The Economic System of Islam
1-An introduction to the principles Islam has legislated to guide the econo=
mic system of society. Part 1: The sources from which the laws that guide e=
conomical activity are derived.
2-The Ideological Basis of Economic Activity and the general principles by =
which they are guided
=20
Introduction
As a complete way of life, Islam has provided guidelines and rules for ever=
y sphere of life and society. Naturally, a functioning economic system is =
vital for a healthy society, as the consumption of goods and services, and =
the facilitation of this by a common medium of exchange, play a major role =
in allowing people to realize their material and other goals in life.
Islam has set some standards, based on justice and practicality, for such e=
conomic systems to be established. These standards aim to prevent the enmi=
ty that often occurs between different socioeconomic sections. Of course, =
it is true that the gathering of money concerns almost every human being wh=
o participates in transactions with others. Yet, while these standards rec=
ognize money as being among the most important elements in society, they do=
not lose sight of the fact that its position is secondary to the real purp=
ose of human existence, which is the worship of God.
An Islamic economic system is not necessarily concerned with the precise am=
ount of financial income and expenditure, imports and exports, and other ec=
onomic statistics. While such matters are no doubt important, Islam is mor=
e concerned with the spirit of the economic system.
A society that implements Islamic laws and promotes Islamic manners will fi=
nd that it bring together all the systems =96 social, economic, and so fort=
h =96 that it deals with. Islam teaches that God has created provision for=
every person who He has brought to life. Therefore, the competition for n=
atural resources that is presumed to exist among the nations of the world i=
s an illusion. While the earth has sufficient bounty to satisfy the needs =
of mankind, the challenge for humans lies in discovering, extracting, proce=
ssing, and distributing these resources to those who need them.
Islam consists of a set of beliefs which organizes the relationship between=
the individual and his Creator; between the person and other human beings;=
between the person and universe; and even the relationship of the person t=
o himself. In that sense, Islam regulates human behavior, and one type of =
human behavior is economic behavior. Economic behavior is dealt by Muslims=
as a means of production, distribution, and consumption of goods and servi=
ces. In Islam, human behavior -whether in the economic area or others - is=
not value free; nor is it value neutral. It is connected with the ideolog=
ical foundation of the faith.
The Sources of Islamic Economics
The fundamental sources of Islam - the Quran and the Sunnah of the Prophet[=
1] - provide guidelines for economic behavior and a blueprint of how the ec=
onomic system of a society should be organized. Therefore, the values and =
objectives of all =93Islamic=94 economic systems must necessarily conform t=
o, and comply with, the principles derived from these fundamental sources. =
The purpose of these articles is to outline the most salient characteristi=
cs of an economic system based on the fundamental sources of Islam. The fo=
cus here is on the principal features of the Islamic system.
The Islamic economic system is defined by a network of rules called the Sha=
riah. The rules which are contained in the Shariah are both constitutive a=
nd regulative, meaning that they either lay the rules for the creation of e=
conomic entities and systems, as well the rules which regulate existing one=
. As an integral part of the revelation, the Shariah is the guide for human=
action which encompasses every aspect of life =96 spiritual, individual, s=
ocial, political, cultural, and economic. It provides a scale by which all=
actions, whether on the part of the individual agents, society, and the st=
ate, are classified in regards to their legality. Thus there are five type=
s of actions recognized, namely: obligatory; recommended; permissible; disc=
ouraged; and forbidden. This classification is also inclusive of economic =
behavior.
The basic source of the Shariah in Islam is the Quran and the Sunnah, which=
include all the necessary rules of the Shariah as guidance for mankind. T=
he Sunnah further explains these rules by the practical application of Prop=
het Muhammad, may the mercy and blessings of God be upon him. The expansio=
n of the regulative rules of the Shariah and their extensions to new situat=
ions in later times was accomplished with the aid of consensus of the schol=
ars, analogical reasoning - which derived rules by discerning an analogy be=
tween new problems and those existing in the primary sources - and finally,=
through textual reasoning of scholars specialized in the Shariah. These f=
ive sources - the Quran, the Sunnah, consensus of the scholars, analogical =
reasoning, and textual reasoning - constitute the components of the Shariah=
, and these components are also used as a basis for governing economic affa=
irs.
Justice
In summary, we can say that the Islamic Economic system is based upon the n=
otion of justice It is through justice that the existence of the rules gov=
erning the economic behavior of the individual and economic institutions in=
Islam can be understood. Justice in Islam is a multifaceted concept, and =
there several words exist to define it. The most common word in usage whic=
h refers to the overall concept of justice is the Arabic word =93adl=94. T=
his word and its many synonyms imply the concepts of =93right=94, as equiva=
lent to fairness, =93putting things in their proper place=94, =93equality=
=94, =93equalizing=94, =93balance=94, =93temperance=94 and =93moderation.=
=94 In practice, justice is defined as acting in accordance with the Sharia=
h, which, in turn, contains both substantive and procedural justice[2] cov=
ering economic issues. Substantive justice consists of those elements of j=
ustice contained in the substance of the Shariah, while procedural justice =
consists of rules of procedure assuring the attainment of justice contained=
in the substance of the Law. The notion of economic justice, and its atte=
ndant concept of distributive justice, [3] is particularly important as an=
identifying characteristic of the Islamic economic system. The rules gove=
rning permissible and forbidden economic behavior on the part of consumers,=
producers and government, as well as questions of property rights, and of =
the production and distribution of wealth, are all based on the Islamic vie=
w of justice.
The following topics will be discussed in the following articles:
(a) individual obligations, rights, and self-interest;
(b) property rights; =20
(c) importance of contracts;
(d) work and wealth;
(e) the concept of barakah;
(f) economic justice;
(g) prohibition of interest (riba);
(h) competition and cooperation; and
(i) the role of the state.
The Ideological Basis of Economic Activity
The ideological basis in Islam may be summarized into six basic principles:
The cornerstone is that everything has to start from the belief in God as t=
he Creator, Lord, and Sovereign of the universe. This implies willingness =
to submit to God=92s will, to accept His guidance, and to have complete and=
unqualified servitude to Him. This means that Muslims - individually and =
collectively - should not imitate or emulate any other system if it differs=
from their particular principles, for example, the system of usury or inte=
rest.
The second basic principle is that Islam, as a religion, is a complete way =
of life; something that guides a person=92s life in all its aspects: the mo=
ral, social, ethical, economic, political, etc. All of these aspects are b=
ased on the guidance of God. Therefore, it is not a question of the person=
=92s acceptance of God=92s teaching in one matter and the refusal of accept=
ance in another. Everything has to be within that basic guidance.
=93=85And we have revealed to you in stages this book, a clarification of =
all things, a guidance, a mercy, and glad tidings=85=94 (Quran 16:89)
A third principle is that God created human beings on earth as His trustees=
, which means that everyone is created to fulfill a certain responsibility =
on this earth. God has entrusted human beings with free will in order that=
they live their lives according to the moral and ethical values that He Hi=
mself provided. In addition, Islam provides an opportunity in material pro=
gress, thereby combining moral, social, and material progress, all interlin=
ked in harmony.
The fourth principle is that God, in order to help humankind to fulfill the=
responsibility of trusteeship, has made everything in this universe subser=
vient to them. There are many verses in the Quran that suggest this meanin=
g, such as:
=93God is He Who made subservient to you the sea that the ships may run the=
rein by His command, and that you may seek of His grace, and that you may g=
ive thanks.=94 (Quran 45:12)
This does not mean, however, that humans are given free reign to use and ab=
use the resources God has provided us however we choose. Rather, there are=
many verses that urge humankind to harness the various resources that God =
has made available to them on this earth responsibly. Humans are encourage=
d to enjoy of the good things that God has created, but they are to do so w=
ithin the boundaries that He has given. Doing so is not regarded as sinful=
as long as it follows His path and does not transgress His limits. God sa=
ys:
=93It is He Who produces gardens, with trellises and without, and dates, an=
d tilth with produce of all kinds, and olives and pomegranates, similar (in=
kind) and different (in variety): eat of their fruit in their season, but =
render the dues that are proper on the day that the harvest is gathered. B=
ut waste not by excess: for God loves not those who waste.=94 (Quran 6:141)
The fifth principle is the principle of accountability in the Hereafter. G=
od has given human beings trusteeship and resources. This means that every=
single person will be questioned on the Day of Judgment as to how he or sh=
e behaved whilst enjoying his or her earthly life. This, of course, includ=
es our economic behavior. God says:
=93And then on that Day (the Day of Resurrection) you will be called to acc=
ount for every comfort and delight [we bestowed upon you].=94 (Quran 102:8)
The sixth principle is that the variation in wealth among people in itself =
does not give a person either inferiority or superiority. Rather, poverty =
and affluence are in the total control of God Who, out of His Infinite Just=
ice and Wisdom, has specified these things for whom he chooses.
=93Indeed God increases provision to whom He pleases and straitens it [in r=
egards to others]=85=94 (Quran 13:26)
Affluence, like poverty, is also seen as a trial from God, one through whic=
h it is seen what one will do with their wealth =96 indulge oneself or use =
constructively in ways legislated in the religion, God says:
=93Your wealth and your children are only a trial, whereas God! With Him is=
a great reward (Paradise).=94(Quran 64:15)
After being bestowed with numerous gifts and bounties and a kingdom incompa=
rable to any other on the earth, God in the Quran narrates that Solomon sai=
d:
=93=85This is from the bounties of my Lord, to test me whether I will be th=
ankful or ungrateful=85=94 (Quran 27:40)
God is not concerned with the amount of wealth a person may have amassed, t=
heir beauty or color, but rather, His measure of honor is the piety of the =
hearts. God says:
=93On humankind! Indeed We created you from a male and female, and we made =
you different nations and tribes, that you may come to know one other. Ind=
eed the most honored amongst you are the most God-conscious.=94 (Quran 49:1=
3)
The Prophet also said:
=93Indeed God is not concerned with your appearances nor your wealth, but r=
ather your hearts and deeds.=94 (Saheeh Muslim)
As one can immediately surmise from these principles that the Islamic econo=
mic system is radically different from others, due to the difference of the=
values upon which it is based. In a capitalist society, one may see certa=
in rules of economics which take precedence over moral and ethical values d=
ue to the intrinsic nature and values of that system. The same may be seen=
in communist, socialist and other societies as well. From the principles =
mentioned in these articles does the Islamic system of economics spring, st=
riking balance between personal benefit and the benefit of society as a who=
le, as well as mundane profits and spiritual gains, all which ensure that o=
ne gain the Pleasure of the Lord of the Worlds.
[1] The Sunnah is general body of narrations of the speech, deeds, and taci=
t approvals of the Prophet.
[2] =93Substantive justice means reaching the =91right=92 result. Procedura=
l justice means getting the result in the =91right=92 way.=94 (A speech en=
titled =93Effective Arbitration Techniques in a Global Context=94 delivered=
by the Secretary for Justice of Hong Kong ,Ms Elsie Leung)
[3] =93Normative principles designed to allocate goods in limited supply re=
lative to demand.=94 Stanford Encyclopedia of Philosophy:
(http://plato.stanford.edu/entries/justice-distributive/)
http://www.islamhouse.com/429666/en/en/articles/The_Economic_System_of_Isla=
m
Thank you