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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