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Islam & Capitalism IBM 11013 Introduction to Islamic Economics RA.Sarjoon Lecturer in charge. Preamble. - PowerPoint PPT Presentation
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Islam & CapitalismIBM 11013 Introduction to Islamic Economics RA.SarjoonLecturer in charge
Many problems are facing by the human being, economic is the one of them and its significance cannot be denied in the life of human being.In the very beginning it was said that economic problem is due to the scarcity.1 Economics of Production2 Economics of Distribution
Economics & Its Problems
What is economics?“To utilize the limited resources in a way that maximum needs and wants
are met to ensure the well being of all members of the human society.”
The four basic economic problems:1. Determination of Priorities2. Allocation of Resources (Land, Labor, Capital, Entrepreneur)3. Distribution of Income4. Development
We will compare how Capitalism, Socialism and Islamic Economic system addresses to these problems.
Capitalism is an Economic System in which a country’s trade and industry are controlled by private owners for profit rather then controlled by the state.
What is Capitalism?
Capitalism is a social system based on the recognition of individual rights including property rights, in which all property is privately owned.
Under capitalism the state is separated from economics, production and trade just like the state is separated from religion .
What is Capitalism?
It is the system of laissez faire. It is the system of political freedom. It is the economic system based on the principle of private ownership and use of factor of production and individual freedom in all economic matters.
An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.
What is Capitalism?
Under this system all farms, factories and other means of production are the property of private individual and firms.
They are free to use them, any way they like, with a view to making
profit. The desire for profit is the sole consideration with the property
owner in the use of their property.
Beside free and unfettered use of their property, everybody
is free to take up any line of production he likes and is free to enter
in and contract with other fellow citizens for his profit
Right of private property
Freedom of enterprise
Freedom of contract
Freedom to use own property
Freedom of choice by the consumer Automatic working Higher efficiency and incentive to hard work Economic development and prosperity Optimum utilization of resources
An imbalanced systemDistribution of wealth in a fewConcentration of wealth and economic power onlyWasteful competition Human welfare ignoredExploitation Mismanagement
Comparison of Capitalism & SocialismComparison of Capitalism & Socialism
Capitalism Socialism
1. Determination of Priorities
2. Allocation of Resources
3. Development
• Every individual has unconditional & absolute right to participate in any business to maximize profits
• Concept of Selfish Interest
• Supply & Demand will determine the priorities.
• No individual has the right to participate in any business independently.
• State will determine the priorities as per the overall planning.
• Concept of collective interest.
• Market forces will decide where to invest resources
• Govt. will decide where to allocate resources
• Market forces will decide • Govt. will decide
Comparison of Capitalism & SocialismComparison of Capitalism & Socialism
Capitalism Socialism
Right to Wealth
• Land - Rent
• Labor - Wages
• Capital- Interest
• Entrepreneur- Profits
4. Distribution of Income
• Land – Rent fixed by Govt.
• Labor – Wages fixed by Govt.
Right to wealth is with the factors of production only.
Right to wealth is with the Govt. which then distributes it among the factors of production.
Islam is a Deen which gives guidance for Aqaid, Ibadat,
Mu’ashrat, Akhlaq & Mu’amalat.
Hidaya- famous nook of Fiqh has 70 % portion dedicated to
Mu’amalat.
The humanitarian goal of achieving the well being of all
members of the human family cannot be attained by
concentrating primarily on the material constituents of well-
being and making maximization of wealth as the main
objective of Economics.
What is Islamic Economics
•It is also necessary to raise the spiritual content of well being and reduce all the symptoms of anomie, like family disintegration, heavy
interest based debt payments, conflict and tensions, crime, alcoholism, drug addiction, and mental illness, all indicating lack of inner happiness and contentment in the life of individuals.
Capitalism as well as Socialism have both
failed to lead mankind to such an overall well-
being. It is therefore, necessary to lay down the
contours of a new system which could help
optimize human well-being as per the divine
guidelines of Allah.
What is Islamic Economics
Islamic Economic System
Islam accepts the market forces of supply and demand- Reference of Holy Quran.
In fact Islam gave the concept of Market Forces 1300 years before Keynes presented the modern model of Economics in 1927.
Islam accepts the right to private property and accepts the right to maximize profits. But these rights are not unbridled and un conditional rather there are some prohibitions.
Islamic Economic System- The prohibitions & considerations
1. Divine Prohibitions:
Islam has prohibited some economic activities that are not allowed at any time at any place.( Interest, Gambling, Hoarding etc.)
2. Govt. Restrictions:
Islam allows Govt. to intervene where it feels appropriate , but these restrictions are temporary as per the need of the time.
3. Moral Considerations & Restrictions:
Life in this world is temporary and there is an eternal life after words. One has to make this worldly life a way to get the maximum benefit in the life hereafter.
Factors of Production in Islamic Economic System
In Islam there are three factors of production
1.Land 2. Labor 3. Entrepreneur
Entrepreneur & Capital is a single factor of production.
As interest is Haram hence the risk of profit & loss is with the capital.
Anyone investing capital must also take the risk of the investment.
Right to Wealth in Islam
In both Capitalism & Socialism the right to wealth is with those factors of production only that have taken part directly in the process of production.
Islam believes that the original ownership of everything is with Allah and without Allah’s “Taufeeq” no factor of production can produce anything.
ALLAH
Factors of Production
Secondary owners of wealth
Zakat, UshrWarasat, SadqaatQurbani,Kharaj
Capitalism gives unbridled and un-conditional right to profit
motive and private ownership, while socialism goes to other
extreme by assuming that perfect planning by the govt. is the
cure of all ills.
Islam gives a balance view among the two extremes by
recognizing the right to private ownership, market forces and
profit motive but under the restrictions of:
1. Divine restrictions 2. Govt. restrictions 3. Moral
considerations
Summary of The ComparisonSummary of The Comparison
Islam ensures equitable distribution of wealth
through the concept of primary and secondary
ownership.
All these factors combined have a cumulative effect
of achieving the well being of all members of the
human society.
Summary of The Comparison
According to Quaranic verses, every thing in this universe belongs to God almighty.
"Whatever is in the heavens and whatever is in the earth belongs to Allah." [Al-Baqarah, 2:284].
He is the real owner of everything "And Allah’s is the kingdom of the heavens and the earth, and Allah has power
over every things." [Al- Imran, 3:189].
جميعا األرض في ما لكم خلق الذي هو
Islamic Economics System
Islamic Economics System
– Halal & Haram
– Justice
– Equality
– Cooperation
– Brotherhood
– kindness
Basic rules of Islam
Naturally
Concentration on ethics and morality
The role of government where required
Solution for Economics Problems
Solution for Economics Problems
Achieving wealth
Rights of ownership
How to use that Rights?
utilization of capital
Distribution of wealth [ عامه كفالت
Wright of private ownership) ( النساء بالباطل بينكم أموالكم التأكلوا) النور ......) غيربيوتكم التدخلوابيوتا No concept of equality in economicsAllah says بينهم قسمنا نحن ربك رحمة يقسمون أهم
.. بعض فوق بعضهم ورفعنا الدنيا الحياة في معيشتهم) الزخرف)
No priesthood Allah says ) ( البقرة الله رزقكم مما وكلوا
Teaching of the Qur,an Regarding Economics
Teaching of the Qur,an Regarding Economics
Distinction between legal and illegal بالباطل بينكم اموالكم التأكلوا
Exaggeration is not allowedالمسرفين اليحب انه والتسرفوا
How to spend? The concept of zakat Spoils of war The concept of Islam regarding inheritance The concept of public property , والنا والكالء الماء ثالث في شركاء الناس