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Islamic Economic System Capitalism and Socialism
Islamic Economic System Capitalism and Socialism
PROJECT TITLE: Islamic Economic System, Capitalism and Socialism SUBMITTED TO: Sir Naveed Khan
Class:
MBAITM-13
Contents
PROJECT TITLE:...............Islamic Economic System, Capitalism and Socialism 1 UNDER TAKEN BY:......................................... 1 Kiran Afshan and Huma Naz
Islamic Economic System, Capitalism and Socialism August 13, 2009 CHAPTER 1.................................................................................. ...............................3 ISLAMIC ECONOMIC SYSTEM...................................................................................3 CHAPTER 2................................................................................ ...............................11 CAPITILISM ECONOMIC SYSTEM.............................................................................11 CHAPTER 3................................................................................ ...............................19 Socialism............................................................................................ ...................19 Chapter 4.................................................................................................................. 23 COMPARISON BETWEEN THE ISLAMIC ECONOMIC AND OTHER ECONOMIC SYSTEM ............................................................................................................... ...............23 DIIFFERENCE BETWEEN ISLAM AND CAPITALISTM:.............................................24 THE DIFFERENCE BETWEEN ISLAMIC AND COMMUNIST SYSTEM OF ECONOMY:.25
CHAPTER 1
ISLAMIC ECONOMIC SYSTEM
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.
Islamic Economic System, Capitalism and Socialism August 13, 2009 3. Restructuring the whole economy, with the objective of realizing the "Maqasid" (see
below) in spite of scarce resources.
3. Equitable distribution of income and wealth. - $ do not only circulate among the 4. Growth and stability.
Goals
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
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.
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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CHAPTER 2
CAPITILISM 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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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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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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Merits:
Maximum utilization of resources:
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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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CHAPTER 3
Socialism
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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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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 4
COMPARISON BETWEEN THE ISLAMIC ECONOMIC AND OTHER ECONOMIC SYSTEM
COMPARISON BETWEEN THE ISLAMIC ECONOMIC SYSTEM AND OTHER ECONOMIC SYSTEMS
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