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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 (17231790), 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 mans 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 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;

Continues..
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