Capitalism collapses when money flows to the financial sector per se.
It is normal that capital floods to the newest and most profitable industries that display the highest rate of technical change and growth, be it Carnegie’s steel mills, Ford’s assembly lines or Bill Gates and his Microsoft. Capitalism collapses, on the other hand, when money flows to the financial sector per se, as if finance were an industry on par with steel, cars, or software. Thus, the fundamental flaw behind today’s global situation is the failure to distinguish sufficiently between the real economy and the financial economy (see Fig. 1 below). This clear distinction was once understood – not only in Islamic economics as today – but all along the political axis from Marx and Lenin on the left, to social democrat Rudolf Hilferding – a Jew who was killed by the Gestapo – to the conservatives Schumpeter and Keynes, all the way to Hitler’s economists on the far right. The German distinction between schaffendes Kapital (creative capital) and raffendes Kapital (roughly: capital which grabs existing wealth) is a useful parallel to good and bad greed, but unfortunately it was created by persons too close to fascism.
As Karl Polanyi points out, what communism, fascism and the New Deal had in common was a distrust of laissez faire. This included an understanding of the need to control the financial sector. Of the three ideologies that aimed at controlling the financial sector, it should be pretty obvious which one to choose: we need to recreate policies in the spirit of the New Deal.