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Islam and Capitalism
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Islam and Socialism
The most dominant
economic systems in the modern world at present are capitalism and
socialism. The capitalism is the dominant economic philosophy in
the western world mainly comprising Western Europe and Northern
America under the leadership of
United States.
The socialism has been dominant economic ideology in USSR, Peoples
Republic of China and some countries of Eastern Europe. Although
socialism, with downfall and dissolution of its former leader
Soviet Union, has received a great setback, yet it still holds a
lot of relevance as an economic philosophy.
However, before
comparing Islamic economic system with capitalism and socialism,
we would briefly introduce these two systems to our readers and
then we shall make comparison.
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I- Islam and Capitalism
What is Capitalism?
Capitalism, as defined by the
Collins Dictionary, “is an economic system based on the private
ownership of the means of production, distribution and
exchange”. Broadly speaking, capitalism is the name given to the
economic system in which the principal means of production,
distribution and exchange are in private (individual or
corporate) hands. The profit motive constitutes the prime
stimulus to productive exertion and the ‘price mechanism’
determines what things shall be made in what quantities and what
conditions.
It is a type of
economy in which capital is privately owned and may be freely
used by the owners as they wish in attempting to make profits
from their economic enterprises.
Thus in this
system of economy production and trade are organised on
individualistic basis. Private individuals or private firms and
corporations with the help of previously accumulated capital,
but more often utilising money borrowed on interest, earn
profits and build up business or industrial empires for
themselves by employing the mass of human labour for wages.
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Features of Capitalism:
Chief
features of capitalism include : existence of unrestricted private
ownership of means of production, exchange and distribution;
economic freedom; profit motive as incentive for productive
activity; free market and competition; existence of monopolies;
banking and institution of interest; wide disparities in
distribution of wealth; economic exploitation of the weak by the
strong, etc.
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Comparison with Islam:
Capitalism and Islam are compared in respect of their basic
economic concepts as under:
1. Right to ownership:
The existence of right of private ownership of property is the
hallmark of capitalism. It gives unrestricted and unencumbered
full rights of ownership to the individual. The individual may
acquire, own or alienate his property in whatever manner he likes.
The system believes in the private ownership of the means of
production, distribution and exchange which are managed and
controlled by individuals or groups of individuals for private
profit. The unrestricted right to own property and earn profits
leads to concentration of wealth in few hands. This necessarily
disturbs the balance of distribution of wealth and income in
society. The economic disparities and the ever-increasing gulf
between the rich and the poor sows the seeds of discord and
destruction in the capitalist society.
Islamic concept of
ownership is unique one. Ownership, in reality, belongs to God
while some rights only vest in man so that he may fulfil the
purpose of God, that is the purpose of community by acting as a
trustee for those in need. In other words, what Allah has created
for benefit of and service to man belongs collectively to the
whole humanity. Legal ownership by the individual is recognised in
Islam but it is subject to the moral obligation that in all wealth
all sections of society have the right to share. Thus private or
individual ownership in Islam is not unlimited or unrestricted.
All the means of production are not placed under private ownership
as public ownership of certain things of common utility exists
side by side with it in an Islamic state. Islamic state has also
the right to nationalise certain things which are under private
ownership for the benefit of the community. In this way the
limited right of private ownership with law of inheritance which
distributes the estate of the deceased among fairly large number
of heirs averts concentration of wealth in few hands and thus
prevents class-conflict.
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2. Economic
Freedom:
Unrestricted economic freedom and non-interference of the state in
such freedom is another feature of capitalist economy. Every
individual is at liberty to initiate, organise and establish any
enterprise, business, trade, profession, etc. He has full freedom
to earn as much income as he can and spend his wealth in whatever
manner he likes. This unrestricted economic freedom generally
leads to earning of wealth through foul means such as gambling and
prostitution. It also encourages business malpractices such as
smuggling, black marketing, profiteering, hoarding, speculation,
forward transactions, fraud, exploitation, adulteration, etc. Thus
a mad-race for earning wealth becomes order of the day and high
social and moral values such as fraternity, brotherhood, mutual
help, love, benevolence, truthfulness give place to selfishness,
callousness, hatred, falsehood and mistrust. Capitalism, in fact,
has come to signify a religion of money or dollar dictatorship.
Islam also allows
economic freedom to an individual who is at liberty to earn
wealth, own it and spend his wealth at his discretion. But the
freedom given by Islam in economic sphere is not unlimited. Islam
makes distinction between halal (permitted being lawful) and haram
(forbidden being unlawful) in every economic activity embracing
vast fields of production, exchange and consumption. Certain means
of earning wealth such as interest, bribery, embezzlement,
gambling, games of chance, speculation, monopoly, usurpation of
wealth of orphans and other weaker persons, prostitution, singing
and dancing, sale of wine and narcotics, short weighing and short
measuring, trade in haram things, immoral and exploitive methods,
etc. are prohibited to a Muslim. Similarly consumption of wealth
on luxurious living, haram things and extravagant spending is also
forbidden. A Muslim is required to pay Zakat and spend whatever he
can for the cause of the poor and the destitute. All these
regulations promote moral values in Islamic society and eliminate
mad-race
for wealth and material gains.
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3. Monopoly:
Competition, which is another feature of capitalism, leads to the
destruction of minor enterprises and firms. This encourages merger
of smaller business organisations into major ones and thus
monopolies or cartels are established. Monopolies kill free
competition, cause inflation in prices and ultimately result into
unemployment. Thus labour and consumer are both exploited in such
a situation. Morever, trade-cycles, unplanned production,
over-competition, increasing accumulation of capital upsets the
balance between production and consumption which sometimes leads
to economic depressions.
Islam forbids
unhealthy competition and bans all the ways which lead to it.
Islam also disallows establishment of monopolies. The Prophet of
Islam is reported to have said : Whoever monopolies is a sinner.
Especially monopolies over food-stuffs or articles of daily use
are forbidden by Islam. Commodities and services which are of the
common interest of the community are never allowed to be
monopolised. Those essential things which are required by everyone
are generally maintained under joint ownership of the community.
Thus interests of the consumers and labour are protected and
balance between production and consumption is never allowed to be
disturbed.
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4. Institutions
of Interest:
The Institution of banking and interest is the life-blood of
capitalistic form of economy. For business, trade and industry
especially for big projects and economic ventures, huge funds are
required which no individual or firm can arrange. This leads to
establishment of banks who borrow capital from depositors and
investors on lower rate of interest and lend it to business
enterprises on higher rate of interest. Thus the institution of
interest has become part and parcel of capitalism.
Islam considers
interest as the most exploitive institution for humanity and has
abolished it root and branch in its every form and manifestation.
According to al-Qur’an taking of interest tantamounts to war
against God and His Apostle, while according to Prophet Muhammad (PBUH)
interest is worse than adultery. Islam builds its economy on
interest free basis and promotes profit and partnership as
incentive for saving and investment.
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5. Exploitation:
Unrestricted right of economic freedom and uncontrolled right of
private ownership has practically resulted into exploitation.
Economic exploitation of the weak by the strong is an order of the
day in a capitalist society. Labour is exploited by the
capitalist, farm worker is exploited by the landlord, poor is
exploited by the rich, servant is exploited by the master, people
are exploited by the rulers and above all national treasury is
exploited and looted by the persons in power. Wealth is the
religion of every person (but a few honourable exceptions) and
earning of it through fair or foul means is his creed.
Consequently, everyone exploits the other economically with a view
to gather as much fortune as possible.
Islamic economic
system, on the other hand, ensures elimination of exploitation of
one man by the other. Many effective measures have been taken by
Islam to do so. Riba or usury is one of the worst instruments of
human exploitation and this has been abolished in all forms by
Islam. Other means of exploitation such as bribery, gambling,
speculative transactions, embezzlement, prostitution have also
been prohibited. Interests of the weaker classes of the society
like women, orphans, slaves, labourers, tenants, consumers, etc.
have been protected against their exploiters through legislation
by Islam. Islam has given these weaker sections of society many
rights which were hitherto unknown in the history of humankind.
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6.
Distribution
of Wealth:
Capitalism does not believe in fair and just distribution of
wealth. Since it believers in full economic freedom and private
ownership of means of production, wide economic disparities exist
in capitalistic economy. Concentration of wealth in few hands
takes place while huge majority of the populace is deprived of the
very basic necessities of life. The privileged few live in luxury
while poverty, ignorance, disease and unemployment is the lot of
the multitude. This disturbed balance of distribution of economic
resources and unbridgeable gulf between the haves and have-nots
ultimately leads to class struggle and ultimate overthrow of the
very system.
Islam, on the one
hand guarantees provision of basic human needs such as food,
clothing and shelter to everyone and, on the other hand, ensures
fair and equitable distribution of wealth and economic resources
among all. It does not tolerate existence of wide disparities
among the rich and the poor and tries to eliminate concentration
of wealth in few hands. For bridging the gulf between the rich and
the poor and for ensuring equitable distribution of wealth, Islam
has taken many steps such as Zakat and Sadaqat, laws of
inheritance and bequest, voluntary charities and compulsory
contributions in the form of taxes and duties. To prevent
concentration of wealth in few hands Islamic economic code has
taken measures like abolition of interest, prohibition of earning
of wealth through haram means, prohibition of hoarding of wealth,
etc.
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II- Islam and Socialism
What is Socialism?
According to
the Collins Dictionary, “Socialism is an economic theory or system
in which the means of production, distribution and exchange are
owned by the community collectively through the state. It is a
transitional stage in the development of a society from capitalism
to communism, and is characterised by the distribution of income
according to work rather than need”. Advanced Learner’s Dictionary
explains socialism as “a political and economic theory advocating
that a country’s land, transport, natural resources and chief
industries should be owned and controlled by the whole community
or by the state and that wealth should be equally distributed.”
Encyclopaedia
Britannica writes : “Socialism is essentially a doctrine and a
movement aiming at the collective organisation of the community in
the interests of the mass of the people by means of the common
ownership and collective control of the means of production and
exchange.” Encyclopaedia Americana, in its article on socialism,
states : “Socialism is a doctrine that espouses public ownership
or control of the major means of production. It aims to achieve a
more equitable and efficient distribution of social goods and
greater economic planning than exist under capitalism. Although
the central concerns of socialism appear to be economic, its
ramifications extend to the moral, social and political realms.”
Political
scientists and scholars do not agree on a uniform definition of
socialism. It has been aptly remarked that there are as many types
of socialism as there are socialists. Socialism is therefore
compared to a hat which has lost its shape because everybody wears
it.
Socialism has drawn
its strength from the desire of conscientious men is all ages from
Plato to Ruskin for a more equitable and fair distribution of the
income and wealth. However, the word ‘socialism’ came into general
use around 1830. But it was Karl Marx who founded it on scientific
lines. Marx is known as father of socialism. He developed the
principle of scientific socialism which came to be known later on
as communism. Along with his friend Frederick Engels, he wrote and
issued the famous communist Manifesto in 1848 calling upon the
labour of the world ‘to unite as they were nothing to lose but
their chains’. He wrote his famous book Das Capital in 1867 which
is considered to be the Bible of socialism. Philosophy of Marx is
mainly based upon the following two principles :
1.
Dialectic materialism or materialistic
interpretation of history is the most important feature of
Marxism. Marx seeks to explain every event in history on economic
grounds. All wars, riots and political movements, according to
him, have their origin in economic factors. He views history as a
class struggle i.e. struggle between the oppressor and the
oppressed. Present struggle between the capitalist class and the
workers or proletariat class would result into victory of
proletariat who would establish their dictatorship, and thus with
the liquidation of capitalist class, a classless society shall
come into being and state would wither away.
2.
Theory of surplus value is another feature of
Marxian teachings. According to Marx, the capitalist gets for his
commodity more than he has spent on labour and other costs. The
excess of market value over the costs is surplus value. This
surplus value, which according to him, is created by labour, is
usurped by the capitalist as profit.
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Distinctive Features of Socialism:
Distinctive features of socialism, briefly speaking, include :
Public or state ownership of all means of production, distribution
and exchange and abolition of private property; economic equality
and provision of basic necessities of life for every citizen;
materialism and emphasis on economic factors; totalitarian state
and dictatorship of proletariat; suppression of civil liberties,
etc.
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Comparison with Islam:
Socialism
and Islam are compared in respect of their basic economic
perceptions as under:
1. Ownership:
State ownership of all property and means of production, as stated
earlier, is the most distinctive feature of socialist economy.
Private ownership of property and of all the means of production,
distribution and exchange is totally abolished. Land, factories,
transport, communications, mines, etc are all placed under state
control. This leads to management of these means of production by
the bureaucracy. Bureaucratic running of economic machinery
results into inefficiency, low production and collapse since the
bureaucrats lack initiative, follow rigid rules and are not
trained to run business.
Islam does not
abolish private ownership of property and does not place all the
means of production, distribution and exchange in the hands of the
state. Although Islam upholds public ownership of some means of
production which are the common utility to the people, but it
concedes the rights of private ownership of majority of the means
of production and distribution. Unlike socialism, Islam gives
economic freedom to an individual who can earn wealth, own it and
enjoy it within certain limits provided he does not infringe
teachings of Islam in the process of earning, owning and consuming
it.
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2. Materialism:
Socialism, especially scientific socialism or communism rests on a
purely materialistic basis. Dialectic materialism or materialistic
interpretation of history is the most vital element of Marxism.
Marx has sought to explain every event in history on economic
grounds. According to him, origin of every activity of man lies in
economic factors. Marx does not believe in religion which, in his
view, is a bourgeois invention to keep the proletariat under their
perpetual control. Engels said : Matter is the only real thing in
the world. The communists believe that human reason is just a
manifestation of matter and soul has no independent existence of
its own but is a product of matter. They hold that all the
different stages of human progress are determined by the interplay
of conflicting economic forces alone, thus leaving no place for
God’s will. So communism is a purely materialistic ideology which
ridicules religion, concept of God and all forms of spiritualism
dubbing them as unscientific.
Islam is the
perfect and final religion revealed by Lord of the universe for
the guidance of mankind. Its foremost aim is to ensure ‘falah’ or
well-being of humanity in this world and in the Hereafter. It does
not give importance to matter only at the cost of spirit as does a
secular ideology like socialism. Islam believes in the material as
well as moral and spiritual welfare of its followers at micro and
macro level. Followers of Islam believe in one God, in all the
Prophets and Holy Scriptures, in the Hereafter, in the moral code
and in the universal brotherhood of mankind. In an Islamic state
there exist no antagonistic classes conflicting with each other,
neither all the events in history are determined by interplay of
economic forces. Although, in the sight of Islam, welfare of
society does not lie in economic prosperity only as moral and
spiritual advancement is equally important, yet it does not
discourage pursuit of material prosperity through fair means.
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3. Regimentation
and Totalitarianism:
Communism sets up a totalitarian state in which bourgeois class is
liquidated and strong dictatorship of the proletariat class is
established. Fundamental rights and civil liberties are crushed
and man is rendered merely to the status of an economic animal. In
the name of bread he is deprived of freedom of conscience, freedom
to think, freedom to speak and freedom to act. In order to achieve
economic objectives and in order to work the huge productive
machine efficiently, the state becomes all powerful and
establishes complete regimentation. Thus the state under communism
does not wither away, as predicted by Marx, rather it turns out to
be a worst type of totalitarian state.
Islam, on the
contrary, believes in democratic form of government as the Qur’an,
its revealed book, enjoins upon Prophet Muhammad (PBUH) to conduct
public affairs in consultation with his followers. Islam gives all
the fundamental rights and civil liberties to the people living in
the Islamic state. All the citizens have freedom of person,
freedom of religion and conscience, freedom of expression, right
to own and alienate property, right to protection of honour, right
to criticise the government, right to equality before the law,
right to education, right to medical care and above all right to
basic human needs such as food, clothing and shelter. Islamic
state does not establish dictatorship of any class, neither it is
a totalitarian state. The state under Islam does not wither away,
rather it becomes indispensible as it discharges all the functions
of a traditional state and modern welfare state.
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4.Economic Equality:
Economic equality is another claim of communism although it has
never been realized so far. In theory at least it is claimed that
the rights of the individuals in the economic sphere are governed
by the principles of equality. Every individual is provided with
the necessaries of life according to his needs.
Islam, unlike
communism, recognises that there is no equality among human beings
as regards the economic means and possession of worldly wealth.
The Qur’an considers these inequalities and disparities in the
distribution of wealth as part of Divine economic order and,
therefore, does not try to eliminate them by unnatural and
artificial means. The existence of economic disparities, in fact,
is a test by which Allah tries the human beings how they behave in
good and bad circumstances. However, Islam does not permit the
differences in possession of wealth to assume such proportions
that concentration of wealth takes place in few hands who live in
luxury while vast majority of people lead a life of abject
poverty, misery and deprivation. Islam does not tolerate the
existence of unbridgeable gulf between the rich and the poor, but
unlike socialism it does not believe in equal distribution of
wealth. Actually Islam believes in fair, just and equitable
distribution of wealth and in social justice. For ensuring
equitable distribution, Islam has taken many steps such as
institution of Zakat and Sadaqat, laws of inheritance and bequest,
voluntary alms and levy of compulsory contributions in the form of
taxes and duties. In addition to this it has abolished interest,
prohibited unfair and unlawful means of earning wealth and banned
hoarding of wealth so that wealth should not concentrate in few
hands.
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