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Chapter 3: Islamic Economic

Sstem and Conventional

Islamic Business School (IBS), UUM

2013

BPMS1013 Theor & Practice of Islamic Business1


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INTRODUCTION Conventional economy is an economy that already been

adopted and applied in an economic society

So, when it linked with the economy the conventional systemcan be considered as an economic system that has beenwidely practiced.

Does not have absolute standard but nature flexible and canchange according to a conditions in a society.

Islamic economic system is based on the proceedings of Al-Quran and Al- Sunnah.

The Direction of economic systems is to bring Al-Falahconcept of success in this world and hereafter.

Prohibition of usury , gambling and many more.



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Definition and Concepts of

Economics Definition of Economics

Study of how societies use scarce resources to produce valuablecommodities and distribute them among different people.

Concepts of Economics

Wants

Scale of preference

Opportunity cost

Choice



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Capitalism Economic System

An economic system based on a free market, open competition,profit motive and private ownership of the means of production.

Capitalism encourages private investment and business, comparedto a government-controlled economy. Investors in these privatecompanies also own the firms and are known as capitalists.

Principle of Capitalism

Belief in economic freedom

Private property

Individual decisions

Competition or economic rivalry in the market place



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Problems of Capitalism

Irrational behaviour

Inequality

Monopoly behaviour

Immobilities

Equity

Unemployment



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The command economic system

(Communism & socialism)Meaning /definition

A command economy is where economic decisions are planned outin detail by a central government authority.

Also known as planned economic.

Example: North Korea, Soviet Union , China ,Cuba

The principle of Communism & socialism

Nationalization of property

Economic equality

Regimentation



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Advantages and Disadvantages

Communism & Socialism

Advantages

Services and goods provided are for the benefit of community and not to makeprofit

Profit in not the main objective, instead the government aims to provide goodsand services to everybody

Less inequality of wealth

Low level of unemployment

No duplication as the allocation of resources is centrally planned

Disadvantages

Lack of innovation

Limited consumer choice

Lack of efficiency

Overstaffing

Neglect of moral education



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The Mixed Economic System

(Welfare state)

Meaning /definition

Mixed economic is an economy system that combine or mixture ofcapitalism and socialism

Industries are privately owned and others are publicly owned or

nationalized Malaysia, England, Germany, Sweden

Objective

Stability prices

Economic growth

Full employment

Efficient use of resources to produce goods and services.



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Advantages and Disadvantages

Mixed EconomicAdvantages

Less income inequality

Helping Producers and Consumers

Protecting the Economy

Free Enterprise

Benefits of taxes for social program

Disadvantages

Harming Competition

Bureaucratic Decisions

Unsuccessful regulations may paralyze features of production

Economic problem



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Islamic Economic SystemDefinition and philosophy of Islamic economic system Social Science that studies human behavior in terms of use and management of natural

resources for the benefit of themselves and the communitys interest to seek the blessingof Allah s.w.t. (Hailani Muji Tahir, 1991)

Philosophy of Islamic Economic System

- Concept of faith - Equality and brotherhood of man

- Concept of authority (Rububiyah) - The Day of Judgement

- Concept of property rights - Human as khalifah

- Concept of moral purification (Tazkiyyah)

Principles of Islamic Economic System1) Individual freedom 2) The right to own property

3) Controlled economic inequality 4) Social justice and equality5) Social Security 6) Widespread distribution of wealth

7) Wealth accumulation uncertain ban 8) The ban on the anti social institutions

9) Individual and social welfare



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Structure and implementation(Government, Private Sector, NGO)

1) Government

- Implemented by the government directly

2) Private sector

- Performed by individuals who seek to use the energy, ability and property in variousfields

3) NGO- Implemented by using private property, public @ baitulmal.

Implementation islamic economic system

Maqasid syariahconcepts and goals

Three principles :

1) Tauhid2) Khalifah

3) Justice



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Maqasid Sharia

(Purposes of Sharia)

Maintain and preserve religious

Keep and preserve sanit sense

Care and look after their own safety and lives

Protect and safeguard the security of property

Care and maintaining dignity



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Conclusions

Generally both forms of business wants to generates profit but thediffer between them is Islamic economy look more on humanbehaviour in manage natural resources for the benefit of

themselves and community. While a freedom in conventional economy will eventually create a

different economic system and policy basis.



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Q & A

Thanks


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