virtual economy. In contrast,
the Islamic economic system strictly prohibits any activities or transaction related
to the virtual economy. Prohibition of the virtual economy in Islam takes place
through several rulings pertaining to economic activities. First, any mu’amalah
that does not follow principles and rulings on Islamic syrikah is
prohibited. Second, Islamic Sharia decreed that the currency must be backed up
with gold and silver. Third, riba is prohibited. To successfully implement
these three policies, the government that rule solely based on the Al-Quran and
As-Sunnah, namely Khilafah System is needed. This is pertinent as the
implementation of economic policies requires political will to ensure
sustainability and sound structure to support them.
