Economial systems and Islam

ECONOMICAL SYSTEMS AND ISLAM

الرحیم الرحمن اللہ بسم

The Basic Economic Problems

• Determination of Priorities• Allocation of Resources• Distribution of Income• Development

The Economic Systems

•Feudalism•Capitalism•Socialism–Communism

•Islam

Feudalism

Feudalism

• In the year 650 AC– Spain– Sicily– Carsa– Sardania– Southern Italy

Feudalism

• End of sixth century – Iran– Syria– Palestine– Jordan– Lebanon– Egypt

Feudalism

• Europe was confronting with the problem of trade routes.

• Cultivation was their main occupation.

Feudalism

• The decline of the ROMAN empire– Small kingdoms– Feudal States.

Feudalism

• The landowners and feudal lords gave small pieces of land to farmers for cultivation. The produce was divided.

• It was the duty of the feudal lord to protect the life and honor of the farmer

• The farmer was bound to offer his military service when needed.

Feudalism

• The farmer was burdened with taxes• If his master was taken prisoner, farmer must

ransom him• When the daughter of the master was wedded

farmer has to arrange her dowry• Farmer had to bear the expenses of

celebration when his master’s son become chief

Feudalism

• The Crusade Wars– Muslims Lost Control over– Eastern Mediterranean Sea– Sicily– Cyprus

Feudalism

• Money Lenders• Progress in Transport• Thinking in Terms of National interests• Patriotism

Muslims Downfall and its Effects

• Muslims downfall in Spain– 1492 King Ferdinand and Queen Isabella defeated

Muslims– Turk Muslims rule over Constantinople and

captured River Bosbhorus and other Sea routes of Europe

Discovery of Ocean Routes

• In 1598 Vasco De Gama discovered an ocean route to India

• Doctrine of Discovery

Industrial Revolution

• Gold and Silver trade• Art of shipping attained new heights• New tools and methods of cultivation• Small farmers sold their land• Increase in city population• Many large and new cities and towns

Capitalism

Eighteenth Century

Capitalism

• Determination of Priorities– Law of demand and supply

• Allocation of Resources– Law of demand and supply

• Distribution of Income– Law of demand and supply

• Development– Law of demand and supply

Capitalism

• Factors of Production– Land – Labor– Capital– Entrepreneur

Capitalism

• Private Property• Profit Motive• Laissez Faire

Capitalism

• For economic solutions– Profit motive a Greed r– Law of supply and demand a– No prohibition of any kind in maximization of

profit r

Capitalism

• No prohibition of any kind in maximization of profit– Appeal evil desire of society– Un wanted inflation– Invest against social benefits– Monopoly

Capitalism

• No prohibition of any kind in maximization of profit– Difference in standard of living– GDP Un employment

Capitalism

• According to G. William Domhoff• As of 2007– The top 1% (upper class) owned 34.6% of wealth– 19% (Managerial professionals) 0wned 50.5%

• Which means 20% of people owned 85% of wealth.

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html (updated October 2009)

Capitalism

1%35%

19%50%

80%15%

Distribution of Wealth 2007

1% 19% 80%

Capitalism

• No prohibition of any kind in maximization of profit– Interest– Gambling– Speculation

Socialism

Socialism

• Determination of Priorities– Planning

• Allocation of Resources– Planning

• Distribution of Income– Planning

• Development– Planning

Socialism

• Factors of Production– Land • Hence it is not in the ownership of anyone, so no need

to pay rent.– Labor• Government will decide the wedge.

Socialism

• Capital– Result of Production

• Entrepreneur– Labor– Actually State is the risk taker

Socialism

• Collective Property• Planning• Collective interest• Equitable distribution of Wealth

Socialism

• Human error and Chances of Corruption• Tyrant State• Decrease in Performance

Islamic Finance

Islamic Finance

• Islam is a complete deen it is not an economic or financial system

Islamic Finance

• Islam does not reject the supply and demand theory

Islamic Finance

• But there are certain prohibitions1. From the creator– Forever– For economic stability– For the well being of society

Islamic Finance

2. From the state– They are temporary

3. Moral

Islamic Finance

• Factors of Production– Land – Labor– Entrepreneur– The Owner• Zakat• Ushar• Sadaqat• The holy Slaughtering

Islamic Finance

• Difference between Land and Capital

Land CapitalUsable by itself and remains with in your hand after use

Does not have its own use only a medium of exchange.

Accept depreciation Does not depreciate

Risk belongs to the owner Does not belong to the owner

Islamic Finance

• That is why Islam does not consider capital same as land

• So you can get rent for the land • Not interest for the capital• If you want profit so bear the risk

Assignment