Difference between Islamic Economics System and Other Economics Systems

Economic System of Islam Islamic Economic System implies a mood of satisfying the economics needs of the members of organized society in accordance with is injection of Quran and Sunnah. The mood of spending production, distribution and exchange of wealth is determined by the tenor of these injections. In this system the economic activities of the members of the society are regulative by the certain values of which pity, justice, benevolence, cooperation, brotherhood and equality are especially important. The sources and origin of these values are the Holy Quran and the Sunnah of Allahs Apostle (PBUH). They are eternal and immutable. Consumers, producers and traders are must abide these values. At one level, the state can also use the its powers to implements and enforce these values, however, Islam mostly ensure their implementations and daily affairs of life through its system of education and training and by creating a general climate of piety in the society. Some Fundamental features of Islamic Economics System are written below. All the wealth belongs to Allah (SWT): "And give them of the wealth of Allah which He has given you." [An-Nur: 33] The community is the trustee of the wealth: "Believe in Allah and His Messenger, and spend whereof He has made you heirs."[Al-Hadid: 7] Hoarding of wealth is prohibited: "And those who hoard up gold and silver and spend not in the way of Allah; announce to them a painful chastisement." [At-Tauba: 34] . Circulation of wealth is a duty: "Whatsoever Allah may restore unto His Messenger - is due unto Allah and unto His Messenger - the orphans and the needy. So, that it may not be confined to the rich amongst you." [Al-Hashr: 7] Other Economic System There are two economic systems Capitalism Socialism

Capitalism Capitalism is the economic system in which the means of production are distributed to openly competing profit-seeking. Capitalism is not merely an economics system but a peculiar attitude of mind and behaviour. Basically it springs out of the notion of the capitalist that he has earned his wealth by his own ability, skills, knowledge and wisdom. Some of the features of capitalism are written below. Private persons and where investments, distribution, income, production and pricing of goods and services are predominantly determined through the operation of a market economy Capitalism is originally defined as a mode of production, where it is characterized by the predominant private ownership of the means of production, distribution and exchange in a mainly market economy Capitalism is usually considered to involve the right of individuals and businesses to trade, incorporate, and employ workers, in goods, services (including finance), labor and land. In Capitalism, state action is confined to defining and enforcing the basic rules of the market though the state may provide a few basic public goods and infrastructure. The most laissez-faire capitalist economies, as measured by indices of economic freedom, include countries like Hong Kong and Canada Socialism Socialism or communism means an economics system in which the mean of production are owned by the state. A central directorate controls the production of goods and services. The directorate decides the nature, quantity, and mood of production of goods. This distribution of goods is also directed by the central body. Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the means of production and distribution of goods, and the creation of an egalitarian society. Modern socialism originated in the late nineteenth-century working class political movement. Karl Marx posited that socialism would be achieved via class struggle and a proletarian revolution which represents the transitional stage between capitalism and communism. Socialists mainly share the belief that capitalism unfairly concentrates power and wealth among a small segment of society that controls capital and creates an unequal society. All socialists advocate the creation of an egalitarian society, in which wealth and power are distributed more evenly, although there is considerable disagreement among socialists over how, and to what extent this could be achieved Some features of socialism are written below

Socialism is not a discrete philosophy of fixed doctrine and program its branches advocate a degree of social interventionism and economic rationalization, sometimes opposing each other. Another dividing feature of the socialist movement is the split on how a socialist economy should be established between the reformists and the revolutionaries. Some socialists advocate complete nationalization of the means of production, distribution, and exchange; While others advocate state control of capital within the framework of a market economy. Social democrats propose selective nationalization of key national industries in mixed economies combined with tax-funded welfare programs. In the 1970s and the 1980s, Yugoslavian, Hungarian, Polish and Chinese Communists instituted various forms of market socialism combining co-operative and State ownership models with the free market exchange. This is unlike the earlier theoretical market socialist proposal put forth by Oscar Lange in that it allows market forces, rather than central planners to guide production and exchange.

Difference between Islamic economic System and others (Capitalism and Socialism)

Comparison of Capitalism with Islam: Capitalism and Islam are compared in respect of their basic economic concepts as under: 1. Right to ownership: The existence of right of private ownership of property is the hallmark of capitalism. The system believes in the private ownership of the means of production, distribution and exchange which are managed and controlled by individuals or groups of individuals for private profit. The unrestricted right to own property and earn profits leads to concentration of wealth in few hands. This necessarily disturbs the balance of distribution of wealth and income in society. The economic disparities and the everincreasing gulf between the rich and the poor sows the seeds of discord and destruction in the capitalist society. Islamic concept of ownership is unique one. Ownership, in reality, belongs to God while some rights only vest in man so that he may fulfill the purpose of God, that is the purpose of community by acting as a trustee for those in need. In other words, what Allah has created for benefit of and service to man belongs collectively to the whole humanity. Legal ownership by the individual is recognized in Islam but

it is subject to the moral obligation that in all wealth all sections of society have the right to share. Thus private or individual ownership in Islam is not unlimited or unrestricted. All the means of production are not placed under private ownership as public ownership of certain things of common utility exists side by side with it in an Islamic state. Islamic state has also the right to nationalize certain things which are under private ownership for the benefit of the community. In this way the limited right of private ownership with law of inheritance which distributes the estate of the deceased among fairly large number of heirs averts concentration of wealth in few hands and thus prevents class-conflict. 2. Economic Freedom: Unrestricted economic freedom and non-interference of the state in such freedom is another feature of capitalist economy. Every individual is at liberty to initiate, organize and establish any enterprise, business, trade, profession, etc. He has full freedom to earn as much income as he can and spend his wealth in whatever manner he likes. This unrestricted economic freedom generally leads to earning of wealth through foul means such as gambling and prostitution. It also encourages business malpractices such as smuggling, black marketing, profiteering, hoarding, speculation, forward transactions, fraud, exploitation, adulteration, etc. Thus a mad-race for earning wealth becomes order of the day and high social and moral values such as fraternity, brotherhood, mutual help, love, benevolence, truthfulness give place to selfishness, callousness, hatred, falsehood and mistrust. Capitalism, in fact, has come to signify a religion of money or dollar dictatorship. Islam also allows economic freedom to an individual who is at liberty to earn wealth, own it and spend his wealth at his discretion. But the freedom given by Islam in economic sphere is not unlimited. Islam makes distinction between halal (permitted being lawful) and haram (forbidden being unlawful) in every economic activity embracing vast fields of production, exchange and consumption.2 Similarly consumption of wealth on luxurious living, haram things and extravagant spending is also forbidden. A Muslim is required to pay Zakat and spend whatever he can for the cause of the poor and the destitute. All these regulations promote moral values in Islamic society and eliminate mad-race for wealth and material gains. 3. Monopoly: Competition, which is another feature of capitalism, leads to the destruction of minor enterprises and firms. This encourages merger of smaller business organisations into major ones and thus monopolies or cartels are established. Monopolies kill free competition, cause inflation in prices and ultimately result into unemployment. Thus labour and consumer are both exploited in such a situation. Moreover, tradecycles, unplanned production, over-competition, increasing accumulation of capital upsets the balance between production and consumption which sometimes leads to economic depressions. Islam forbids unhealthy competition and bans all the ways which lead to it. Islam also disallows establishment of monopolies. The Prophet of Islam is reported to have said Whoever monopolies is a sinner. Especially monopolies over food-stuffs or articles of daily use are forbidden by Islam. Commodities and services which are of the common interest of the community are never allowed to be monopolized.

4. Institutions of Interest: The Institution of banking and interest is the life-blood of capitalistic form of economy. For business, trade and industry especially for big projects and economic ventures, huge funds are required which no individual or firm can arrange. This leads to establishment of banks who borrow capital from depositors and investors on lower rate of interest and lend it to business enterprises on higher rate of interest. Thus the institution of interest has become part and parcel of capitalism. Islam considers interest as the most exploitive institution for humanity and has abolished it root and branch in its every form and manifestation. According to al-Quran taking of interest tantamount to war against God and His Apostle, while according to Prophet Muhammad (PBUH) interest is worse than adultery. Islam builds its economy on interest free basis and promotes profit and partnership as incentive for saving and investment. 5. Exploitation: Unrestricted right of economic freedom and uncontrolled right of private ownership has practically resulted into exploitation. Economic exploitation of the weak by the strong is an order of the day in a capitalist society. Wealth is the religion of every person (but a few honorable exceptions) and earning of it through fair or foul means is his creed. Consequently, everyone exploits the other economically with a view to gather as much fortune as possible. Islamic economic system, on the other hand, ensures elimination of exploitation of one man by the other. Many effective measures have been taken by Islam to do so. Riba or usury is one of the worst instruments of human exploitation and this has been abolished in all forms by Islam. 6. Distribution of Wealth: Capitalism does not believe in fair and just distribution of wealth. Since it believers in full economic freedom and private ownership of means of production. Concentration of wealth in few hands takes place while huge majority of the populace is deprived of the very basic necessities of life. The privileged few live in luxury while poverty, ignorance, disease and unemployment is the lot of the multitude. This disturbed balance of distribution of economic resources and unbridgeable gulf between the haves and have-nots ultimately leads to class struggle and ultimate overthrow of the very system. Islam on the one hand guarantees provision of basic human needs such as food, clothing and shelter to everyone and, on the other hand, ensures fair and equitable distribution of wealth and economic resources among all. For bridging the gulf between the rich and the poor and for ensuring equitable distribution of wealth, Islam has taken many steps such as Zakat and Sadaqat, laws of inheritance and compulsory contributions in the form of taxes and duties. To prevent concentration of wealth in few hands Islamic economic code has taken measures like abolition of interest, prohibition of earning of wealth through haram means, prohibition of hoarding of wealth, etc.

Comparison of Socialism with Islam 1. Ownership: State ownership of all property and means of production, as stated earlier, is the most distinctive feature of socialist economy. Private ownership of property and of all the means of production, distribution and exchange is totally abolished. This leads to management of these means of production by the bureaucracy. Bureaucratic running of economic machinery results into inefficiency, low production and collapse since the bureaucrats lack initiative, follow rigid rules and are not trained to run business. Islam does not abolish private ownership of property and does not place all the means of production, distribution and exchange in the hands of the state. Although Islam upholds public ownership of some means of production which are the common utility to the people, but it concedes the rights of private ownership of majority of the means of production and distribution. Unlike socialism, Islam gives economic freedom to an individual who can earn wealth, own it and enjoy it within certain limits provided he does not infringe teachings of Islam in the process of earning, owning and consuming it. 2. Materialism: Socialism, especially scientific socialism rests on a purely materialistic basis. Dialectic materialism or materialistic interpretation of history is the most vital element of Marxism. Marx has sought to explain every event in history on economic grounds. According to him, origin of every activity of man lies in economic factors. Marx does not believe in religion which, in his view, is a bourgeois invention to keep the proletariat under their perpetual control. Engels said : Matter is the only real thing in the world. The communists believe that human reason is just a manifestation of matter and soul has no independent existence of its own but is a product of matter. They hold that all the different stages of human progress are determined by the interplay of conflicting economic forces alone, thus leaving no place for Gods will. Islam is the perfect and final religion revealed by Lord of the universe for the guidance of mankind. Its foremost aim is to ensure falah or well-being of humanity in this world and in the Hereafter. It does not give importance to matter only at the cost of spirit as does a secular ideology like socialism. Islam believes in the material as well as moral and spiritual welfare of its followers at micro and macro level. Followers of Islam believe in one God, in all the Prophets and Holy Scriptures, in the Hereafter, in the moral code and in the universal brotherhood of mankind. 3. Regimentation and Totalitarianism: Communism sets up a totalitarian state in which bourgeois class is liquidated and strong dictatorship of the proletariat class is established. Fundamental rights and civil liberties are crushed and man is rendered merely to the status of an economic animal. In the name of bread he is deprived of freedom of conscience, freedom to think, freedom to speak and freedom to act. In order to achieve economic

objectives and in order to work the huge productive machine efficiently, the state becomes all powerful and establishes complete regimentation. Islam, on the contrary, believes in democratic form of government as the Quran, its revealed book, enjoins upon Prophet Muhammad (PBUH) to conduct public affairs in consultation with his followers. Islam gives all the fundamental rights and civil liberties to the people living in the Islamic state. Islamic state does not establish dictatorship of any class; neither is it a totalitarian state. The state under Islam does not wither away; rather it becomes indispensable as it discharges all the functions of a traditional state and modern welfare state. 4.Economic Equality: Economic equality is another claim of communism although it has never been realized so far. In theory at least it is claimed that the rights of the individuals in the economic sphere are governed by the principles of equality. Every individual is provided with the necessaries of life according to his needs. Islam, unlike communism, recognizes that there is no equality among human beings as regards the economic means and possession of worldly wealth. The Quran considers these inequalities and disparities in the distribution of wealth as part of Divine economic order and, therefore, does not try to eliminate them by unnatural and artificial means. Islam does not tolerate the existence of unbridgeable gulf between the rich and the poor, but unlike socialism it does not believe in equal distribution of wealth. Actually Islam believes in fair, just and equitable distribution of wealth and in social justice. For ensuring equitable distribution, Islam has taken many steps such as institution of Zakat and Sadaqat, laws of inheritance and bequest, voluntary alms and levy of compulsory contributions in the form of taxes and duties