-
PROJECT IN BRIEF
PROJECT TITLE: Islamic Economic System,
Capitalism and Socialism
SUBMITTED TO:
Sir Naveed Khan
UNDER TAKEN BY: Kiran Afshan
Huma Naz
Class: MBAITM-13
ContentsPROJECT TITLE:...............Islamic Economic System,
Capitalism and Socialism
1UNDER TAKEN BY:......................................... Kiran
Afshan and Huma Naz
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Islamic Economic System, Capitalism and SocialismAugust 13,
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CHAPTER
1..................................................................................
...............................3ISLAMIC ECONOMIC
SYSTEM...................................................................................3
CHAPTER
2................................................................................
...............................11CAPITILISM ECONOMIC
SYSTEM.............................................................................11
CHAPTER
3................................................................................
...............................19Socialism............................................................................................
...................19
Chapter
4..................................................................................................................
23COMPARISON BETWEEN THE ISLAMIC ECONOMIC AND OTHER ECONOMIC
SYSTEM...............................................................................................................
...............23
DIIFFERENCE BETWEEN ISLAM AND
CAPITALISTM:.............................................24THE
DIFFERENCE BETWEEN ISLAMIC AND COMMUNIST SYSTEM OF ECONOMY:.25
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CHAPTER 1ISLAMIC ECONOMIC SYSTEM
Economic system of Islam
Meaning :
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Islam is an entire way of life, and Allah's Guidance extends
into all areas of our lives. Islam has given detailed regulations
for our economic life, which is balanced and fair. Muslims are to
recognize that wealth,earnings, and material goods are the property
of God, and we are merely His trustees. The principles of Islam aim
at establishing a just society where in everyone will behave
responsibly and honestly. The Arabic words Ma'eeshat and Aish share
the same root. Ma'eeshat also means "economy" and "Aish" means
"pleasure and happiness". There is no doubt that if the economy of
a nation is good, it will have a life of pleasure and happiness. In
other words, if Ma'eeshat of a country is good, the nation will
have Aish. In 20:124, Allah says,
"Those who will disregard my Message [ZIKR], their economy will
be in dire straits and they
will be resurrected blind on the Day of Judgment" [20:124].
4 Key Aspects of an Islamic Economic System
1. Need Fulfillment.
Respe ctable source of earning:
2. Equitable distribution of income and wealth. 3. Growth and
stability.
Islam - Places a greater emphasis on duties than on rights.
Under Islam, the criteria for determining a man's worth are not his
race, family, position or wealth but rather his character (which is
a reflection of his faith and practice) and service to humanity.
Lifestyles that reflect arrogance, pomp, grandeur or moral laxity
lead to extravagance and waste and result in unnecessary pressure
on resources, reducing societies' ability to satisfy the needs of
all. They also promote unscrupulous ways of earning and generate
inequalities of income beyond the normal distribution that is
warranted by differences in skill, initiative, effort and risk. The
adoption of Islam protects society form going to excess in lusts,
luxury and pleasure, equally, in following restraint and privation.
A 'real' Muslim is he whose goodness and efforts are directly aimed
to benefit the community. All values conceived on the basis of
utilitarianism and self-interest can be disputed, whereas human
society needs to be based on values of/on (for) 'good' or 'evil,'
and 'right' or 'wrong' which are not disputed even if they benefit
the 'have-nots' at the expense of the 'haves.' Without the feeling
of Moral obligation to make sacrifice, what is it that can motivate
a rich man to forgo his luxuries and economic resource use for the
need satisfaction of all. Neoclassical, Keynesian & Socialist
Economics are all secularist in their approach to the realization
of human well-being and analysis of human problems. They all place
too much emphasis on consumption and material possessions as a
source of human happiness. Equitable distribution requires a
motivation to serve social interest even if this involves sacrifice
of self-interest.
Islamic Economic Strategy : Consists of reorganizing the entire
economic system with a set of four indisputable and mutually
reinforcing elements:
1. A socially-agreed filter mechanism. 2. A strong motivating
system to induce the individual to render his best in his own
interest as well as in the interest of society.
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3. Restructuring the whole economy, with the objective of
realizing the "Maqasid" (see below) in spite of scarce
resources.
4. A positive and strong goal-oriented role for the government.
This must provide:
1. Need Fulfillment. - assure everyone a standard of living that
is humane and respectable.
2. Respectable source of earning. - Need fulfillment must be
through individuals own effort.
3. Equitable distribution of income and wealth. - $ do not only
circulate among the rich.
4. Growth and stability.
Important institution of Islamic economic system : Most
important institution of Islamic economic system are:
Private ownership The system of zakat and usher Khamas and
kharaj Law of inheritance Spending and sadqat Sharakat and mazarbat
Rule and regulation of commercial dealing Prohibition of interst
and gambling State responsibility of providing necessities of
life
G oals 1). Achievement of welfare:
The higher goal of Islamic economic system is the achievement of
welfare of human beings. As in Islam prohibited the interestfor the
well beings of people. Muslims are not to deal in interest.
"O you who believe! Devour not usury, doubled and multiplied.
But fear Allah thatyou may really prosper." (3:130)
This prohibition is for all interest-based transactions whether
giving or receiving, whether dealing with Muslims or non-Muslims.
It is reported that the Prophet Muhammad (peace be upon him) cursed
those who pay interest, those who receive it, those who write a
contract based on it, and those who witness such a contract. It is
forbidden to gain property or wealth by fraud, deceit, theft or
other falsehoods.
2).Economic development:
For economic growth to benefit human development in a just and
Islamic economic environment, it must contain,
Full Employment Security of Income Participation for all in the
Democratic process An equitable distribution of wealth Social
Cohesion Cultural Enrichment Sustainable development for future
generations
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Interest (Riba) is prohibited! The principle is that any profit
which we should seek should be through our own exertions and at our
own expense, not through exploiting other people or at their
expense.
3).Relief from poverty and starvation:
an important goal of Islamic economic system is the relief from
starvation and poverty. Zakt and Sadat play an important role in
this purpose.
"And they have been commanded no more than this: to worship
Allah, offering Him sincere devotion, being true in faith. To
establish regular prayer, and to give zakat. And that is the
religion right and straight." (98:5)
Every Muslim who owns wealth, more than a certain amount to meet
his or her needs, must pay a fixed rate of Zakt to those in need.
Zaktis a means of narrowing the gap between the rich and the poor,
and to make sure that everyone's needs are met. Muslims are
encouraged to give constantly in charity.
"Your riches and your children may be but a trial. Whereas
Allah, with Him is the highest reward. So fear Allah as much as you
can, listen and obey, and spend in charity for the benefit of your
own souls. And those saved from the selfishness of their own souls,
they are the ones that achieve prosperity." (64:15-16).
The Prophet Muhammad once said that "nobody's assets are reduced
by charity."
4).Economic Well-Being & the Moral Norms of Islam We read in
the Quran these verses: Eat and drink of that which God has
provided and act not corruptly, making mischief in the world
(Al-Baqarah 2:60). O you who believe! Forbid not the good things
which God has made lawful for you and exceed not the limits.
Surely, God loves not those who exceed the limits. And eat of the
lawful and good that God has given you, and keep your duty to God
in whom you believe (Al-Ma'idah 5:87-88). These verses of the
Quran, and there are many others like these, strike the keynote of
the Quranic message in the economic field. Islam urges Muslims to
enjoy the bounties provided by God and sets no quantitative limits
to the extent of material growth of Muslim society. It even equates
the struggle for material well-being with an act of virtue.When the
prayer is ended, then disperse in the land and seek of Gods bounty
(Al-Jumu`ah 62:10). The Prophet Muhammad has also said:"If God
provides anyone of you with an opportunity for earning livelihood,
let him not leave it unexploited until it is exhausted or becomes
disagreeable to him." (Ibn Majah) "Any Muslim who plants a tree or
cultivates a field such that a bird, or a human being, or an animal
eats from it, this act will be counted as an act of charity."
(Al-Bukhari).Islam goes even further than this. It urges Muslims to
gain mastery over nature because, according to the Quran, all
resources in the heavens and the earth have been created for the
service of mankind. (Luqman 31:20).From this, one cannot but infer
that the goal of attaining a
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suitably high rate of economic growth should be among the
economic goals of a Muslim society. Islam has prohibited begging
and urged Muslims to earn their livelihood. From this premise one
may infer that one of the economic goals of a Muslim society should
be to create such an economic environment that those who are
willing to and looking for work are able to find gainful employment
in accordance with their abilities. If this is not accomplished
then the Muslim society cannot succeed even in its spiritual aims,
because those unemployed would be subjected to a life of extreme
hardship unless they depend on the dole, or resort to begging or
immoral practices, all of which, particularly the last two, would
be repugnant to the spirit of Islam. This stress of Islam on
economic well-being springs from the very nature of its message.
Islam aims at making life richer and worth living and not poorer,
full of hardships.
5).Equitable of distribution of wealth:
Zakat and sadqat play an important role for the distribution of
wealth. The root of the word Zakt (t) is Z-K-W (za-kaf-waw), which
leads to the following meanings: To increase, To grow, to thrive,
to increase in the purity of heart; to increase in integrity. Zakt
means increase or augmentation or growth or development. Sadaqa is
what is given voluntarily for the sake of Allah to obtain the
recompense from Allah when the person who does so aims at
conformity with the truth in his deed. SADAQA is voluntary while
ZAKA is obligatory. For zakat, there are direct commands of Allah
in the imperative while SADAQA is not enjoined in the Quran in the
imperative.
Some differences between ZAKA and SADAQA :
1. Zaka is obligatory while Sadaqa is supererogatory or
voluntary. The money for the
purpose of Zaka can be taken by force by the authorities while
for Sadaqa, this is not the
case
2. Zaka must be managed by a central authority while Sadaqa may
be given individually or
through authorities
3. Sadaqa is usually for exigencies or a sudden unforeseen
crisis while Zaka is a continuous
program aimed at providing the resources for the physical and
personal development of the
people
6). Security of freedom:
Another purpose of Islamic economic system is to adopt a course
of economic struggle which:
does not crub the freedom of thought and action of the
individual
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preserve human liberty give to the human freedom to relies his
potential in any sphere of his choicegives
him complete control over the use and spending of resources
earned by lawful mean. This would be the manifestation of a
continuous effort to use, through research and improvements in
technology, the resources provided by God for the service and
betterment of mankind, thus helping in the fulfillment of the very
object of their creation.
impose no restriction on him except that he remain within the
limits setup by the will of Allah
7). Elimination of waste:
A Muslim should be responsible in spending money. Extravagance
and waste are strongly discouraged. "[The Servants of Allah are]
Those who, when they spend, are not extravagant and not stingy, but
hold a just balance between those extremes." (25:67).
"O Children of Adam! Wear your beautiful apparel at every time
and place of prayer. Eat and drink, but waste not by excess, for
Allah loves not the wasters." (7:31)
Function of the Islamic economic system
The decision which the economic system of Islam has to take in
the practical field are called its function. This decision
determined to what things are produced, for whom they are produced
and which mode of production are used. Islamic economic system
regulates this whole economic struggle by its moral values. These
values are the justice, pity, benevolence and cooperation. The
source of these values is Quran and tradition. This is the main
difference between Islamic economics and other economic system.
Ideological foundation of Islamic economics :
Existence of the creator of universe: the basic foundation of
Islamic economic system is that the creator of whole world, master
of the world, sustainer and lord is Allah. The whole creation is
his family and he is guardian and protector of his family.
1).Man is vicegerent of God: Man is vicegerent of God and deputy
of god. In this capacity it is his duty to establish the will of
his master in his own sphere.
2). Abundance of provision: Allah has fulfilled this world with
infinite resources and these all are for man to use and conquer
it.
The door of provision open wide up to sky
3).These sources are for the benefit of human beings.
4). these sources of provision only utilized according to will
of god.
5). Economic problems only one part of life.
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6). It creates a sense of responsibility. Man should perform all
action in the economic struggle and make all efforts to utilized
resources.
Fundamental features of the economic system of Islam :
1).Use of lawful means for earning livelihood
It provides all lawful means for earning of wealth and
discourages wealth with out
work."Wealth without work is a deadly sin". According to the
Holy Quran, That man can
have nothing but what he strives for;
Al-Qur'an, 053.039 Almaysir, which is usually translated as
gambling, but includes any
form of 'easy money', has been forbidden in the Quran (see
Al-Quran, Chapter 2 verse 219
and chapter 5 verse 90-91).
2). Prohibition of amassing wealth
The Arabic word "Suht" as it appears in 5:42, 5:62, 5:63, has
the following meanings: A
thing that is prohibited, forbidden or unlawful. Any money or
property that is forbidden, not
lawful to be gained or devoured Suht" in all the above meanings
is strictly forbidden by the
Quran. In 5:41-42, Allah says that for those who make money by
illegal, unlawful, forbidden
or prohibited means or trade or by taking bribes, there is
disgrace in this world and a great
torment in the hereafter. In 5:62, Allah has described it as
superlatively evil and bad deed.
"Why do not the rabbis and the priests forbid their
evil-speaking and their devouring of illicit
gain? Verily evil is their handiwork." [5:63]
3). Circulation of wealth
As in Quran Allah says:
Do not be a spendthrift but feed the indigent, instead
[17:26]
Allah commands you to give alms [sadaqa] to the indigent
[9:60]
Do good to the indigent till their economic imbalance is no more
[2:83, 2:215, 4:36]
4). Morale value and the role of state
Every society has a diversity of jobs to be done. It needs
sweepers as much as shopkeepers, book-keepers, as well as leaders
and so on. Quran alludes to this diversity of endeavors or jobs in
92:4. But in virtually every society today, those who have amassed
some wealth are always at a vantage point to be able to earn more
than the deprived, either through investments or interest. Also
those who are sharp-minded, shrewd or more intelligent than others
are more likely to earn more than those who are less so. But isn't
it injustice. Shouldn't man be rewarded by measure of his endeavors
and not by measure of his intelligence or capital? Quran suggests a
system in which people are rewarded by the measure of their
endeavors [20:15], whereby no one can have more than what he
strives for [53:39].
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Other important features of Islamic economic system are economic
freedom, flexibility and price mechanism of goods.
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CHAPTER 2CAPITILISM ECONOMIC SYSTEM
Capitalism
Capitalism is can be simply defined as an economic system,
marked by open competition in a free market, in which the means of
production and distribution are privately or corporately owned and
development is proportionate to increasing accumulation and
reinvestment of profits. However, capitalism tends to incorporate a
certain "way of thinking", driven by greed, the search for
ever-increasing profits, worldwide expansion, and internal
development. Starting from the earliest origins of capitalism, only
societies with the capabilities and the appropriate mindset could
flourish amidst this period of economic,
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social, and religious dispersion. The earliest form of
capitalism is seen in feudalism, the political and economic system
based on the relation of lord to vassal held on conditions of
homage and service. The earliest establishment of capitalism
originated in Rome through mercantilism. Mercantilism involves the
distribution
Capitalism, economic system in which private individuals and
business firms carry on the production and exchange of goods and
services through a complex network of prices and markets. Although
rooted in antiquity, capitalism is primarily European in its
origins; it evolved through a number of stages, reaching its zenith
in the 19th century. From Europe, and especially from England,
capitalism spread throughout the world.
The term capitalism was first introduced in the mid-19th century
by Karl Marx, the founder of communism. Free enterprise and market
system are terms also frequently employed to describe modern
non-Communist economies. Sometimes the term mixed economy is used
to designate the kind of economic system most often found in
Western nations.
The individual who comes closest to being the originator of
contemporary capitalism is the Scottish philosopher Adam Smith, who
first set forth the essential economic principles that undergird
this system. In his classic An Inquiry into the Nature and Causes
of the Wealth of Nations (1776), Smith sought to show how it was
possible to pursue private gain in ways that would further not just
the interests of the individual but those of society as a whole.
Society's interests are met by maximum production of the things
that people want. In a now famous phrase, Smith said that the
combination of self-interest, private property, and competition
among sellers in markets will lead producers as by an invisible
hand to an end that they did not intend, namely, the well-being of
society.
Philosophical Foundations of Capital system:
Materialism:
Capitalism system has been derived from materialistic philosophy
of life. The center and the focus of mans struggle should be the
satisfaction of material needs.
Liberalism:
The4 individual have complete freedom of thoughts and action in
every sphere of life. No higher authority has the power to impose
any restriction on the liberty of individual. The function of the
sovereignty of state is not to circumscribe, but to safeguard the
liberty of the individual.
Hedonism:
The entire struggle of the individual has only one goal personal
interest. That thing attitude, behavior is right which brings
profit, pleasure and happiness to the individual. That thing
attitude or behavior is wrong, false and unacceptable which brings
loss, grief or pain to the individual.
A system of life raised on this philosophy of life will give
rise to cut throat competition among individuals to gain economic
means. Freedom of thought and action will not only
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intensify this competition but also tilt the balance in favour
of dominant classes. Moreover hedonism will provide moral
justification the exploitation of the upper classes. In the
presence of these factors capitalism system can never be free of
the evil of exploitation.
Characteristics of capitalist economies :
A set of broad characteristics are generally agreed on by both
advocates and critics of capitalism. These are a private sector,
private property, free enterprise, profit, unequal distribution of
wealth, competition, self organization, the existence of markets
(including the labor market) and the capitalist class and the
proletariat, and the pursuit of self-interest.
1).Private property rights
An essential characteristic of capitalism is the institution of
rule of law in establishing and protecting private property,
including, most notably, private ownership of the means of
production. Private property was embraced in some earlier systems
legal systems such as in ancient Rome but protection of these
rights was sometimes difficult, especially since Rome had no
police. Such and other earlier system often forced the weak to
accept the leadership of a strong patron or lord and pay him for
protection. It has been argued that a strong formal property and
legal system made possible
I. Greater independence; II. Clear and provable protected
ownership; III. The standardization and integration of property
rules and property
information in the country as a whole; IV. Increased trust
arising from a greater certainty of punishment for cheating in
economic transactions; V. More formal and complex written
statements of ownership that permitted the
easier assumption of shared risk and ownership in companies, and
the insurance of risk;
VI. Greater availability of loans for new projects, since more
things could be used as collateral for the loans;
VII.Easier and more reliable information regarding such things
as credit history and the worth of assets;
VIII.An increased fungibility, standardization and
transferability of statements documenting the ownership of
property, which paved the way for structures such as national
markets for companies and the easy transportation of property
through complex networks of individuals and other entities. All of
these things enhanced economic growth. Many governments extend the
concept of private property to ideas, in the form of "intellectual
property." It has been argued that the introduction of the patent
system was a crucial factor behind the rapid development and
widespread use of new technology and memes during and following the
industrial revolution. Some oppose the establishment of
intellectual property as being counterproductive or coercive.
Others argue that some intellectual property rights may be too
rigid or constraining to innovation, favoring weaker
protections.
2). Free market
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The notion of a "free market" where all economic decisions
regarding transfers of money, goods, and services take place on a
voluntary basis, free of coercive influence, is commonly considered
to be an essential and exclusive characteristic of capitalism. In
systems where individuals are prevented from owning the means of
production (including the profits), or coerced to share them, not
all economic decisions are free of coercive influence, and, hence,
are not free markets. In an ideal free market system none of these
economic decisions are decreed by government. Instead, they are
determined in a decentralized manner by individuals trading,
bargaining, cooperating, and competing with each other. In a free
market, government may act in a defensive mode to forbid coercion
among market participants but does not engage in proactive
interventionist coercion. Nevertheless, some authorities claim that
capitalism is perfectly compatible with interventionist
authoritarian governments, and/or that a free market can exist
without capitalism.
3). Profit
The pursuit and realization of profit is an essential
characteristic of capitalism. Profit is derived by selling a
product for more than the cost required to produce or acquire it.
Some consider the pursuit of profit to be the essence of
capitalism. Sociologist and economist, Max Weber, says that
"capitalism is identical with the pursuit of profit, and forever
renewed profit, by means of conscious, rational, capitalistic
enterprise." However, it is not a unique characteristic for
capitalism, some hunter-gatherers practiced profitable barter and
monetary profit has been known since antiquity. Opponents of
capitalism often protest that private owners of capital do not
remunerate laborers the full value of their production but keep a
portion as profit, claiming this to be exploitative. However,
defenders of capitalism argue that when a worker is paid the wage
for which he agreed to work, there is no exploitation, especially
in a free market where no one else is making an offer more
desirable to the worker; that "the full value of a worker's
production" is based on his work, not on how much profit is
created, something that depends almost entirely on factors that are
independent of the worker's performance; that profit is a critical
measure of how much value is created by the production process;
that the private owners are the ones who should decide how much of
the profit is to be used to increase the compensation of the
workers , and that profit provides the capital for further growth
and innovation.
4).Self interest
The pursuit of self-interest is commonly regarded as playing an
essential role in capitalism. Many writers, such as Adam Smith and
Ayn Rand, point to what they believe to be the benefit of
individuals trading for their self-interest rather than
altruistically attempting to serve the "public good." Smith, widely
considered to be the intellectual father of capitalism, says in
Wealth of Nations: "By pursuing his own interest frequently
promotes that of the society more effectually than when he really
intends to promote it. I have never known much good done by those
who affected to trade for the public good." Ayn Rand, probably the
most outspoken advocate of the role of self-interest in capitalism,
says in Capitalism: The Unknown Ideal: "America's abundance was
created not by public sacrifices to the common good, but by the
productive genius of free men who pursued their own personal
interests and the making of their own private fortunes."
Nobel-economist Milton Friedman also embraces the role of
self-interest in capitalism. In his famous article The Social
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Responsibility of Business is to Increase Profits, as he asserts
that business has no social responsibility other than to increase
profits and refrain from engaging in "deception or fraud." He
maintains that when business seeks to maximize profits, while
respecting the guidelines of a free market by not defrauding or
deceiving, it almost always incidentally does what is good for
society. Friedman does not argue that business should not help the
community but that it may indeed be in the long-run self-interest
of a business to "devote resources to providing amenities to
community..." in order to "generate goodwill" and thereby increase
profits. Some, including some supporters of capitalism, dislike the
focus on self-interest. For example, self-described "free market
libertarian" founder and CEO of Whole Foods Market, John Mackey,
claims in an article in Reason magazine that he is serving
customers and society out of "love" rather than self-interest while
he boasts the profitability of his company in that article.
(Rethinking the Social Responsibility of Business,
5).Free enterprise
In capitalist economies, a predominant proportion of productive
capacity has belonged to companies, in the sense of for-profit
organizations. This include many forms of organizations that
existed in earlier economic systems, such as sole proprietorships
and partnerships. Non-profit organizations existing in capitalism
include cooperatives, credit unions and communes.
6).Economic growth
One of the primary objectives in a social system in which
commerce and property have a central role is to promote the growth
of capital. The standard measures of growth are Gross Domestic
Product or GDP, capacity utilization, and 'standard of living.The
ability of capitalist economies to sustainably increase and improve
their stock of capital was central to the argument which Adam Smith
advanced for a free market setting production, price and resource
allocation
7). Economic mobility
One of the key markers of entrepreneurial economies and 'growth'
in a society is its economic mobility, defined as the existence of
large changes in the make-up of its socio-economic strata. This is
manifested as the occurrence of large fluctuations in the various
deciles or quintiles of income and wealth among the population, and
the existence of large changes over a person's lifetime in relation
to their real earning power. In standard economics, a capitalist
system provides more opportunities for an individual to rise faster
in the world by entering new professions or establishing a business
venture. The instability of economic strata is contrasted with
traditional feudal or tribal societies, which are considered to
have more stable wealth relationships, and with the egalitarianism
that exists in socialist societies, which distribute more of their
wealth in the form of social benefits and therefore reduce income
mobility, particularly among those who own capital and wish to
trade it.
Merits:
Maximum utilization of resources:
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Private ownership, profit motive and economic freedom force
individuals to exercise their God gifted talent to the full and in
the best possible manner. This lead to the maximum utilization of
human and natural resources. Goods and services are produces in
large quantity to satisfy consumer needs.
Inventions and Technical Advances:
In the presence of profit motivate and competition the
entrepreneurs are forever seeking better techniques of production.
This motive leads to new inventions and development of new
techniques of work and business management which are calculated to
facilitate and increase production at reduced cost.
Demerits:
Philosophical Errors:
Materialism gives rise to selfishness in the society which
eliminates sympathy and kindles the fire of mutual conflict in the
society. Makes individual indifferent to collective interest. They
indulge in nepotism and become slaves of pleasure. Man loss the
ability to see beyond the self interest. A society whose members
are self seeking, selfish and self centered can never be free of
economic hardship and misery.
Callous Competition:
Competition and conflict hold great importance in the capitalist
system. The expectations attached to competition are based on a
supposition which does not exist in practical life. Competition can
deliver well only when all parties in competition is equal in power
and strength. But in the capitalist system power and strength is
concentrated in the hands of big capitalists.
Class Struggle:
The capitalist system divides the society in cases: the employer
and worker. This thing shatters peace and harmony in the
society.
Injustice distribution of Wealth:
The capitalist utilize their wealth to earn more wealth so that
gradually the bulk of national resources is concentrated in the
hands of a few big cabalists.
Economic Crises:
In the consequences of the concentration of wealth under this
system the purchasing power of the masses diminishes leading to
reduction in the demand of produced goods. The sale of goods
stopped. Large Scale production heaps up stock unsold goods. This
creates serious economic crises.
Disaster of Interest base Trade:
Interest is the backbone of capitalist system. Under this
system, interest is the chief means of providing finance for the
brink of economic disaster. Interest is the major cause of the
concentration of wealth. By increasing the inequality of
distribution of wealth it creates an
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atmosphere of class conflict. It increases the cost of
production, raises the prices, weakens the purchasing power of the
people and discourages the investments.
Flow of Economic Resources in the wrong Direction:
Under this economic system resources flow in the direction of
vocations which promise maximum profit, even if they are inferior
on the social scale and spread mischief.
Corrupt Business Practices:
This philosophy behind this system is devoid of moral values.
Businessmen feel no hesitation in resorting to fair or foul means
in order to earn maximum profit. The consumers are exploited by
creating artificial monopolies and small businessmen are squeezed
out of the sector of production.
Economic Rivalries and Wars:
When due to over production demand decreases then capitalists
look to foreign markets. All capitalist countries enter into a
conflict over capturing international markets. This conflict
sometime escalates into wars. Economic rivalries were the main
cause of two world wars in the twentieth century.
Shadows of Poverty:
In this system easy methods of mass production creates an
environment of economic prosperity, but the fruits of this
prosperity are enjoyed only by a tiny wealthy class. The large
majority of people live in the dark shadow of poverty.
Unemployment:
Unemployment becomes an integral part of this system. To gain
maximum profit the entrepreneurs prefer to use capital intensive
technology leading to large scale retrenchment of workers.
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CHAPTER 3Socialism
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Socialism:
Socialism and communism means an economic system in which the
means of production are owned by the state. A central Directorate
the production of goods and services. The Directorate decides the
nature, quality and model of production of goods. The distribution
of goods is also directed by this central body.
Philosophical Foundations:
Materialistic Interruption of History:
The evaluation of human history takes place due to material and
economic factors. Changes in the social relations and contact
follow the changes in the means and modes of production. The large
scale mode of production and factory system created by modern
capitalism has led to the formation of labour unions and increase
the collective strength of workers. This strength of the workers
will strike a death blow to capitalism and establish socialism.
Theory of Surplus Value:
In the capitalism system a large portion of profit is
expropriated by the capitalist. The wage pays to the worker far
less than the real value of work. This injustice can only be
removed in the system of collective ownership.
Class War:
The war between rich and poor always exist in the society. In
modern capitalist economy this conflict rages between the
capitalist and the worker. Under this system the number of
capitalists in constantly decreasing while that of the workers is
increasing and unity among the workers is growing strong day by
day. Hence It is the workers who will be victorious in this war and
a classless society dominated by workers will replace the modern
capitalist system.
Dictatorship of the Proletariat:
With the end of capitalist system the supreme power in the state
will come into the hands of the workers. They will have the
authority to exercise the power of the state.
Anti-Religion:
Religion makes man forget material facts and entangles him in
metaphysical issues.
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Characteristics of Socialism:
Abolition of Private property:
An individual can own nothing expect necessaries of life. No one
can run private business.
Collective ownership of Means of Production:
All the means of production such as factories, farms, land,
trade mines and means of transport and communication are under
state ownership and control.
Central Planning:
The forces of demand and supply are balances by central planning
and a balance is not affected by price mechanism.
Elimination of Unfair Gaps in Incomes:
Each person is paid compensation according to his needs. This
eliminates unfair gaps in incomes. The system of distribution of
wealth based on fair basis.
Provision of Necessaries of Life:
In this system state ensure that work is extracted from each
individual according to his capacity and compensation is given to
him to supply all his needs. The state guarantees economic security
to every citizen.
Merits:
Elimination of Wastage of Resources:
Goods and services are produce according to needs. This
eliminates large scale wastage of resources which is an essential
feature of competition under capitalist system. Cost of
advertisement and businesses are entirely eliminated.
Eradication of Exploitation:
Since there is no opportunity to earn private profit in this
system, the exploitation and economic plundering of the weak is
eradicated.
Elimination of concentration of wealth:
There is no possibility of national wealth accumulating in a few
hands.
Eradication of Unequal Distribution of Wealth:
In this system there is no scope of gaining wealth through rent,
interest or private profit. Every member of the society is the
worker and receives the fixed wage. So unfair gap in the
distribution of wealth do not take place at all.
Provision of Necessaries of Life:
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In this system the provision of necessaries of life to every
citizen is the responsibility of the state. It is the reasonability
of state to provide facilities like food, clothing, housing,
education and medical care to every individual.
Immunity from Economic Crisis:
Good and services are produced according to the demand. Hence
there is no possibility of overproduction in this system. The
danger of economic depression is completely eliminated.
Elimination of Unemployment:
In this system, the process of production is kept going
according to a comprehensive plan. This makes it possible to give
employment to all capable individuals.
Demerits:
End of the Liberty:
In this system, man becomes a slave of the government for the
sake of eating two meals a day. Economic and political power is
concentrated in the hands of the government and the individual are
completely deprived of freedom of thought and action.
Weakening of the will to work:
Absence of the profit weakens the will of the individual to
think about and discover new techniques of work. The process of
inventions and discoveries is affected.
Errors in Planning:
Good are produced in general interest and individual likes and
dislikes are not given any importance. All decisions in matters
relating to planning are taken according to official priorities and
people are forced to meet the official targets.
Failure in Practice:
This system fails to achieve its objective in practice. In the
model of communist country Russia despite the reign of terror and
oppression and lack of freedom, the level of production has fallen
below the production of capitalist countries. Members of the ruling
party and high officials have enjoyed the same exorbitant salaries
and facilities as their counterparts in capitalist countries. More
and more restrictions are imposed on individual liberty.
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Chapter 4COMPARISON BETWEEN THE ISLAMIC ECONOMIC AND OTHER
ECONOMIC SYSTEM
COMPARISON BETWEEN THE ISLAMIC ECONOMIC SYSTEM AND OTHER
ECONOMIC SYSTEMS
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Capitalism and communism is that the latter systems study
analyses and try to solve the economic problem of man by isolating
it from the total framework of human life. They do not give much
consideration to the effect that their solution of the economic
problems might have no other spheres of collective life. In
contrast Islam studies the economic problem of man in the total
perspective of individual and collective life and adopts a solution
which not only tackles the problem in the best possible manner but
also does not have any adverse effect in other departments of
collective life.
DIIFFERENCE BETWEEN ISLAM AND CAPITALISTM:Both recognize the
right of private ownership of necessaries of life and the means of
production. There is difference between concept of ownership given
by Islam and Capitalism.
According to Islam All kind of property are Allahs trust with
the individuals this interest can only be obtained with Allahs
will. Islam does not recognize the right of the individual to own a
property which he has gained by those means which shariat declares
unlawful.
Capitalism recognizes absolute right of the individual to own
and utilize his property. This opensthe door to all the evils like
economic inequality, injustice distribution of wealth and class
conflicts.
Interest:
Interest is the backbone of capitalism. The creation and
formation of capital and professional activity depends on it. Islam
proscribes interest. So the rise of major and blood- sucking
usurious monsters has been stopped forever.
Distribution of wealth:
The capitalism economy by nature tends to concentrate means of
livelihood in a few hands. In this system individuals exercise
their freedom to rapidly establish their economic monopolies.
Taxes can be imposed only up to the limit. Moreover the
capitalism class generally resorts to tactics of tax-evasion.
Islam discourages all those means of earning wealth which leads
to the rise of economic monopolies. Islam ensures the circulation
and equitable distribution of wealth among all classes of society
by establishing a regular system of Zakat, sadqat and the law of
inheritance.
THE DIFFERENCE BETWEEN ISLAMIC AND COMMUNIST SYSTEM OF
ECONOMY:
Different viewpoints:
There is the difference between fundamental view points of both
systems. The communist system is the child of materialism. It
regards material need as the only real needs of man.
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Hence man should struggle to satisfy these needs. Islam present
the concept of higher world which is above this material world.
This higher world is permanent and everlasting.
Collective Ownership:
The basic concept of the communist economy is to abolish private
ownership and establish collective ownership of means of
production. All means of production are taken under state control.
Multitude of capitalists is replaced by only one big
capitalist.
There is no doubt that collective ownership of means and
production and state management of distribution of goods and
services ensures the supply of necessities of life to individual
citizens but for this gain they loss their natural blessing of free
thoughts and actions.
Profit Motive:
Production targets are set in advance and then measures are
taken to achieve those targets by force.
Islam has kept the natural profit motive alive among the
individuals so that they may have full opportunity to exercise
their intellectual talent, capacities and energies. Where the
profit motive oversteps its lawful bounds, automatic checks are
ready to keep it on the right track.
Communism and Capitalism-----Two sides of same coin:
Capitalism and socialism are the two branches of same tree.
Hence they take two different directions the fruit they bear are
the same. In the capital system, the greed for profit has blinded
on individual. In socialism collective ownership has robbed
individual of not only their property but also their natural
freedom of thoughts.
In other words, both systems in their philosophy and action have
proved destructive of social justice which guarantees peace and
comfort to human beings.
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CHAPTER 1ISLAMIC ECONOMIC SYSTEM
CHAPTER 2CAPITILISM ECONOMIC SYSTEM
CHAPTER 3Socialism
Chapter 4COMPARISON BETWEEN THE ISLAMIC ECONOMIC AND OTHER
ECONOMIC SYSTEMDIIFFERENCE BETWEEN ISLAM AND CAPITALISTM:THE
DIFFERENCE BETWEEN ISLAMIC AND COMMUNIST SYSTEM OF ECONOMY: