Capitalism

Group Members: Misbah Zafar Nazia Waheed Sukena Saadia Saiqa Hammed Subject: Fiqh Teacher: Sir Naveed Assignment

Topic:

Capitalism, Socialism and Islamic Economic System

Capitalism: Capitalism typically refers to an economic and social system in which the means of production (also known as capital) are privately controlled; labor, goods and capital are traded in a market; profits are distributed to owners or invested in new technologies and industries; and wages are paid to labor. The extent to which different markets are free, as well as rules determining what may and may not be private property, is a matter of politics and policy; consequently, historians and economic sociologists have debated over how to define capitalism, and many states have what are termed "mixed economies." Capitalism as a system developed incrementally from the 16th century in Europe and England, although some features of capitalist organization existed in the ancient world, and early aspects of merchant capitalism flourished during the Late Middle Ages. Capitalism has been dominant in the Western world since the end of feudalism. Capitalism gradually spread throughout Europe, and in the 19th and 20th centuries, it provided the main means of industrialization throughout much of the world. There is no consensus on capitalism or how it should be used as an analytical category. There are a variety of historical cases over which it is applied, varying in time, geography, politics and culture. Economists, political economists and historians have taken different perspectives on the analysis of capitalism. Economists usually put emphasis on the market mechanism, degree of government control over markets (laissez faire), and property rights, while most political economists emphasize private property, power relations, wage labor, and class. Neither is there universal agreement on whether capitalism is ultimately beneficial for societies or whether it is destructive, resulting in political advocacy both for and against capitalism.

Criticism: Notable critics of capitalism have included: socialists, anarchists, communists, some forms of conservatism, Luddites, Narodniks, some schools of nationalism and Shakers. Marxism advocated a revolutionary overthrow of capitalism that would lead to socialism before eventually transforming into communism after class antagonisms and the state

ceased to exist. Marxism influenced social democratic and labour parties as well as some moderate democratic socialists, who seek change through existing democratic channels instead of revolution, and believe that capitalism should be heavily regulated rather than abolished, supplementing the market economy with a mixed economy. Many aspects of capitalism have come under attack from the anti-globalization movement, which is primarily opposed to corporate capitalism.

Religious criticism and opposition: Many religions have criticized or opposed specific elements of capitalism; traditional Judaism, Christianity, and Islam forbid lending money at interest, although methods of Islamic banking have been developed. Christianity has been a source of both praise and criticism for capitalism, particularly its materialist aspects. The first socialists drew many of their principles from Christian values, against "bourgeois" values of profiteering, greed, selfishness, and hoarding. Some Christian critics of capitalism may not oppose capitalism entirely, but support a mixed economy in order to ensure adequate labor standards and relations, as well as economic justice. Indian philosopher P.R. Sarkar, founder of the Ananda Marga movement, developed the Law of Social Cycle to identify the problems of capitalism and proposed the Progressive Utilization Theory (PROUT) as a solution to its ills. Pope Benedict XVI issued an encyclical Caritas in veritate (Charity in Truth) in 2009; he stated: "The dignity of the individual and the demands of justice require, particularly today, that economic choices do not cause disparities in wealth to increase in an excessive and morally unacceptable manner" and "Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.

Tendency towards oligopoly and monopoly: Critics argue that capitalism is associated with: unfair and inefficient distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism, counter-revolutionary wars and various forms of economic and cultural exploitation; repressions of workers and trade unionists, and phenomena such as social alienation, inequality, unemployment, and economic instability. Critics have argued that there is an inherent tendency towards oligolopolistic structures when laissezfaire is combined with capitalist private property. Capitalism is regarded by many socialists to be irrational in that production and the direction the economy is unplanned, creating many inconsistencies and internal contradictions. In the early 20th century, Vladimir Lenin argued that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism.[89] Economist Branko Horvat states, "it is now well known that capitalist development leads to the concentration of capital, employment and power. It is somewhat less known that it

leads to the almost complete destruction of economic freedom."[90] Southern Methodist University Economics Professor Ravi Batra argues that excessive income and wealth inequalities are a fundamental cause of financial crisis and economic depression, which will lead to the collapse of capitalism and the emergence of a new social order.

Environmental destruction of unfettered economic growth: Environmentalists have argued that capitalism requires continual economic growth, and will inevitably deplete the finite natural resources of the earth, and other broadly utilized resources. Murray Bookchin has argued that capitalist production externalizes environmental costs to all of society, and is unable to adequately mitigate its impact upon ecosystems and the biosphere at large. Labor historians and scholars, such as Immanuel Wallerstein, Tom Brass and latterly Marcel van der Linden, have argued that unfree labor — by slaves, indentured servants, prisoners, and other coerced persons — is compatible with capitalist relations.

The profit motive: In capitalism, the motive for producing goods and services is to sell them for a profit, not to satisfy people's needs. The products of capitalist production have to find a buyer, of course, but this is only incidental to the main aim of making a profit, of ending up with more money than was originally invested. This is not a theory that we have thought up but a fact you can easily confirm for yourself by reading the financial press. Production is started not by what consumers are prepared to pay for to satisfy their needs but by what the capitalists calculate can be sold at a profit. Those goods may satisfy human needs but those needs will not be met if people do not have sufficient money. The profit motive is not just the result of greed on behalf of individual capitalists. They do not have a choice about it. The need to make a profit is imposed on capitalists as a condition for not losing their investments and their position as capitalists. Competition with other capitalists forces them to reinvest as much of their profits as they can afford to keep their means and methods of production up to date. As you will see, we hold that it is the class division and profit motive of capitalism that is at the root of most of the world's problems today, from starvation to war, to alienation and crime. Every aspect of our lives is subordinated to the worst excesses of the drive to make profit. In capitalist society, our real needs will only ever come a poor second to the requirements of profit

Capitalism = free market?

It is widely assumed that capitalism means a free market economy. But it is possible to have capitalism without a free market. The systems that existed in the U.S.S.R and exist in China and Cuba demonstrate this. These class-divided societies are widely called 'socialist'. A cursory glance at what in fact existed there reveals that these countries were simply 'state capitalist'. In supposedly 'socialist' Russia, for example, there still existed wage slavery, commodity production, buying, selling and exchange, with production only taking place when it was viable to do so. 'Socialist' Russia continued to trade according to the dictates of international capital and, like every other capitalist, state, was prepared to go to war to defend its economic interests. The role of the Soviet state became simply to act as the functionary of capital in the exploitation of wage labour, setting targets for production and largely controlling what could or could not be produced. We therefore feel justified in asserting that such countries had nothing to do with socialism as we define it. In fact, socialism as we define it could not exist in one country alone—like capitalism it must be a global system of society.

Capitalism and the exploitation of workers: Under capitalism, the chief means of production—the factories, the railroads, the mines, the banks, the public utilities, the offices, and all of the related technology—are privately owned by a super-rich minority, the capitalist class. The capitalists then compete with each other in the marketplace and run production on the basis of what will bring them the biggest profit. This drive to successfully compete and to maximize profit leads big business to exploit workers, to pay their employees as little as possible, a mere fraction of the actual value that they produce. It also leads big business to resist the efforts of workers to unionize and to obtain increased pay, reduced working hours, and improved working conditions. This exploitation of workers results in a gross concentration of wealth, to the benefit of the capitalists and at the expense of working people. Even in the United States, the richest country in the world, where workers admittedly have one of the highest living standards, there is nonetheless a gross concentration of wealth. According to the Federal Reserve Survey of Consumer Finances, the top 1% of American families (834,000 households) own more than the bottom 90% (84 million households).

Socialism: Socialism refers to various theories of economic organization advocating state, public or common worker ownership and administration of the means of production and distribution of goods, and a society characterized by equal access to resources for all individuals with a more egalitarian method of compensation. Modern socialism originated in the late 18th-century intellectual and working class political movement that criticized the effects of industrialization and private ownership on society, however, socialism itself is not a political system; it is instead an economic system distinct from capitalism. Karl Marx posited that socialism would be achieved via

class struggle and a proletarian revolution and become the transitional stage from capitalism to communism. Socialism is not a concrete philosophy of fixed doctrine and program; its branches advocate a degree of social interventionism and economic rationalization, sometimes opposing each other. Another dividing feature of the socialist movement is the split between reformists and the revolutionaries on how a socialist economy should be established. Some socialists advocate complete nationalization of the means of production, distribution, and exchange; others advocate state control of capital within the framework of a market economy. Socialists inspired by the Soviet model of economic development have advocated the creation of centrally planned economies directed by a state that owns all the means of production. Others, including Yugoslavian, Hungarian, German and Chinese Communists in the 1970s and 1980s, instituted various forms of market socialism, combining co-operative and state ownership models with the free market exchange and free price system (but not free prices for the means of production).

Criticism: Criticisms of socialism range from claims that socialist economic and political models are inefficient or incompatible with civil liberties to condemnation of specific socialist states. There is much focus on the economic performance and human rights records of Communist states, although there is debate over the categorization of such states as socialist. In the economic calculation debate, classical liberal Friedrich Hayek argued that a socialist command economy could not adequately transmit information about prices and productive quotas due to the lack of a price mechanism, and as a result it could not make rational economic decisions. Ludwig von Mises argued that a socialist economy was not possible at all, because of the impossibility of rational pricing of capital goods in a socialist economy since the state is the only owner of the capital goods. Hayek further argued that the social control over distribution of wealth and private property advocated by socialists cannot be achieved without reduced prosperity for the general populace, and a loss of political and economic freedoms. Democratic control is therefore also essential to the meaning of socialism. Socialism will be a society in which everybody will have the right to participate in the social decisions that affect them. These decisions could be on a wide range of issues—one of the most important kinds of decision, for example, would be how to organise the production of goods and services. Production under socialism would be directly and solely for use. With the natural and technical resources of the world held in common and controlled democratically, the sole object of production would be to meet human needs. This would entail an end to buying, selling and money. Instead, we would take freely what we had communally produced. The old slogan of "from each according to ability, to each according to needs" would apply.

In socialism, everybody would have free access to the goods and services designed to directly meet their needs and there need be no system of payment for the work that each individual contributes to producing them. All work would be on a voluntary basis. Producing for needs means that people would engage in work that has a direct usefulness. The satisfaction that this would provide, along with the increased opportunity to shape working patterns and conditions, would bring about new attitudes to work.

Properties of Socialism:     

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All members of the economy share benefits, regardless of their economic value to the system. Succesful socialistic systems depend on sufficient resources for the entire population. A healthy socialistic system results in non-economic productivity. In environments with plentiful resources, socialism provides all members with their survival needs, creating a stable social environment. Members that cannot participate economically - due to disabilities, age, or periods of poor health - can still impart wisdom, support and continuity of experience to the system. Freedom from [obviously productive] work provides opportunity for some societal members to explore non-economically-productive pursuits, such as pure science, math and the arts.

Economic System of Islam: Islam is an entire way of life, and Allah's Guidance extends into all areas of our lives. Islam has given detailed regulations for our economic life, which is balanced and fair. Muslims are to recognize that wealth, earnings, and material goods are the property of God, and we are merely His trustees. The principles of Islam aim at establishing a just society wherein everyone will behave responsibly and honestly. The fundamental follows: Muslims are not to deal in interest. "Those who devour usury will not stand....Allah has permitted trade and forbidden usury.... Allah will deprive usury of all blessing, but will give increase for deeds of charity...." (Qur'an 2:275-6) "O you who believe! Devour not usury, doubled and multiplied. But fear Allah, that you may really prosper." (3:130) This prohibition is for all interest-based transactions, whether giving or receiving, whether dealing with Muslims or non-Muslims. It is reported that the Prophet Muhammad (peace be upon him) cursed those who pay interest, those who receive it, those who write a contract based on it, and those who witness such a contract.

It is forbidden to gain property or wealth by fraud, deceit, theft, or other falsehoods. "...Give just measure and weight, and do not withhold from people the things that are their due. And do not do mischief on the earth after it has been set in order. That will be best for you, if you have faith." (7:85) It is particularly hateful for a guardian to take from an orphan's property. "To orphans restore their property (when they reach their age). Do not substitute your worthless things for their good ones, and do not devour their property by mixing it up with your own. For this is indeed a great sin." (4:2) Forbidden are earnings from gambling, lotteries, and the production, sale, and distribution of alcohol. "O you who believe! Intoxicants and gambling, sacrificing to stones, and divination by arrows are an abomination of Satan's handiwork. Eschew such abomination, that you may prosper." (5:90) It is unlawful to hoard food and other basic necessities. Everyone should take what they need and no more. "And let those who covetously withhold of the gifts which Allah has given them of His Grace, think that it is good for them. No, it will be the worse for them. Soon it will tied to their necks like a twisted collar, on the Day of Judgment. To Allah belongs the heritage of the heavens and the earth, and Allah is well-acquainted with all that you do." (3:180) A Muslim should be responsible in spending money. Extravagance and waste are strongly discouraged. "[The Servants of Allah are] Those who, when they spend, are not extravagant and not stingy, but hold a just balance between those extremes." (25:67) "O Children of Adam! Wear your beautiful apparel at every time and place of prayer. Eat and drink, but waste not by excess, for Allah loves not the wasters." (7:31) Payment of Zakat (alms). "And they have been commanded no more than this: to worship Allah, offering Him sincere devotion, being true in faith. To establish regular prayer, and to give Zakat. And that is the religion right and straight." (98:5) Every Muslim who owns wealth, more than a certain amount to meet his or her needs, must pay a fixed rate of Zakat to those in need. Zakat is a means of narrowing the gap between the rich and the poor, and to make sure that everyone's needs are met. Muslims are encouraged to give constantly in charity. "Your riches and your children may be but a trial. Whereas Allah, with Him is the highest reward. So fear Allah as much as you can, listen and obey, and spend in charity for the benefit of your own souls. And those saved from the selfishness of their own souls, they are the ones that achieve prosperity." (64:15-16) The Prophet Muhammad once said that "nobody's assets are reduced by charity." • • • •

Inheritance. Wills. Public Goods. Exceptional Taxes.

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Social Insurance. Games of Chance. Interest on Money-lending. Statistics. Daily Life.

Inheritance: Both the individual right of disposing of one's wealth and the right of the collectivity visà-vis the wealth of each individual, in as much as one is a member of society, have to be simultaneously satisfied. Individual temperaments differ enormously. Sickness or other accidents may also affect a man out of all proportion. So it is necessary that a certain discipline should be imposed upon him in the interest of the collectivity. Thus Islam has taken two steps: firstly the obligatory distribution of the goods of a deceased person among his close relatives, and secondly a restriction on the freedom of bequest through wills and testaments. The legal heirs do not require any testamentary disposition, and inherit the property of the deceased in the proportions determined by law. A testament is required solely in favor of those who have no right to inherit from a deceased person. There is equality in the parents of the same category, and one cannot award to one son (elder or younger) more than to the other -- whether major or minor. The first charges on the property left by the deceased are the expenses of his burial. What remains then goes to his creditors, the debt having priority over the "rights" of the inheritors. In the third place, his testament is executed, to the measure and extent that it does not exceed the third of the available property (after burial and payment of debts). It is only after satisfying these prior obligations that heirs are considered. The (male or female) partners of life, the parents, the descendants (sons and daughters) are the first class heirs, and inherit in all cases. Brothers and sisters, and other more remote relatives inherit from a deceased person only in the absence of nearer relatives. Among these more remote relatives, we find uncles, aunts, cousins, nephews and others.

Wills: We have just mentioned that the right of testamentary bequests is operative only within the limits of a third of the property, in favour of persons other than creditors and heirs. The aim of this rule seems to be two-fold: (1) To permit an individual to adjust things, in extraordinary cases, when the normal rule causes hardship; and a third of the property is sufficient for fulfilling all such moral duties. (2) Another motive of the law of the will is to prevent the accumulation of wealth in the hands of a few, a thing which would happen

if one should give all this property, by will, to a single person excluding totally one's near relatives. Islam desires the circulation of wealth among as large a number of people as possible, taking into account the interests of the family.

Public Goods: One also has obligations as a member of a larger family, viz., society and the State in which one lives. In the economic sphere, one pays taxes, which the government redistributes in the interests of the collectivity. The taxation rate differs according to the various kinds of the sources of income, and it is interesting to note that the Qur'an, which gives precise directions with regard to budgetary expenditure, has enunciated neither rules nor rates of the income of the State. While scrupulously respecting the practice of the Prophet and of his immediate successors, this silence of the Qur'an may be interpreted as giving latitude to the government to change the rules for income according to circumstances, in the interest of the people. In the time of the Prophet, there were agricultural taxes, and the peasants handed over a tenth of the harvest, provided it was above a certain tax less minimum and irrigated their lands with rain or spring water, and half that rate in the case of wells as the means of irrigation. In commerce and exploitation of mines, one paid 2½% of the value of goods. As for import taxes on foreign caravan-leaders, there is an interesting fact which should profitably be brought into relief. In the time of the Prophet, these were subject to a tithe as customs duty. The caliph 'Umar reduced by half this tax on foreigners, concerning certain categories of victuals imported in Madinah (as reported by Abu 'Ubaid). This precedent of high authority casts light on the essential principles of the fiscal policy of Islam. In the time of the Prophet, there were taxes on herds of camels, sheep and goats, and oxen provided they were fed on public pastures and exceeded in number the tax less minimum. Exemption was accorded further to beasts of burden and those employed for ploughing and irrigation. There was a tax of 2½% on savings on silver and gold. This obliged people to employ their wealth for increase, and not to indulge in idle hoarding. The term sadaqat, which we translate as the State tax on Muslims, and which is a synonym of Zakat, signifies all the taxes paid by Muslims to their government, in normal times, whether on agriculture, mines, commerce, industry, pasturing herds, savings or other heads. These exclude the provisional taxes imposed in abnormal times, the revenues levied on non-Muslims - subjects or foreigners and also all the non-obligatory contributions. Juridical literature of early Islam, and particularly the sayings of the Prophet, leaves no doubt that the term sadaqat was employed in this sense. It did not refer at all to alms, which can be neither obligatory nor determined as to the quantity and the time of payment. The equivalent for alms is infaq fi sabil Allah, expenditure in the path of God, or tatauwu': voluntary charity.

Exceptional Taxes:

The sadaqat were the only taxes of the State in the time of the Prophet and the Orthodox Caliphs. In later times, on occasions of extraordinary need, the jurists have admitted the legal possibility of imposing supplementary charges, on a strictly provisional basis, for occasional exigencies. Such taxes are called nawa'ib (calamities).

Social Insurance: Only risks involving heavy charges form objects of insurance, and these differ according to the times and social conditions. Among the Arabs at the commencement of Islam, daily ailments were unknown and the cost of medical care was practically nothing. The average man built his house with his own hands, and did not pay even for the major part of the material. Thus it is easy to understand why one had no need of insurance against sickness, fire etc. On the contrary, insurance against captivity and against assassination were a real need. Already in the time of the Prophet, this point had received attention, and certain dispositions were made which had the elasticity of further development and adaptation to circumstances. Thus, in the Constitution of the City-State of Medina of the first year of the Hijrah, this insurance is called ma'aqil and it worked in the following manner. If someone was made a prisoner of war by an enemy, payment of ransom was needed to procure his liberation. Similarly, all bodily torts or culpable homicides required payment of damages or blood money. This often exceeded the means of the individual concerned, prisoner or criminal. The Prophet organized an insurance on the basis of mutuality. The members of a tribe could count on the central treasury of their tribe, to which everybody contributed according to his means. And if the treasury of the tribe proved inadequate, other related or neighboring tribes were under obligation to render aid. A hierarchy was established for organizing the units into a complete whole. At Medina, the tribes of the Ansarites were well known. The Prophet ordered the Meccan refugees there, who belonged originally to the various tribes of Mecca, or were Abyssinians, or Arabs belonging to different regions, to all constitute a new "tribe" of their own, for purposes of the said social insurance. Later in the time of the caliph 'Umar, the branches of insurance were organized on the basis of the profession, civil or military administration, to which one belonged (or even of regions). Whenever needed, the central or provincial government came to the succour of the branches, as we have described above when speaking of State expenditure. Insurance signifies essentially the repartition of the burden of an individual on as many as possible, in order to lighten the burden of each. Instead of the capitalistic companies of insurance, Islam preferred organizing insurance on the basis of mutuality and cooperation, aided by a pyramidal gradation of the branches culminating in the central government.

Games of Chance: In prohibiting these, the Qur'an (5:90) has characterized them as the "work of Satan" for cogent reasons. It is recognized that most social evils emanate from the bad distribution of the national wealth wherein some individuals become too rich and others too poor and as a result, they fall victim to exploitation by the rich. In games of chance and lotteries, there is great temptation for quick and easy gain - and so often easy gain is bad for society. Suppose that in horse racing (and other forms) and in either public or private lotteries, as well as all other games of chance, the people of a country spend 3 million pounds every week (as is the case in certain countries) in the course of only ten years, a sum of 1,560 millions of pounds will be collected from a very large number of the inhabitants and redistributed among a ridiculously small number of people. Less than one percent of the people thrive at the expense of the remaining 99 per cent. In other words, the 99 per cent are impoverished in order to enrich the 1 per cent so that one creates one per cent of millionaires by systematically ruining the other 99 per cent. Whether games of chance, including lotteries, are private or nationalized, the evil of accumulating wealth in the hands of the few at the expense of a very vast majority, works with full force. Hence the total prohibition of games of chance and lotteries in Islam. As in capitalistic insurance, games of chance bear one-sided risks.

Interest on Money-lending: Probably there is no religion in the world which has not prohibited usury. The distinctive trait of Islam is that not only has it forbidden this kind of gain, but it has also remedied the causes leading to the existence of this evil institution in human society: Nobody pays willingly an interest on what he borrows: he pays only because he requires money and he finds that he could not get it without paying interest. Islam has made a very clear distinction between commercial gains and interest on money-lending. The Qur'an (2:275) says: ". . . God permitted trading and forbade interest. . ." A little later (2:279), it says: "If you do not give up (interest), then be warned of war against God and His messenger; and if ye repent, then ye shall have your principal, (without interest); neither have ye wronged nor be wronged." The basis of the prohibition of interest is also the unilateral risk. For when one borrows a certain sum for earning an increase by the rich. In games of chance and lotteries, there is a great temptation for quick and easy gain, it is possible that circumstances should not have been propitious enough for earning sufficiently to be able to pay the promised interest, the lender not participating in the risks of the exploitation. In the case of commercial loans, there is also the system of mudarabah, in which one lends money and participates equally in gains as well as in risks. If, for instance, two individuals form a company, each one furnishing half of the capital and labour, then the distribution of the profit is not difficult. However, if the capital comes from one party and the labour from the other, or if the two furnish the capital though only one of them works,

or the proportions of the partners' share are not equal, in such cases a reasonable remuneration of the labour, on the basis of the previously agreed conditions is taken into consideration before the distribution of gains and profit is effected. Of course all possible precautions are taken, in order to prevent risks, yet Islam demands that in all contractual negotiations, the profit as well as the loss should be shared by both the contracting parties.

Statistics: In all planning, it is necessary to have an idea of the available resources. The Prophet organized the census of the Muslim population, as al-Bukhari informs us. In the caliphate of 'Umar, the census of beasts, fruit-trees, and other goods was organized; and cultivable lands were measured in the newly-acquired provinces. With a large spirit, full of concern for the well-being of the public, caliph 'Umar had the habit of inviting representatives of the people of different provinces, after the collection of taxes, to find out if they had any complaint against the behavior of the collectors during the year.

Daily Life: What a loss to those who are economically weak! The use of alcohol has the peculiarity that its consumption in a small quantity makes one gay and weakens his resolution to drink no more. And when one becomes drunk, one has loses control over one's acts. One may then squander money without noticing it. To these evils may be added the unhygienic effects of alcoholic beverages which are transmitted in the children and their progeny also. One of the Quranic verses (2:219) speaks of it in interesting terms: "They question thee about wine and games of chance; say: in both is great sin and some profits for men; but the sin of them is greater than their usefulness." (Qur'an 2:219). The Qur'an does not deny that there are certain profits in the use of alcohol, still it declares it a sin against society, against the individual himself, and of course against the Legislator. In another verse (5:90) it relegates it to the same level as idolatry, and declares it to be the handiwork of Satan. It adds that if one desires to be happy in both worlds, one should abstain from games of chance and alcoholic beverages.

Islamic socialism: Islamic socialism is a term coined by various Muslim leaders to counter the demand at home for a more spiritual form of socialism. Problems arise for Muslim socialists when Islamic scholars declare them to be atheist. It is for this reason that they tend to create a new brand of socialism they call Islamic socialism. One of the very notable persons in this context was the Pakistani leader of Pakistan People's Party, Zulfikar Ali Bhutto (1928 to 1979). He promoted Islamic socialism in order to calm down the people after the Islamic scholars declared him and his system to be atheist.

Scholars have highlighted the similarities between the Islamic economic system and socialist theory, e.g., both are against unearned income. Islam does allow private ownership but natural resources and large industries are owned collectively. Islamic vs. Conventional Economics – Addressing Property Ownership The issue on ownership right is always critical in any economic system. This is because wealth and well-being of the people, in term of material possession depend on how the economic system allocates the resources, rewards the factors of production and redistributes wealth created from the economic activities. Briefly, we can say that capitalism emphasizes on private property ownership which gives freedom to economic agents to accumulate material wealth with loose intervention from the authority. Interestingly, the system has successfully created list of names of the richest men in the world and at the same time, also faces problem of severe poverty and widening income disparity. Socialism, on the other side, confiscates the freedom of individual to own property. Basically, the state has full control in term of wealth creation, management and distribution. History has proven how Marx’s advocacy of equal distribution of wealth subtly, had been the cause and catalyst leading to the collapse of the system. From an Islamic point of view, as far as property ownership is concerned, visions on the matter have been outlined clearly. 1. Fundamentally, absolute ownership exclusively belongs to Allah AWT (Qur’an, 1:2). This means, everything in the universe are all owned by Allah. 2. Man is given the responsibility as trustee to manage this world (Qur’an 33:72). Our possessions are relative and conditional. 3. Because of the responsibilities given, man is accountable for all possessions in this world before Allah, the Almighty in the hereafter (Qur’an 84:7-15). 4. Islam recognizes labor as a legitimate basis of ownership (Qur’an 4:32). At the same time, need also is another legitimate basis of ownership. For example, in the case of poverty. 5. Public and private property ownerships are both allowed by Islam. Islam promotes the well-being of the people. Well-being here does not simply measured based on material possessions, but it also caters the spiritual and moral aspects. Hence, the Islamic economic system ensures freedom for mankind to progress within a guided parameter which suits the human nature (fitrah). At the same time, Islam also takes care of the welfare of the unfortunate people by many social security schemes in the religion

which some are made obligatory (i.e. Zakat) and some others are very recommended (i.e. sadaqat).

Islamic Economics vs. Conventional Economics: To compare Islamic economics with conventional economics (capitalism and socialism), we would critically evaluate both systems based on several common criteria. These criteria are selected because both systems have their own distinctive features in providing mechanism and solutions to the real-world problems. Hence, with the common criteria of comparison, it is hoped that we could clearly see the difference between Islamic economic system and the conventional economic system. We found that Islamic economics and the conventional economics are different in term of these six criteria: 1. Definition of economics. 2. Ownership of property. 3. Role of government. 4. Incentive mechanism. 5. Organization of decision making. 6. Activities – consumption, production, distribution and exchange.

Maqasid as-Shari'ah: In developing Islamic economics in the modern context, ijtihad in many times is required. To derive ijtihad, we need clear understanding of the primary sources. Usul alfiqh provides us the methodology to derive rulings from the sources of Shari’ah. Sometimes, there are no Quranic texts or hadith (nass) addressing certain issues. In this situation, scholars or researchers need Maqasid as-shari’ah (the objectives of shari’ah) as guidance.

Islam is neither capitalism nor socialism: Islam is neither capitalism (Right) nor socialism (Left). It is the comprehensive way of life decreed for mankind by Allah Almighty. In Islam we find principles and formulations aimed at shaping the individual as well as the collective life of man within the parameters of divine guidance contained in the Qur’an and the Sunnah. As Islam encompasses all areas of human life, both politics and economics come under its purview.

The two socio-economic systems predominant in today’s world are democratic capitalism and democratic socialism. The hallmarks of the former are private ownership and free markets, while those of the latter are collective ownership and state control. The United States and France are two countries that have adopted the democratic capitalist system, while China and India, for instance, have adopted democratic socialism. We find that both these systems suffer from inherent and systemic flaws that have made their practitioners leave their ideals and hastily adopt measures that undermine the very foundation of those systems. Thus, France often calls itself a socialist country, while China already shines with a capitalist hue. There is also the Communist system, which is described as the culmination of the socialist evolution. But it has never materialized in history and exists only in the dissertations of staunch ideologues. Communism is impracticable, as it seeks to violate human nature and basic instincts. In contrast with the above systems, the Islamic system approves of individual ownership in the case of certain things and collective ownership in certain other things. Islam also provides for the state ownership of some resources. Although the true Islamic political system does not exist now, (of course, there are some countries that call themselves, “Islamic”) it once flourished, producing dramatic results. It was Islam in its pristine purity that succeeded in transforming a primitive desert people into the most civilized nation of the time. The boundaries of the Islamic Empire then stretched between China in the East and the Atlantic Ocean in the West. It was the deviation from Islam that caused the failure of the Islamic Empire. Islam stands for the submission and subordination of all our interests and concerns to the One God; and the foundation of the Islamic state is the principle of the oneness of God. All humans, being the creations of the One God, are equal. Islam views man as a part of nature, which is destined to obey certain rules. The so-called natural laws are the laws of God; and as nature obeys God’s physical laws, nature is Muslim (that is, submitting peacefully to God’s laws). All the planets that float around the sun obey the unalterable laws of God, and so they are Muslim (submitting peacefully to God). Man is distinguished from other creatures of God by virtue of his reasoning power and free will. Man obeys two kinds of laws.

Socialism vs. Capitalism: Every one knows’s what Capitalism and Socialism is, or at least they think they do… Some based on what they “know” about each gives them a bias to side with either. Most use example’s of an attempt at either… but not the REAL thing. Let’s start comparing the two:

First, the basic definition of Capitalism; “Where the government basically pays for nothing… a free market, the people control the money”. Now the basic definition of Socialism; “Where the government pays for everything and takes complete care of things… everything is equal”. Analysis: In theory, just based on definition Socialism sounds better, in theory. Since based on the definition, in Capitalism the people may control the money, but then also that means some people will get more then others. While is Socialism, the government controls the money and everyone gets equal amounts! See the only problem is then, if someone does more work then someone else… they still get the same payment for it and in real life that isn’t equal, it isn’t even fair.

Positives and Negatives of each: In Capitalism, we have an equal chance of obtaining what is known as the American Dream, aka: Rags to Riches. Also in Capitalism, we have religious freedom and a sense of individuality. Sadly though, since Capitalism is also run by the people and Government has absolutly no control… There is the negative of having no police, firefighter’s, universal healthcare, or public school systems. All those items are run by the government, therefore having them is not capitalist. To be a true capitalist country, the people would have to pay for those nescessities themselves or go without. In Socialism, no one goes hungry or poor. Everyone has the right to everything but at a limit. There is universal healthcare, police, firefighters, and public schooling so everyone is educated. The downside, Religion is not allowed in a true Socialist society which could lead to much prosecution. Also, there is a need for extreme control on the people, since some may try to take advantage of such a government, but this is reality… not theory

Similarities and Differences Between the Socialism and Capitalism: Similarities Between the Socialism and Capitalism:    

Both require strong government support to survive. Both despise free enterprise. Both pretend to be something other than they are. Socialism has never existed except on paper. Capitalism is a form of usury the leads to what is now called fascism.

 The U.S. is supposed to enjoy free enterprise, which is why it is intentionally confused with capitalism by capitalist propaganda.  Both require strong control over the general population.

Difference Between the Socialism and Capitalism : Socialism and Communism are ideological doctrines that have many similarities as well as many differences. It is difficult to discern the true differences between socialism and communism, as various societies have tried different types of both systems in myriad forms, and many ideologues with different agendas have defined both systems in biased terms. Some general points distinguishing the two concepts, however, can still be identified. One point that is frequently raised to distinguish socialism from communism is that socialism generally refers to an economic system, while communism generally refers to both an economic and a political system. As an economic system, socialism seeks to manage the economy through deliberate and collective social control. Communism, however, seeks to manage both the economy and the society by ensuring that property is owned collectively, and that control over the distribution of property is centralized in order to achieve both classlessness and statelessness. Both socialism and communism are similar in that they seek to prevent the ill effects that are sometimes produced by capitalism. Both socialism and communism are based on the principle that the goods and services produced in an economy should be owned publicly, and controlled and planned by a centralized organization. Socialism asserts that the distribution should take place according to the amount of individuals' production efforts, however, while communism asserts that that goods and services should be distributed among the populace according to individuals' needs. Another difference between socialism and communism is that communists assert that both capitalism and private ownership of the means of production must be done away with as soon as possible in order to make sure a classless society, the communist ideal, is formed. Socialists, however, see capitalism as a possible part of the ideal state and believe that socialism can exist in a capitalist society. In fact, one of the ideas of socialism is that everyone within the society will benefit from capitalism as much as possible as long as the capitalism is controlled somehow by a centralized planning system. Another difference between socialism and communism is centered on who controls the structure of economy. Where socialism generally aims to have as many people as

possible influence how the economy works, communism seeks to limit that number to a smaller group.

Individual Conclusion About what we prefer Capitalism Or Socialism: It seems like I am living in a society of people that has come to view capitalism as bad, sometimes even evil. They find it offensive that someone could actually own something, and that the free market that capitalism creates is somehow unfair. I always wonder what could possibly bring someone to such a conclusion, because capitalism is perhaps one of the most unbiased economic systems in place today. Capitalism provides us all with the same opportunity. We just have to be willing to do what it takes to take advantage of those opportunities. I suppose that's why some people don't think it's fair, because we've become so used to "leveling the playing field." What people don't understand is that leveling the playing field doesn't only bring people up to a status they perhaps didn't earn; it also brings people down to a status they don't deserve. Capitalism, like any other fair economic system has ups and downs. Some people will do better than others at certain times. There isn't anything unfair about it, because we each have the choice about what we do with the given resources. We're free to decide to do with our money and our property, and it's not wrong if you succeed, and it's still not wrong if you fail. That's called life, and it's a shame that so many people want to artificially alter it. Under a capitalistic economic system, the sky is the limit. But it could be that unlimited potential that scares some people. Unfortunately there are people in this world who don't believe we know what to do with ourselves. They believe that a governing body should step in and say "Hold on a second there, you can't possible know what to do with your own life, with your own property, with your own money!" And that is how a little something called socialism was born, and like so many other bad ideas, it caught on. Instead of allowing people to realize their potential and the free market to naturally adjust with the ebb and flow of the economy, socialism puts a crimp in all of that. Private ownership all but ceases to exist. You become merely another citizen, perhaps just another number. You exist within the framework of the socialistic system, and the government takes care of the rest. There is no need for you to excel, because there is nowhere for you to go. There is no need for you to better your life, because the government has told you exactly how good it should be, and you should just be happy with that.

It's a sad existence for most. It breeds apathy, and eventually the system crumbles underneath itself. You would rarely see such things happen in a capitalistic system, because it naturally adjusts. With people who are willing to continue putting their efforts into the system, it will always find a way to thrive. The same simply cannot be said for socialism, because eventually people stop caring, and they stop putting their efforts into a system that will never reward them accordingly. Capitalism might not be perfect, but when you consider the alternative, it comes pretty close.

Conclusions: Islam as a religion and ideology needs to be revisited by both Muslims and non-Muslims alike. It is a religion that should be looked at as a continuation of previous religions and inheritor of them as well. As an ideology, Islam should be viewed as one that provides economic, political, and social systems that do not belong to the ideologies of materialism (both capitalism and socialism). After the fall and collapse of socialism, thepeople of the world resorted to capitalism as their only alternative. The collapse of capitalism is eminent. It is the responsibility and the duty of the people of the world to examine Islam with serious and sincere scrutiny, in order to consider it as the only viable alternative to capitalism. In practical terms an Islamic economic system is unlikely to differ fundamentally from other economic systems as far as goals, institutions, techniques are concerned. Indeed, it may be argued that the main differences from capitalist systems may be the absence of interest as a source of income and that the main difference from a socialist or certanally planned system.