Transcript Islamic Economic System

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
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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
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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.);
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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
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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
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The theories presented by Adam Smith in 17thcentury
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”