ISLAMIC ECONOMIC SYSTEM Importance of the Economic goals

ISLAMIC ECONOMIC SYSTEM

Importance of the Economic goals • According to Islamic Economics “Livelihood may be necessary and indispensable but cannot be the true purpose of human life” • At one side, Islam disapproves monasticism while at the other side advise to restrain from the temptations for worldly life

Status of economic activities in Islam • • Islamic viewpoint about worldly life is different from the views of other systems Economic activities are very important part of human life that provide resources for existence of human being. Therefore, economics is not something paid no or very low attention by Islam. Books of Fiqh are full of discussions on trade, financial dealings and exchange transactions; Well-being of all members of society is an objective of Islamic economic system;

Status of economic activities in Islam • Well-being from Islamic perspective are of two types: – Material well-being – satisfaction of the needs of all; – Spiritual well-being – nearness to God, moral uplift: these are necessary for peace of mind, inner happiness, family and social solidarity, absence of crime and anomie; • Conventional economic systems does not recognize spiritual well-being for success in the day of judgment. Consequently they segregate between material and spiritual well-being and consider the religion a personal matter;

The real nature of wealth and property • Wealth in all its forms is a thing created by Allah and delegates the right of property over a thing to man • The Holy Quran Says “Give to them from the property of Allah which he has bestowed upon you” • Man can only put his labor into the process of production

Continues. . • So, “Wealth” is the property of Allah • Allah has given the right of use of property to man • Right given to man is not absolute but has certain limitations. • Man must use his right according to the commandments of Allah • At this point, Islamic economics differs from Capitalism and Socialism

Some of the limitations Economic prohibitions (7 ills); – Haraam activities (general prohibitions); – Riba (interest); – Gharrar (excessive uncertainty); – Qimar (gambling); – Concentration of wealth [Irtikaaz] (circulation in hand of few); – Hoarding (gathering for creation of scarcity) ; – Concealment of wealth (non-fulfillment of obligations related to wealth – Zakat, Usher, Sadaqaat etc. ); •

Capitalism • Capitalism, as defined by the Collins Dictionary, “is an economic system based on the private ownership of the means of production, distribution and exchange”. • Capitalism gives man unconditional and absolute right of property over his health. That is why they claim of “doing what they like"

• According to materialistic economics “ “Livelihood is the fundamental problem of man and economic developments are the ultimate end of human life”

Capitalist model • • The capitalist model suggested by Adam smith believes in free market and assumes that market has an invisible hand that set market equilibrium and make all players enjoy benefits; This theory assumes that there should not be any hurdle on entry and exit of market players; The control of government should be zero or very low; Everyone has right to do anything; Motive of personal profit is acceptable here in this model; Interest and any way of making wealth is acceptable; They present theory of factor of production;

Capitalist model Pure market Economy theory assumes that: – All resources are privately owned; – Coordination of economic activity is based on the prices generated in free, competitive markets; – Any income derived from selling resources goes exclusively to each resource owner; – Everyone can enter and exit the market; – Market makes its own decisions for production and distribution of wealth; – No governmental intervention; This theory is based on famous concept presented by Adam Smith (1723– 1790), who presented the idea that market forces coordinate production as if by an “invisible hand”;

SOCIALISM • According to the Collins Dictionary, “Socialism is an economic theory or system in which the means of production, distribution and exchange are owned by the community collectively through the state. • Socialism denies man’s right to private property while in Islam man keeps his right to use the property given to him by Allah with the limitations explained above

Socialist model • • • The theories presented by Adam Smith in 17 thcentury created giant entrepreneurs and a class that struggle to live; The unbalanced flow of wealth, very low salaries and other ways of clustering the wealth in hands of few created very negative impacts on society; The resistance increased in society and clashes erupted between elite and labour class; The famous incidence of killing of Chicago labour was an example of what was happening there at these times; The German economist Carl Marx was the person who boosted the socialist thoughts; The solution for concentration of wealth and its unbalanced flow was solved by eliminating the factors of Rent and Entrepreneur;

Difference b/w Islam, Capitalism and Socialism • Capitalism affirm an absolute and unconditional right to private property • Socialism totally denies the right to private property • But the truth lies between these two extremes • Islam admits the right to private property but with some conditions, otherwise unconditional right is bound to cause “disorder on the earth”