Humanomics

Eternal Challenge of Islamic Economics to Capitalism and

Communism
Muhammad Iqbal Anjum
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to Capitalism and Communism", Humanomics, Vol. 12 Iss 1 pp. 53 - 90
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 Volume 12 Number 1 1996 53
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Eternal Challenge of Islamic Economics to Capitalism and Communism

Muhammad Iqbal Anjum,International Institute of Islamic Economics,
International Islamic University, Islamabad, Pakistan
Capitalism is fundamentally an economics of producers that has always served
the cause of producers. Its special concern for economizing the production
process in the guise of economic efficiency went always in favor of producers
at the cost of interests of workers and consumers thereby creating a strong
sense of economic deprivation in the conscience of workers and low-income
consumers who generally constitute the majority of the population in almost all
the developed countries including the United States of America. It is this
growing sense of economic deprivation that can be easily observed, especially
in the big cities of the United States of America, as a catalyst for Marxist
reaction. The Marxist fruit of Capitalist international economics appeared in
the form of cold war within the global economy between the rich and the poor
countries. Keeping in view the historical dynamics of Marxist movement,
twentieth century Capitalist economists have consciously started to counter the
threat of Marxism by incorporating in economics the extensive analysis of
issues such as social welfare function, interdependent utility functions,
intertemporal utility functions, equity in distribution, unemployment insurance,
economic development, labor unionism, full-employment of labor, economic
rents, consumer protectionism etc. in the form of labor economics, public
sector economics and development economics. It was no doubt a Capitalists'
cleverish attempt to redress the grievances, mainly resulting from market
failures, of the economically depressed classes within the Capitalist system. So
far problems of the depressed classes could not be solved and are not at all
expected to be fully solved within the original Capitalistic framework due to its
inherent exploitative tendencies.

Economics of Capitalism insists on positive economics. This insistence

makes it an incomplete and unrealistic approach, as the
 54 Humanomics

humanity being normative in its matter and spirit wants economics to be

normative-cum-positive. This hard fact had to be accommodated in the
framework of Capitalist economics. The fact that a US dollar currency
note, the symbol of the United States ofAmerica's Capitalist economy,
carries religious value in the form of a statement saying "In God We
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Trust" itself speaks about the inevitability of normative-cum-positive

economics.

In fact Communism has historically evolved as an extreme

intellectual and professional response to the inherent exploitative
tendencies and practices of Capitalism. Communists analyzed Capitalism
and declared the individual freedom, individual's right of private property
and free-market mechanism as the fundamental causes of human
exploitation in Capitalism. So Communism raised and practiced the so-
called revolutionary slogan of snatching individual freedom, individual's
right of private property and eliminating free-market mechanism for the
sake of creating an economically classless society. It established the
institutions of State Ownership after the nationalization of the private
property of all individuals and the Centrally Administered Markets. It
clearly reflected the historical transition from the "Individual Capitalism"
to the "State Capitalism." In this way Communism practically emerged
as an economics of controlled production, controlled distribution and
controlled consumption.

Communism tried to ride the wave of dialectical materialism in

orderto bring about Communist revolution. So the historical struggle of
the rival material forces, in the form of class-conflict between the huge
disciplined army of the unemployed workers and the exploitative
minority of capitalists, was claimed to be the only automatic mechanism
capable of leading to the Communist revolution. Here it is important to
note that Communism totally negated the revolutionary role of the
religious forces and its flag-bearers characterized religion as opium. By
denying the due role to the revolutionary forces of the religious beliefs
and spiritual values Communism failed to assume the character of a
genui ne
Volume 12 Number 1 1996 55

revolutionary movement. But it was a fatal mistake to ignore the natural

composition of the real dynamics of the human history. This myopic approach
was an act of self-deception on the part of Communist thinkers. History of the
twentieth century is evident on the fact that once Communist revolution was
brought to constitute super power in the name of Soviet Union through the
historical interaction of the material forces and then the edifice of this
communist superpower collapsed as a direct result of the decade-long struggle
between its forces of Communist material values and the spiritual forces of the
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Islamic values and beliefs in the vast battlefield of Islamic Afghanistan.

The history of the applied Communism in the Socialist Block led by the Soviet
Union during twentieth century has exposed it as the only system, in the
contemporary world, characterized by the worst possible degree of economic
inefficiency. It was a direct result of the denial of the individual freedom and the
individual property rights as the economic incentives to the masses accompanied by
the official discrimination in the distribution of privileges among numerous
hierarchical position holders within the ruling Communist Party with the working
class as the least privileged class in the so-called class-less communist society. The
last decade of 20th century is fortunate enough to observe that the former
communist block led by the communist super-power the Soviet Union had to
succumb to the pressure of natural law of individual's freedom and private property
rights after its internal politico-economic degeneration into bits and pieces of free-
market capitalist economies. This failure of communism confirms the fact that the
reactionary treatment of Capitalistic ills prescribed in the form of communist
doctrines was quite unrealistic and ill-conceived. Of course the recent collapse of
communism in Central Asia is a great symbolic human victory against the evil
forces of Capitalism as well as State Capitalism. Yet it must be realized that this
historic collapse of Communism is not at all a certificate of the death of Communist
ideology and the communist intellectuals. It is simply because Communism came
into being as a reaction to
 56 Humanomics

Capitalism. As long as Capitalism exists it is destined to face at least the

intellectual threat of Communist ideology.
The history of Capitalism merely goes back to the last five centuries
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while Communism is hardly two centuries old. On the other hand the
revealed Islamic guidelines, that constitute the basis of Islamic
Economics, for governing the economic behavior of humanity in the
universal perspective are as old as the history of mankind. In addition the
vast Islamic literature contributed by the Prophet Muhammad (Peace Be
Upon Him), the last Holy Prophet of Allah, and his Muslim followers, is
a living evidence on the fact that they have analyzed numerous
hypothetical situations in order to provide a comprehensive set of
solutions to the current as well as future problems related to any given
issue under their consideration. Just like the secular economics, that got
gradually sorted out of the general multi-disciplinary philosophical
writings of scholars like Adam Smith, Bentham etc. as a distinct field of
knowledge, Islamic Economics has finally been extracted as a distinct
branch of Islamic knowledge in the second half of twentieth century from
the centuries old multidimensional intellectual contributions of the
numerous Islamic jurists who simultaneously contributed in the Islamic
fields of law, sociology, economy, politics, worships, ethics, etc.
Throughout the history of evolution of Islamic economic thought, Islam
has always emphasized economics for the sake of total human
development. It is because of this universal truth that the eternal Islamic
charter of human rights aims at the simultaneous development of
individual, collective, ideological, spiritual, moral, sociological,
psychological, environmental, economic, political, regional and global
aspects of human life. This fact manifests the truthful Islamic world-
view that man is not an economic animal. According to Islamic
philosophy mankind is the best of all the creatures created by Allah Who
is the Only One Creator of His entire best planned universe. This Islamic
philosophical point serves as the initial challenging point of Islamic
economics for both Capitalism and Communism which raise their
respe superstructures on the basis of the idea of aimless, accidental and
ctive automatic creation of this universe including the
Volume 12 Number 1 1996 57

socialized animal called man. Consequently, Capitalist and Communist

development strategies aim at improving the conditions of man up to the status
of a materially developed social animal while Islamic Economics emerges with
a development program aiming at the simultaneous spiritual and material ascent
of man to the summit of the ideally developed human being. So there lies a
significant qualitative gap between the outcomes of the Applied Islamic
Economics and Applied Conventional Economics.

Now Islamic economics, along with its worldwide practical manifestations,

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has embarked on the path of growing into a recognized full-fledged scientific

discipline capable of challenging the contemporary secular economic thinking
as well as responding to the challenges of secular economics. This fact is
supported by the continuously increasing number of official visits of economists
and policy makers belonging to governments of the developed countries,
multinational corporations and other international financial institutions with the
sole aim of understanding the Islamic economic policies and procedures of
Muslim countries wherein economy is being Islamized. With this historical
background, the stage is now set for presenting a detailed introduction of
Islamic economics.
Definition of Islamic Economics

Islamic Economics is a scientific discipline concerned with the theoretico-

empirical analysis of the known economic realities and future economic
possibilities, in the light of exploitation- free Islamic principles, in order to
explore the most effective means of enhancing production, its equitable
distribution and balanced consumption from the point of view of relieving
economic hardships, facilitating and beautifying human life for the peace,
prosperity and development of all human beings.
Origin and the Salient Features of Islamic Economics

Islamic economics originates from the fundamental Islamic concept of Tawhid

(unity and uniqueness of Allah). The concept of Tawhid constitutes the real
b asis for the logical development of the
58 Humanomics

superstructure ofIslamic economics as a branch ofIslamic knowledge.

This point leads to Islamic Unitary Approach of logically deducing all the
salient features of Islamic economics from the concept of Tawhid.
Islamic Unitary Approach illustrates the fact that Islam is a complete
code of life capable of rightly guiding the humanity in all aspects of
human life in all times at all places. It considers every living human being
as a homogeneous compound of matter and spirit. Hence material and
spiritual aspects of human life are inherently inseparable. Broadly
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speaking, human life is a functional whole of all aspects of human life

such as material, spiritual, psychological, religious, individual, social,
economic, political, local, global and moral aspects. This phenomenon
reflects everything having links with everything else in this universe. It
highlights the fact that every human action is simultaneously
characterized by many of the prementioned aspects of human life. So the
economic problem cannot be comprehensively solved by ignoring the
other aspects of human life.

Tawhid

The term Tawhid refers to the unity and the uniqueness of Allah (the
Only One God), His divine attributes, His divine scheme of things and
the supremacy of His scheme and His prescribed system for the eternal
welfare of all human beings and other creatures. According to Tawhid,
only Allah as the only one Creator and the Nourisher of everything in this
universe deserves to be worshipped. It declares that Allah created
everything including human beings with a definite purpose of
worshipping Him in order to fulfil the objective of its creation. Worship
(Ibadah) means total submission of all human beings to the Will of Allah
in each and every aspect of their lives. While in absolute sense Tawhid is
an attribute of Allah alone, in the relative sense Tawhid is manifested as a
unifying force for the entire humanity on the social plane because all
human beings are created by Allah from clay. Tawhid, therefore, enables
the n beings to get rid of the social diseases of superiority complex and
huma inferiority complex. It successfully ensures the pleasant socio-economic
Volume 12 Number 1 1996 59

coexistence of human beings of all colors, languages, religions, cultures and

regions all over the globe.
The fundamental concept of Tawhid can be logically translated into a set of
five important philosophical points: (a) divine vicegerency of mankind on earth
(Khilafah), (b) worship (Ibadah), (c) prophethood (Risalah), (d) divine
ownership and guidance (Ruhubiyah), (e) world (Dunia) & hereafter (Akhirah).
These five philosophical points are perfectly capable of providing a full insight
into the discipline of Islamic Economics. With the help of figure 1, these five
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philosophical points are being analyzed in order to highlight the salient features
of Islamic Economics as follows:
(a) Khilafah
The term Khilafah refers to the endowment of distinct status of man as the best
of all creatures in the universe and as the vicegerent of Allah on earth for
enabling him to maximize the welfare of mankind as well as other living
creatures with the sole aim of establishing Allah's Will in the universe in the
light of The Holy Qur'an:
"Behold thy Lord said to the angels, I will create a vicegerent on earth: They
said: will thou place therein one who will make mischief therein and shed blood whilst
we do celebrate thy praises and glorify thy Holy (name). He said, I know, what ye
know not." (2:30)

"Verily we have honored the children of Adam We carry them on land and the sea
and have made provision of good things for them, and have preferred them above
many of those whom We created with a market preferment." (17:70)

"And He who made you as Vicegerent for earth" (6, 165)

These verses of The Holy Qur'an highlight the administrative and economic
privileges that man has been originally entitled to enjoy in the course of
discharging the duties assigned to him by Allah. The institution of Khilafah
logically involves the freedom of choice between right and wrong ways of
administration and accountability in case of success or failure in fulfilling the
as ission. In order to make the test associated with the exercise of man's authority
si in
g
n
e
d
m
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60 Humanomics
(PT)
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V dom of choice and the consequent accountability process really
o meaningful, Allah has provided the man with sufficient
l resources as a matter of trust while Allah is their real owner.
u However, man as His vicegerent, has these universal resources
m on his disposal as a means of fulfilling his mission. The
e institution of Khilafah clearly determines the following four
important features of Islamic Economics.
1
2 (i) Islamic Man

Islamic man is an Islamically programmed human being whose

N
economic activities revolve around his central aim of optimizing
u
a truly balanced combination of spiritual and material welfare.
m
The concept of Islamic man characterizes Islamic economics as a
b
e truly dynamic discipline by bringing in its fold the welfare
r analysis with respect to two time periods namely the finite time
1 period associated with the temporary phase of human life in this
world and the infinite time period associated with the eternal
1 human life in the world hereafter, in contrast to conventional
9 economics which is a static discipline because it confines its
96 analysis to one time period of this world's human life.
61 (ii) Balanced Individual Freedom ofChoice

Individuals are free to choose, initiate and develop any economic

t activity within the framework of Islamic law. They enjoy
e economic freedom as long as their actions do not harm their
r personal interests and the interests of the society as perceived by
m Islam. Individual economic freedom, which is balanced by the
s sense of unavoidable real accountability, promotes constructive
economic competition at all levels of Islamic economy.
o (iii) Trusteeship of Resourcesfor the Individuals, Society and Islamic
f State

f Human beings are trustees of universal resources that have been

r provided by Allah, Who owns everything in terms of absolute
e ownership, to facilitate the fulfillment ofmission. In this context,
e The Holy Qur'an informs:
 62

Humanomics

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"He is Who created for you all that is in earth." (2,29)

So people own resources in relative sense but not in absolute

sense. There are certain terms and conditions of trust which
have been communicated by Allah to mankind. People are
legally required to follow these conditions while using
resources. They are not entitled to waste them. Violators of
Islamic property rights face Islamic penalties.

Keeping in view the fact that the nature of Islamic duties

and responsibilities of individuals, society and state
necessitates that each of these entities have ownership rights,
Islam recognizes the relative importance of the individual,
society and the state in the establishment of Islamic world
order. So Islam establishes as well as protects individual's
property rights, society's property rights and Islamic state's
property rights. Recognition and protection of individual's
property rights serves as a great personal incentive for an
individual to accelerate his economic activities and to
experience a healthy competition with other economic
agents. This Islamic categorization of property rights
constitutes the basis of equitable distribution of income and
wealth in Islamic economy.

(iv) Economic Gradation

Economic gradation is based on gradation in natural

endowments of all individuals. Allah has created different
individuals with different strengths of numerous physical
and spiritual faculties, that give rise to different economic
strength in case of every individual, in order to make the
human world truly dynamic, competitive, efficient, ever-
developing and extremely beautiful. Otherwise, equality of
all individuals in every aspect seems to make the society too
inacti cooperative to succeed the test of fulfilling its original
ve mission. The fact that Allah has kept some economic
and differences among individuals is supported by The Holy
too Qur'an's following verses which also imply that economic
non- gradation is based on purpose and it is not aimless:
Volume 12 Number 1 1996 63

"It is He Who has made you agents, inheritors of the earth: He has
raised you in ranks some above others, that He may try you." (6,165)

"It is We Who portion out between them their livelihood in the life
of the world: and We raise some of them above others in ranks so
that some may command work from others." (43,32)
(b) Ibadah
The term Ibadah means worship in the context of total human
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submission to the Will ofAllah in all aspects of life. Ibadah is no

doubt the only aim behind the creation of humanity as implied by
the following Qur'anic verse.
"I have created jinns and men, only that they may worship Me."
(51,56)
Ibadah implies the following three levels of relationship that
identify-some salient features of Islamic economics:
- Relationship between Man and Allah
Allah treats all human beings on the basis of justice and
benevolence. He takes care of all kinds of their material and
spiritual needs while at the same time commanding them to be just
and benevolent among themselves. Logically, man should offer
thanks to Allah by worshipping Him alone in order to please Him.
This relationship gives rise to the following salient features of
Islamic economics:
(i) The Pleasure of Allah as the Central Objective of Economic
Optimization
All economic activities of Islamic agents are consciously
performed to achieve Allah's pleasure and blessings.
 (ii) Economic Activities Recognized as Worships
Islam inspires Muslims to initiate economic activities according to
Islamic teachings. Good economic activities are good deeds that
are rewarded by Allah in this world and in the world hereafter. So
economic activities are sanctified and honored in Islam just like
other modes of worship. Dignity of economic activities as acts of
worship
64

Humanomics

logically requires decency, carefulness and a sense of

responsibility in Islamic economic agents' behavior.
- Relationship between Man and Man

Ibadah at the level of Islamic relationship between man and

man implies that human beings must worship Allah by
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obeying Islamic laws that govern the rights and privileges in

case of all human beings in their daily lives in the light of
the universal truth that Allah created Adam (Peace Be Upon
Him) from clay and then generated the other people from
him (Peace Be Upon Him). In this way, Islam refers to their
universal brotherhood based on their original blood
relationship. Moreover, the unique force of Islamic beliefs
cements this original relationship between man and man by
bringing the people in the fold ofIslam. This stronger human
brotherhood in Islam has been termed as Islamic
brotherhood according to the following verse of The Holy
Qur'an:
"It is no doubt that Believers are brothers." (49,10)

In this way Islam has unified the global human society

irrespective of region, color, race, sex, health and wealth.
Islam further strengthens this bond of human brotherhood
by inculcating the quality of Taqwa (piety based on Allah-
fearing) in Muslims' hearts. Islamic human brotherhood is
uniq ine interests of all people in the context of total human
ue in development, it never intends to harm the genuine individual
the and social interests and it treats all people equally in order to
sens ensure socio-economic justice and economic equity. This
e relationship contributes the following salient features of
that Islamic economics:
it is
com (i) SocialJustice and Equal Economic Opportunities
mitte Social justice is one of the basic salient features of Islamic
d to economics. Justice means the placement of a thing in its
pro appropriate place. Social justice implies the equality of all
mote
people before Islamic law. Islamic provision of social justice
the
guarantees equality of economic opportunities for all. It is
genu
this equality of opportunities for all that,
October 2015
(PT)
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V he strong economic incentive in the form of individual ownership
o rights, serves as a catalyst for a really competitive interaction
l among all economic agents at all levels ofIslamic economy thereby
u accelerating the process of economic development. Social justice
m is a necessary condition for the establishment of a true Islamic
e society and Islamic economy. In this context Allah has
1 commanded in The Holy Qur'an as following:
2
"O you who believe! Be upright for Allah, bearers of witness with
N justice and not be hatred of others make you swerve from justice. Be
u just, this is next to piety and fear Allah, for Allah is Aware of what you
do."(5,8)
m
b Hence Islamic system's existence cannot be ensured without social
e justice and social justice is meaningless without economic justice.
r So Islamic economics embodies economic justice as its highly
1 ranked objective.

1 (ii) EconomicJustice
9
96 Economic justice means that every one should be entitled and
65 authorized to receive his due remuneration exactly according to his
marginal productive contribution in the production process without
any delay and exploitation. So Islam aims at determination of just
wages, just prices, just rents and just profits by Allah-fearing
a
economic agents through the interactions of market forces.
l
Economic justice is supported by the following Qur'anic verse:
o
n "Withhold not things justly due to others." (26,183)
g
The following Saying of The Holy Prophet Muhammad (Peace Be
w Upon Him) inspires Muslims to practice justice:
i "Behold! the Dispenser of Justice will be seated on the pulpits of light
t beside Allah on the right side of the Merciful, Exalted and Glorious.
h Either side of the Being is the right side both being equally
meritorious. (The Dispensers of Justice are) those who do justice in
their rules, in matters relating to their females and in all that they
t undertake to do."

The Holy Prophet Muhammad (Peace Be Upon Him) also warned

about the consequences of injustice as following:
 66

Humanomics

"He who appropriated the right of a Muslim by (swearing

false) oath, Allah would make Hell-Fire necessary for him
and would declare Paradise forbidden for him."
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In this way, Islamic economy seems to be characterized by

the elimination of all kinds of economic injustice-oriented
economic activities such as interest, cheating, over burdening
of workers, shirking, profiteering, adulteration, gambling and
unjust taxation. This economic environment reflects a
mutually caring society wherein dutiful economic agents
work honestly in tension-free atmosphere and achieve the
highest degree of economic efficiency.

(iii) Economic Equity

Economic equity refers to fairness and justice in the

distribution and redistribution of economic resources across
all segments of universal human society in the light of Islamic
public welfare policy. Islam acknowledges the genuine
economic needs of all those people (eg. orphans, widows, the
unemployed, the sick, the travellers in need) who could not
participate in the production process due to their physical,
religious, social, political and economic limitations. Keeping
in view the fact that Islamic economy is established on the
basis of universal human brotherhood of mutually caring
people, Islam has prescribed many temporary and permanent
redistributional measures to ensure equity on the level of
personal distribution. So there are some small and temporary
redistributional measures like Qardhi-i-Hasanab (Benevolent
Loan), SadaqatulFitr (payment of 2.5 kilograms of wheat or
its monetary equivalent by all the family members of the rich
muslims before praying the Eidul Fitr prayer) to take care of
the transitional needs of have nots. The big and permanent
redistributive measures like Zakat, Ushr (agricultural tax),
inhe been prescribed to take care of the permanent and greater
rita needs of the deserving persons. These Islamic redistributive
nce measures aim at enabling the poor to become self-sufficient.
etc. The largest set of Islamic measures of equitable distribution
hav reflects the greatest Islamic commitment to socio-economic
e justice.
Volume 12 Number 1 1996 67

(iv) Economic Benevolence

While Islamic laws of socio-economic justice introduce and

maintain equilibrium in economic transactions, Islam also inspires
economic agents to make the economic environment pleasant and
loving. So Islam, through a two step Islamic scheme of equitable
distribution, first ensures economic justice in the functional
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distribution and then ensures economic benevolence in the personal

distribution on the basis of the following commandment of Allah:

"Butseek, with (the wealth) which Allah has bestowed on thee,

The home of the Hereafter. Nor forget thy portion in this world:
but do though good, as Allah has been good to thee, and seek not
(occasions for mischief in the land.)" (28,77)

Encouragement for Qardhi-i-Hasanah is one of the many

benevolence-oriented Islamic measures which complement Islamic
measures of socio-economic justice for achieving a pleasant
environment for the global economic progress.

(v) Interdependent Utility Functions and the Islamic Social Welfare

Function

Establishment of the Islamic universal brotherhood in its letter and

spirit clearly reflects the recognition of the importance and
existence of interdependent utility functions in Islamic economics.
So in an Islamic economy consisting of "n" members using a set of
allowed goods "G", utility functions of individuals "1", "2", ..., "n"
a re:
68

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So a Muslim consumer experiences an increase in his own

utility •whether he consumes goods himself or offers goods
he likes for himself to the other human beings for their
consumption. The marginal utility of a person "i" goes on
diminishing if he consumes more and more of G i because
the law of diminishing marginal utility applies when
anybody consumes additional material goods for him-self.
However, the marginal utility of a Muslim "i" goes on
increasing if he offers more and more of goods to others in
the way of Allah because the law of increasing marginal
utility applies due to ever-in-creasing spiritual satisfaction
and reward from Allah associated with the offering of more
and more material goods in the way of Allah. The
corresponding Islamic Social Welfare Function, that takes
into account the utility functions of all "n" individual
members of Islamic economy, is:
It se in the utility of any one individual and all individuals
impli increases social welfare index in Islamic economy. Islamic
es social welfare function generates social preferences that
that can be ex-pressed in the form of Islamic social indifference
increa curves which can be used in the field of welfare economics.
Volume 12 Number 1 1996 69

Relationship between Man and Universe

Allah has created the universe and its constituents for the service of
humankind. The human, as Allah's vicegerent on earth, is legally
and morally responsible for effectively employing all the universal
resources in the best possible productive channels set forth by Islam
for the human development on the level of individual and society
on the basis of Tazkiah (purification and growth) of human and
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physical capital. It is well-known that growth factors (eg.

technological knowledge, population) and anti-growth factors (eg.
depreciation of physical capital, deterioration of human faculties
and human values, environmental deterioration) are always
challenging each other. So development in Islam is viewed as
quantitative and qualitative growth of human-cum-nonhuman
universal resources. Humanity is capable of achieving this aim by
strictly following Islamic universal law which brings human actions
in complete harmony with the course of discipline prevailing in the
universe. Of course the discipline and harmony are preconditions
for peace and development. These facts contribute the following
features of Islamic economies:

(i) Behavioral Equilibrium

Islamic economics recommends and establishes behavioral equilib-

rium at levels of individual, society and economy operating within
the domain of Islamic political economy. It aims at creating and
maintaining balance and equilibrium in consumption, production
and distribution for the sake of economic efficiency.
(ii) mic Growth and Development Based on Discoveries, Inven-tions
E and Innovations
c
o Islamic economics is the exponent growth and total development of
n all human and nonhuman resources due to mankind's natural incli-
o nation towards achieving its ever-increasing control over the vast
resources of the universe through scientific discoveries, inventions
70

Humanomics

and innovations and employing it for accelerating the growth

rate of global output from the point of view of distributing it
among all human beings and other living creatures to
improve the degree of harmony among all human beings and
the universal environment. It is important to note that both
human and nonhuman resources are inherently capable of
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automatically growing over time.

(c) Risalah

The term Risalah refers to the divine institution of

communication between Allah and mankind. The Holy
Prophets of Allah, the revealed Holy Books and Angels
together constitute the institution ofRisalah. It informs
mankind about the truthful concept ofthe unity of Allah,
about itself and about concepts of Khilafah, Ibadah, Rububi-
yab and Akhirah. The firm belief in Risalah is one of the first
order necessary conditions of Islamic faith required to be
satisfied by a true muslim. The institution of Risalah reveals
that Allah, as the Only One Creator of humankind and this
universe, is the Only One Who knows the best about humans
and everything else in this universe. It also reveals that man's
knowledge about himself as well as about the universe is so
limited and imperfect, due to his inherently limited
observational and intellectual faculties, that his eyes can not
see beyond a certain limit even in front of him. In the context
of wledge, Allah informs people in the Holy Qur'an as
limit following:
ed
hum
an "Of knowledge, it is only a little that is given to
you." (17,85)
kno
Keeping in view his inherent physical limitations as well as
great duties as His vicegerent, Allah has benevolently
communicated Islam to mankind as the most comprehensive
and universal way of life for all times and for all places. In
this situation man can not be a rational person ifhe relies
only on his personal limited knowledge. Rationality logically
demands that man should behave on the basis of flawless
sets of full information and instructions, which indeed were
fully practi-cable and were implemented by The Holy
Prophet Muhammad
15:21 24 October 2015
(PT)
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V m). This axiom is received through the institution of Risalah from
o Allah Who is the Only One possessing perfect information. On
l the basis of limited wisdom, man can not judge with certainty
u whether a particular thing is good or bad for him. It is clearly
m implied by the following verse of The Holy Qur'an:
e
1 "It is possible that ye dislike a thing which is good for you and that ye
2 love a thing which is bad for you." So Islamic concept of economic
N rationality is not at all a theoretical jargon. Instead it is more logical,
realistic and wider in scope than the conventional concept of economic
u
rationality. Fortunately, the institution of Risalah by informing
m mankind about Halal (permissible) and Haram (prohibited) goods,
b services and activities, provides to mankind in general and to Muslims
e in particular, a perspective of certainty about the consequent usefulness
r or harmfulness of an issue or activity or a commodity on the basis of
1 principle of dominance of a good's utility over disutility. The
1 institution of Risalah contributes the following salient features of
Islamic economics:
9
97 (i) Tazkiyah
61
Tazkiyah means the simultaneous achievement of the two
qualities of purification and growth of all resources especially the
( human resources. Tazkiyah is one of the most important
P objectives set forth by Allah in the context of the establishing
e ofthe institution of Risalah according to the following verse of
a The Holy Qur'an:
c
"Our Lord send amongst them an Apostle of their own who shall
e rehearse Your signs to them and instruct them in Scripture and
Wisdom and purify them. For You are the Exalted in Might, The
B Wise." (2,129)
e
The continuous purification of material and spiritual aspects
U of human life from all impurities accelerates the pace of
p quantitative and qualitative development-oriented growth of
human and non-human resources. Important manifestations of
o
Tazkiyah are observable in the case of true implementation of
n
Islamic system of cleanliness, prayers, fasting, sacrificing in the
way of Allah and Zakat. All The Holy Prophets (Peace Be Upon
H
Them) had accomplished their mission of Tazkiyah for the sake of
i
developing a man, society, economy and environment.
 72

Humanomics

(ii) Taqwa

Observance of Halal and Haram by Islamic economic agents

implies that they fear only from Allah. The degree of Taqwa
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and the degree of observance of Halal and Haram are

positively correlated. The characteristic of Taqwa enables
Islamic economics to implement its agenda of total human
development without fearing from the anti-Is-lamic human
dictatorial regimes. This impression is supported by the
following verse of The Holy Qur'an:

"Eat of the tilings which Allah hath provided for you, lawful
and good; but fear Allah, in Whom you beleive." (5,91)

(iii) Sabr and Shukr

Islamic economic agents sincerely offer thanks to Allah for His

infinite blessings by strictly following Islamic law of Halal and
Haram. In this way they acquire the moral value of Sabr
(Patience) as the additional excellent quality of avoiding the
Islamically prohibited affairs and pleasures in the light of the
following verse of The Holy Qur'an:
"Eat of the substance of your Lord and give thanks
toHim."(34,15)

Behavioral patterns of Sabr and Shukr (thanks-giving to Allah)

are established by Muslims in anticipation of eternal reward
from Allah Who has declared, about the reward for those who
duly obey His orders, in the following verse of The Holy
Qur'an:
"Gardens of prosperity which The Beneficent has promised to His
servants-And they have their sustenance therein morning
andevening."(19,61-62)
 (iv) The Perspective of Certainty

The perspective of certainty associated with the belief in

Risalah conveys a sense of mission to the Islamic economic
agents and assures them that if they conduct their economic
activities according to the commandments of Allah only then
they are going to accomplish their
Volume 12 Number 1 1996 73

development programs and their ultimate mission as well. This

message is clearly implied by the following verse of The Holy
Qur'an:

"And he whom Allah guided, he is lead aright." (17,97)

For example, the elimination of interest from economic

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transactions accompanied by the full payment of wealth tax,

Zakat, to the Zakat-recipients according to Islamic teachings will
clearly cause a significant reduction in economic equalities
between the rich and poor members of Islamic economy, thereby
enabling everyone to enjoy the fruit of development as well as to
participate effectively in the Islamic development process.
Moreover Islamic commandments regarding the strict observance
of Islamic law of Halal and Haram make Islamic economic agents
self-disciplined by incorporating in their behavior Islamic values
of Taqwa, Sabr and Qana'ah (contentment).

(v) Islamic Economic Rationality and Rational Expectations

Islamic economic rationality originates from the fart that Allah is

the only One Perfect Knower while man's knowledge is limited
and imperfect. Especially man's personal knowledge about the
future economic situations is imperfect and unreliable. So he
needs to make his rational economic decisions and plans about
future on the basis of his rational expectations. Islamically rational
expectations of economic variables are to be based on two sets of
relevant information, namely, the set of revealed perfect
k and the set of all available pieces of imperfect information
n collected through human efforts. It is therefore in the best interest
o of man to make the rational economic decisions on the basis of
w perfect knowledge instead of limited knowledge. Such rational
l decisions improve the degree of confidence ofIslamic economic
e agents in their own decisions. So they confidently implement their
d decisions in letter and spirit thereby optimizing their welfare in
g this world and in the world hereafter. Practically the economic
e forecasts based on Islamic rational expectations will be found very
close to the actual economic outcomes. In this way Islamically
rational decision making is
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74 e dynamic analysis of Islamic economics than in case of
conventional economics which does not incorporate the most
Hu reliable revealed information in its rational expectations
ma generating mechanism. The importance and superiority of the
no revealed perfect knowledge in developing rational economic
mi behavior and generating truly rational expectations can be felt
cs in the following verse of The Holy Qur'an:

"Wealthand children are an ornament oflife of The world. But

ac the good deeds which endure are better in thy Lord's sight for
co reward and better in respect of hope." (18,47)
m
Hence a rational Islamic man will desire and pray in the light
pa
ni of the following verse of The Holy Qur'an:
ed "Our Lord! Give unto us in The world that which is good and
by in The world hereafter that which isgood."(2,201)
th
e On the other side, the conventional approach of rational
int expectations ignores the most important set of the revealed
ro perfect information and relies only on economic agents' own
du imperfect information. So the so-called rational expectations in
cti conventional economics, be-cause of not being based on all the
on available information, are inferior to the rational expectations
of generated in the framework of Islamic economy.
be
tte
r (vi) Characterization of Goods, Economic Activities and
rat Services as Halal andHaram:A Casefor Quasi Sovereignty of
io Economic Agents
na
l From Islamic point of view everything contains simultaneously
ex benefit and harm for its user. However, goods, economic
pe activities and services have been characterized as Halal on the
cta basis ofthe simple reasonable principle of dominance of human
tio welfare gain over the human welfare loss associated with them in
ns their usage. Islam logically applies the net welfare-gain principle
in in case of tangible material welfare as well as non-tangible
th spiritual welfare associated with a particular good, service or
activity in the context of determining
 Volume 12 Number 1 1996 75

whether it is Halal or Haram. It is because Islam aims at

improving human welfare through quality control by allowing the
production, distribution and consumption of only pure and
excellent Halal goods and services in the light of the Holy
Qur'an:
"This day (all) good and pure things are made lawful for you." (5,5)

"He (The Prophet) makes lawful to them the good things and
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prohibits for them impure things." (7,157)

Islamic laws governingHalal and Haram clearly constrain

Islamic economic agents in their economic behavior thereby
implying the quasi sovereignty of consumers and producers in
Islamic economy.
(vii) Presence of Austerity and Absence ofProhibited Things as the
Special Built-in Stabilizerfor Islamic Economy

Islam presents a simple way of life, wherein it equilibriates the

behavior of economic agents by commanding them to practice
moderation and austerity. It is because Islam aims at discouraging
and eliminating all the factors, associated with even Halal goods,
capable of inducing harmful excessive cyclical behavioral trends
of economic agents and destablizing the Islamic economy.
Similarly, Haram things and activities are prohibited because
these introduce and accelerate violent cyclical trends in economy.
Moderation is recommended in The Holy Qur'an:

"Eat and drink: but not waste by excess, for Allah loveth not the
wasters." (7,31)

"And those who, when they spend, are neither extravagant nor
niggardly, but hold a just balance between those (extremes)."
(25,67)

So Islam dislikes and prohibits excessive indulgence in the

pleasures and the luxurious activities of this worldly life thereby
i ying stable consumption in Islamic economy. This trend of
m stability in consumption seems to be further strengthened by the
p fact that Islam strongly recommends for economic agents to
l consume, invest and
76

Humanomics

produce within the limits of their resources. It is clearly

implied by the following verses of The Holy Qur'an:

"Let the man of means spend according to his means; and

the man whose resources are strained; let him spend
according to what Allah has given him." (65,7)
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So unlike the inherently credit-based capitalist economy

which is always vulnerable to the violent fluctuations in
interest rate and hence in consumption, investment,
production and distribution, Islamic economy is almost
stable, partially because of the absence of interest in it.

It is interesting to note that stable consumption and

aggregate demand patterns tend to cause investment,
production and distribution to follow an almost stable
pattern while allowing for normal minor cyclical
oscillations in Islamic economy. Austerity causes
simultaneously the autonomous investment to be higher and
the induced investment to be less volatile in the downswing
and moderately high in the upswing of the Islamic economy
than in Capitalist economy. During expansionary phase the
austerity accompanied by the absence of interest-based
investment finance effectively moderates any possible
violent pattern of growth of induced investment thereby
causing the cyclical upswing to be much damper and longer
in duration than in case of Capitalist economy. It is the
manifestation of greater and longer stability of Islamic
economy during expansionary phase. It is because of the
truly rational expectations-based moderate behavior
ofIsl ly unlevered Islamic business firms. In contrast to that the
amic buoyant Capitalist economy, during expansionary phase, is
econ characterized by the irrational behavior of the secular
omic economic agents based on the extreme optimism along
agent withthe excessively high leverage ratios of firms which are
s and legally bound to pay back loans within the prespecified time
beca period, thereby making them highly vulnerable. In this
use background, as soon as the investors discover the piling up
of of too much output as compared to the actual demand for
the their output, they become extremely pessimistic and under
equal the
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V
o
pressure of their high leverage ratios they embark on the path of
l
excessive disinvestment in order to meet the debt obligations
u
m before it is too late. Excessive disinvestment results in the fall of
e stock prices like a snowball. Hence capitalist economy experiences
1 sharp and violent downswing as a result of lower autonomous
2 investment due to absence of austerity in it.

N Hence the higher autonomous investment acts as a bigger,

u least erodible bottom rock and as a more powerful hedge against
m any possible spell of recession, making the downswing less sharp
b during contractionary phase in Islamic economy. In this way, the
e preserved higher level of autonomous investment along side the
r reasonably optimistic Islamic economic agents about the future,
1 enables the Islamic economy to recover earlier than the secular
economy. These arguments clearly imply that Islamic economy's
1 dynamic behavior, displayed by the broken line, is more stable
9 than that of a Capitalist economy represented by the continuous
97 line as illustrated in the figure 2, wherein, the continuous straight
67 line reflects the standard growth path of a fully employed
economy.
 78

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Humanomics

(d) Rububiyah

The term Rububiyah refers to the unique divine attribute of

Allah as the only One Most Powerful Authoritative Master,
Perfect Nour-isher and Sustainer of everything in this
universe. It implies that Allah has ideally programmed the
dynamic mechanism of divine nourish-ment, sustenance and
training for the comprehensive development of everything
including mankind to the level of extreme excellence. A
direct implication of the concept of Rububiyah is the
guaranteed adequate resources for the nourishment and
sustenance of all living creatures. This belief builds and
strengthens the quality of Tawakkul (Muslims' confidence
in Allah as their Sustainer) and inspires to make the best use
of one's faculties to discover his destined adequate
sustenance for optimizing welfare.

The concept of Rububiyah highlights the fact that Islam

concen-trates on total human development because of the
most dignified status ofman as the vicegerent ofAllah on
earth. Logically, the dignity of man requires his needs'
fulfilment by the development of universal resources. Islam
has a great commitment in this regard as reflected by the
institution of Rububiyah. The concept of Rububiyah signifi-
cantly broadens the scope of Islamic economics as
compared to that of conventional economics, thereby
making Islamic economics more realistic on the supply side
of economic resources. In fact this concept constitutes the
original solid basis for the establishment and the
development of the superstructure of Islamic economics as
well as it contributes its following salient features:
(i) Adequate Provision of Universal Resources
Islam Allah has provided sufficient means for the fulfilment of all
infor the genuine needs of all human beings and other living
ms creatures. In this context The Holy Qur'an clearly states:
that
"It is We Who have placed you with authority on
earth, and provided you therein with means for the
fulfilment of your life. Small are the thanks that ye
give." (11,6)
Volume 12 Number 1 1996 79

So Allah has provided economic resources in adequate amount

especially for the human development. A close observation of this
self-evident universe is just sufficient for a rational man to
acknowledge this universal truth.
(ii) Guaranteed Sustenance
Allah's attribute of Rububiyah inspires Muslims to believe in Him
as the only One Cherisher and Sustainer of all worlds and to
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request Him for fulfilling all their material-cum- spiritual needs in

the light of The Holy Qur'an:
"Those whom ye serve instead of Allah, have no power to give
sustenance; then seek ye sustenance from Allah." (29,17)
The following verse of The Holy Qur'an informs that Allah
guarantees the provision of sustenance to all creatures:
"There is no moving creature on the earth but its sustenance
dependth on Allah. (11,6)
(iii) Qualitative Family Planning as an Islamic Population Policy

The concept of Rububiyah leads to Islamic population policy based

on the following Qur'anic verse:
"And kill not your children for the fear of poverty - We shall
provide sustenance for them as well as for you. Surely the killing of
them is a great sin." (27,31)

So Islam strictly prohibits the killing of the newly created babies,

irrespective ofthe stage oftheir development, for the fear of
s n and poverty. In fact economic pessimism of human being
t associated with the population growth is totally unjustified and
a baseless because Allah Himself as The Sustainer of all worlds
r guarantees the adequate provision of sustenance to everyone. So
v Islam allows the growth of highly qualified population. For this
a purpose Islam obligates every Muslim to bring up his children in a
t healthy environment and equip them with Islamic values and
i technologicaly skills in order to make them useful Islamic citizens.
o In this context, Islam inspires Muslim
80

Humanomics

parents to produce as many good Muslims as they can. But if

they cannot produce children characterized by the true Islamic
qualities, then Islam advises them to practice self-restraint
instead of applying abortion-oriented measures.
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In this way, Islamic population policy aims at making the

best use of human resources for the total development of its
population. For this purpose it eliminates the false economic
pessimism from the brains of people, thereby making them
economically self-confident, self-reliant and productive.
(iv) Tawakkul

Islamic concept of Rububiyah creates the strongest quality of

trust (Tawakkul) in the personality of a Muslim, because it
convinces him that he should totally rely only on Allah for the
economic prosperity and work hard in order to explore the
economic resources that Allah has destined for him. On the
basis of the quality of Tawakkul a Muslim does not get
frightened from the so-called materially powerful human
forces of this world. Hence, he overcomes these material forces
and accomplishes his Islamic economic mission as a brave and
free man. The real spirit of Tawakkul is manifested in the
following Saying of The Holy Prophet Muhammad (Peace Be
Upon Him):
 "I heard the Messenger ofAllah (PeaceBe Upon Him) saying: "If
" you trust in Allah as He deserves to be trusted in. He would grant
U rizq (sustenance) to you as He does to birds, which fly out with their
m bellies empty in the morning and return (in the evening) with their
a bellies full."
r
(e) Dunia and Akhirah
r
e
The term Dunia refers to the temporary phase of human life in
p this world as the term Akhirah refers to the next permanent
o phase of human life beginning exactly after the end of human
r life experience in Dunia. From the point of view of Islam,
t human life in Dunia is characterized by the greatest
e responsibility of fulfilling its fundamental mission as the
d
vicegerent of Allah on earth. Hence human life in Dunia is a
:
test. Whosoever wants to succeed in this
October 2015
(PT)
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V legally required to live his life exactly according to the revealed
o Islamic instructions. If he does so, then he is going to receive not
l only the temporary prize in Dunia in the form of growing material
u wealth, spiritual peace and prosperity, but also the eternal prize in
m the form of his extremely luxurious permanent stay in the paradise
e in Akhirah. The paradise is created as a reward for those who are
1
declared successful by Allah. The individuals who do not try then-
2
best to accomplish their mission in Dunia have been declared
N destined to face not only the temporary punishment in the form of
u experiencing material losses and spiritual dissatisfaction but also
m the eternal punishment in Akhirah in the form of their unavoidable
b permanent painful stay in the Hell-fire. In this background, Islamic
e concepts of Dunia and Akhirah extend the time horizon for the
r economic decision-making and the consequent rational optimizing
1 behavior of economic agents from the limited time period
associated with Dunia to the unlimited time period associated with
1 Akhirah.
9
98 The firm belief in Akhirah is one of the basic conditions of
61 Islamic faith required to be necessarily fulfilled by Muslims.
Islamic knowledge fully informs mankind about the relative
importance of Dunia and Akhirah. The relative importance of
c Dunia and Akhirah in the context of quantity and quality of
r rewards, provides the most effective and unique sets of
u motivational forces for Islamic economic agents to achieve
c excellent results in the Islamic framework. It is interesting to note,
i that Islamic values and beliefs can be translated into positive
a motivational forces in the form of economic profits and losses as
l well as the normative motivational forces which serve as the
salient features of Islamic economics. Concepts of Dunia and
t Akhirah imply the following features of Islamic economics:
e
s (i) EconomicProfits (AsBlessings of Allah in Monetary Terms)
t andLosses (As a Measure of Economic Accountability for Economic
Inefficiency)
i
Islam commands all Muslims to undertake economic activities in
s
the light of the verse of The Holy Qur'an:
 82

Humanomics

"When you havefinishedyour prayer, then spread in the

earth and seek the bounties of Allah." (62,10)
Economic profits are recognized as the genuine incentive
for undertaking and accelerating Islamically lawful economic
activities. Economic profits embodying the blessings of Allah
in monetary terms are indicators of the degree of success of
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individual's economic activities in Dunia. The level of profit

acts as an internal force of economic accountability for the
individual economic agent. It encourages and enables him to
improve his economic activities from the point of view of
economic growth and development. Similarly, economic
losses reflect mismanagement, economic inefficiency and the
consequent absence of blessings of Allah in economic
activities of an economic agent. Losses also act as a force of
economic accountability for an inefficient economic agent
and as a disincentive for the irresponsible behavior of
economic agents. Rational economic agents will try to avoid
economic punishment in the form of economic loss by
improving their performance for their economic development.

Moreover, rational Islamic economic agents while

keeping in view ten times reward anticipated to be acquired
in the life hereafter for doing business for the welfare of
people in Dunia, will be motivated to optimize economic
profits in Dunia as well as the ten times reward in Akhirah
corresponding to their good business action in Dunia as
promised in Islam. Hence they will be relatively more
motivated to undertake and conduct the social welfare-
oriented economic activities in order to optimize their welfare
in this world as well as their eternal welfare in the world
hereafter according to the following verse of The Holy
Qur'an:
 " with the (wealth) which Allah has bestowed on thee, the
B home of the Hereafter, but not forget thy portion in this
u world." (2877)
t
(ii) Normative Motivational Forces of Islamic Values and
Beliefs
s
e Islamic economic agents are fully convinced about the
e truthfulness of Islamic beliefs and values. So Islamic beliefs
k and values constitute the
Volume 12 Number 1 1996 83

most powerful and the most reliable motivational forces in Islamic

economics that automatically motivate the economic agents to
undertake only the Islamically lawful economic activities keeping
in view the anticipation of achieving the pleasure of Allah and His
blessings in this world as well as in the world hereafter, and to give
up the Islamically prohibited actions and economic activities in
order to avoid the painful punishment associated with the violation
of Islamic laws. The effect of these Islamic motivational forces is
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continuously operationalized through glad-tidings and warnings

stated, for economic agents, in the Holy Qur'an:

"For those who believe and dorighteousdeeds there will be gardens

of bliss. (31,8)

"For them there is hell as a couch (below) and folds of covering

above; such is our requital of those, who do wrong." (7,41)

In fact Islamic beliefs and values are so powerful that a true

Muslim will practice them even at the cost of his life.
(iii) Islamic Institutions for the Efficacy ofIslamic Motivational
System

In order to ensure that Islamic motivational forces are continuously

in action for the achievement of Islamic objectives, Islam has
established a unique set of the following Islamic institutions:
- Social Institution ofMutual Advice
 c social institution of mutual advice refers to the religious
I responsibility of each and every Muslim to voluntarily advise each
s other about doing good deeds and giving up wrong practices for
l protecting and promoting Islamic socio-economic interests. This
a cooperation-oriented voluntary institution is instituted for the
m mutual welfare of all economic agents in the light of the following
i verses of The Holy Qur'an:

"Let there arise out of you a band of people inviting to all that is
good, enjoining what is right and forbidding what is wrong." (3,104)
84

Humanomics

"Help ye one another in righteousness and piety but help yet

not one another in sin and rancour." (5,3)

- The Institution ofIslamic State

If an economic agent fails to correct his violations of Islamic

law despite the operation of the prementioned Islamic
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motivational forces of Islamic beliefs and values as well as the

voluntary institution of mutual advice, then the Islamic state as
the symbol of the vicegerency of Allah is legally entitled to
rely upon its subordinate institutions of Hisbah (institution of
ombudsman) and Courts in order to legislate him to follow
Islamic laws in his own best interest as well as in the best
interest of achieving the objectives of Islamic economy. The
institution of Hisbah minutely monitors the activities of
economic agents and immediately directs the violators to
follow Islamic law and ensures the compliance of its
directions. Islamic court is the state-institution established for
the purpose of guaranteeing justice and equality of economic
opportunities for all. Islamic courts quickly decide the legal
cases of complaints of any one against any one else pertaining
to injustice and legal violations among the parties involved.
Islamic courts also ensure that their decisions are implemented
by the administration of Islamic state.
 forces are always simultaneously in action in order to ensure
S efficiency of the highest possible degree in Islamic economy.
o Hence it can be concluded that Islamic economics has a
all uniquely effective full- fledged motivational system for the
the achievement of the enviable objectives of Islamic economy.
se
Isl Salient features of Islamic economics imply that it
am originates from Islamic beliefs and is consistent with the
ic universal world view. Moral values and material values are
mo fused together in it. The direction of flow in Islamic
tiv economics is from moral point of view to material point of
ati view so that the value judgements are inevitable in Islamic
on economics. Hence Islamic economics is simultaneously
al positive and normative in its letter and spirit.
2015 (PT)
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V of Islamic Economics with the Capitalist Economics and
o Communist Economics
l
u While both the Capitalist economics and the Communist economics
m base their respective paradigms on the same imaginary materialistic
e views of the aimless accidental origin of the universe and of an
1 over-time socialized economic animal called man, Islamic
2 economics bases its unique paradigm on the revealed universal truth
ofthe aimful preplanned creation, by Allah, of both the universe and
N the originally dignified man as the best among all the creatures of
u Allah as well as the vicegerent of Allah on earth. So Capitalist
m economics as well as Communist economics view man's economic
b problem as a purely materialistic problem of socialized animal and
e hence try to solve it only in the materialistic context by employing
r even the bad means, while Islamic economics view man's economic
1 problem as the spiritual-cum-material problem of a dignified human
being and gracefully solves it spiritually as well as materially by
1 employing only the means which are purely useful for people.
9 Consequently the quantitative as well as qualitative economic
98 outcomes of the application of Islamic economics are superior than
65 those of its rival contemporaries on the basis of the following
additional main points of comparison.

C (a) Capitalist economics as well as Communist economics argue

that the economicproblem arises because ofscarcity of resources as a
o
result of the miserliness of nature in providing resources for
m satisfying unlimited human wants. Islamic economics argues that
p Allah has provided sufficient resources for satisfying all the real
a needs, but not all wants, because not every want deserves to be
r fulfilled. The economic problem arises because of the
i mismanagement by economic agents. The economic problem can
therefore be solved through continuous human efforts and best
s
human management of all available resources for satisfying all the
o wants endorsed by Islam.
n
(b) While for optimizing only the material human welfare in this
world Capitalist economics recognizes only individual's right of
 86

Humanomics

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state's ownership right, Islamic economics recognizes
the ownership rights of the individual, society and state
in the context of their complementary roles for
optimizing the eternal spiritual- cum-material welfare of
the individual and society.
(c) In contrast to the guaranteed unbridled economic
freedom in Capitalist economics and the totally negated
economic freedom in Communist economics, Islamic
economics guarantees free-dom of economic activities as long
as they do not harm individ-ual and social interests.
(d) While Capitalist economics negates the role of church in
eco-nomics and Communist economics expells religion from
eco-nomics by calling it opium, Islamic economics recognizes
economic activity an act of worship, thereby treating Islamic
religion as its integral part.
(e) Allocation of resources occurs in Capitalist economics
through the perfectly competitive market system; in
Communist eco-nomics, through centrally administered
market system, and in Islamic economics through morally
administered market sys-tem.
(f) Islamic economic motivational forces based on Islamic
beliefs and values are much more effective in achieving
Islamic eco-nomic objectives than the material remunerative
motivational forces of Capitalist economics as well as the
coercive motiva-tional forces of Communist economics, due to
the natural law of diminishing marginal effectiveness of the
material motiva-tional forces in the context of achieving
economic objectives.
(g) Islamic economics frees the economy and society from
the socio-economic exploitation by prohibiting interest-based
tran gambling, speculation, decieving, adulteration, profi-teering,
s- false advertizing, immoral business of music, dancing,
acti prostitution and obscene literature, and the consequent unjust
ons, concentration of wealth within the capitalist class in contrast to
Volume 12 Number 1 1996 87

Capitalist economics in which these economic evils exist, be-

cause of its refusal to admit the role of religion in economics.
However, Communist economics frees the economy and soci-
ety only from the evil of interest-based transactions.
(h) Islamic economics is characterized by the unique Islamic
insti-tutions of Benevolent Loan, Musharikah (business
partnership), Mudharabah (cooperative business venture between
owner of money capital and the capital-less worker), Zakat (Islamic
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wealth tax), Ushr (Zakat on agricultural produce), Sadaqat

(compulsory and voluntary spendings of Muslims in the way of
Allah), Islamic law of inheritance, Fai (enemy's wealth captured by
Islamic state without actually fighting a war), Ghanaim (war booty)
which have no parallel in Capitalist economics and Communist
economics and which lead to more and more equitable distribution
of wealth in Islamic economy.
Conclusion

Islamic economics is as old as human history. It is consistently

based on the most comprehensive Islamic worldview that
gracefully distinguishes it from Capitalist economics and
Communist economics. It presents a natural comprehensive
solution to the economic problem of mankind in all times and at all
places, that has a universal appeal because of its being based only
on the pure truth about the universe and because Islamic economics
aims at the total human development in material as well as spiritual
contexts with reference to the inherently dignified status of
humanity as the best of all creatures of Allah. This fact is a
universal truth and is the original source of the eternal challenge of
Islamic economics to Capitalism and Communism. Capitalists and
Communists all over the world feel the ever growing strength of
t eeling is clearly manifested in the statements and works of the
h exponents of Capitalism and Communism. Shrinking international
e distances as a result of the advent of the fastest communication
systems are destined to create general awareness among all human
c beings about truths unfolded byIslam. Latest developments in
h Islamic
a
l
l
e
n
g
e

o
f
I
s
l
a
m
i
c

e
c
o
n
o
m
i
c
s
.
T
h
i
s
f
 88

Humanomics

economics and in the economies of Muslim countries indicate

that finally, Islamic economics is going to succeed in
accomplishing the challenge of truly and completely solving the
economic problems of humanity.
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Dow
 Volume 12 Number 1 1996 89
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