The Economic System of Islam


The Economic System of Islam

Introduction to the Economic System

Thoughts, in any nation, are the greatest fortune the nation gains in her life if the nation is newly born; and they are the greatest gift that any generation can receive from the preceding generation, provided the nation is deep-rooted in the enlightened thought.

With regard to material wealth, scientific discoveries, industrial inventions and the like, all of these are of much lower importance than thoughts. In fact, to gain such matters depends on the thoughts, and preservation of these matters depends on the thoughts as well. If the material wealth of a nation is destroyed, it is possible for it to be restored quickly as long as the nation preserves its intellectual wealth.

However, if the intellectual wealth collapses and the nation retains only its materialistic wealth, this wealth will soon shrink and the nation will fall down into poverty. Most of the scientific achievements which the nation once made can be regained, provided it does not lose its way of thinking.

Whereas, if it lost the productive way of thinking, it would soon regress and lose its discoveries and inventions. Therefore, it is necessary to take care of the thoughts first. Based upon these thoughts, and according to the productive way of thinking, material wealth is gained, and the achievement of scientific discoveries, industrial inventions and the like is sought.

What is meant by thoughts is the existence, within the nation, of the process of thinking in it’s life affairs, such that the majority of its individuals use the information that they have when facing events, so as to judge on them. This means that they have thoughts which they contrive to use in life, and by using these thoughts frequently and successfully, a productive way of thinking results.

Today, the Islamic Ummah is lacking in thoughts, so it is naturally deprived of the productive way of thinking. The present generation did not receive from its preceding generation any ideas, be they Islamic or non-Islamic and naturally; it did not receive a productive way of thinking. Nor did it attain by itself any thoughts or a productive way of thinking. As a result, it is natural for this generation to be seen in poverty, despite the abundance of material resources in its lands. Likewise, it is natural to have no scientific discoveries and industrial inventions even though it studies the theories of these discoveries and inventions and is aware of them. This is because it is impossible to rush to gain them in a productive way, unless it possesses a productive way of thinking i.e. unless it has thoughts and it is creative in using their thoughts in life. Therefore, it is inevitable for the Muslims to establish for themselves thoughts and a productive way of thinking. Thereafter, they will be able to proceed, based on that, to acquire material wealth, make scientific discoveries, and industrial inventions. Unless they do this, they will not proceed a single step; rather they will continue to go around in a vicious circle, exhausting their mental and physical efforts, only to end up exactly where they began.

The present generation of Muslims has not even adopted a basic thought which contradicts their ideology of Islam, which we aim to establish amongst them. If it had done so, it would have been able to fully comprehend the Islamic ideology given to it, because this comprehension would have resulted from a clash between the Islamic ideology and the one carried by this generation, making the Ummah realise the correctness of the Islamic ideology. Rather, the current Islamic generation is empty of any thought and of any productive way of thinking. Instead, it inherited the Islamic thoughts as an academic philosophy, in the same way that the Greeks inherited the philosophies of Aristotle and Plato. It also inherited Islam as rituals and religious dogma, in the same way the Christians inherited Christianity. At the same time, it became fascinated with Capitalism after witnessing its successes, and not through comprehending the validity of its thoughts; and from its submission to its rules, and not from comprehending how these solutions emanate from the Capitalist viewpoint of life. Therefore, the Ummah is devoid of the Capitalist thoughts intellectually, although it lives according to the Capitalist way of life. The Ummah also became devoid of the Islamic thoughts in practice, although it conducts some of its rituals and studies its thoughts.

The tendency of this generation towards the Capitalist ideas went far beyond just reconciling Islam with the Capitalist laws and solutions. It has now reached such an extent that there is a feeling of Islam being incapable of solving contemporary problems of life, and there is an urge to take Western laws as they are, without even reconciling them with Islam. The Ummah came to see no harm in giving up Islamic rules and adopting others, in order to progress with the civilised world, and catch up with the Capitalist and Socialist nations, considering them as progressed peoples. As for those who adhere to Islam, they have the same tendency towards the Capitalist thoughts, but they still try to reconcile them with Islam. However, those who try to reconcile Islam with other thoughts have no influence in life, nor do they have any presence in society, i.e. in the actual relationships that go on between the people.

Therefore, the delivery of the Islamic thoughts and rules which solve problems of life, collides with minds, empty of thought and a way of thinking. Instead it clashes with inclinations, from all the people, towards the Capitalist and Socialist thoughts, and with the way of life currently governed by Capitalism. So unless the given thought is strong enough to cause a shake-up in the hearts and minds, it will be impossible to move the people, nor even attract their attention to it. This thought has to push the dull shallow minds to think deeply, and it has to shake off the deviated inclinations and the sick tastes, so as to establish the sound inclination towards the Islamic thoughts and rules.

Consequently, it is necessary for the carrier of the Islamic Da’wah to expose the foundation upon which the Capitalist solutions are established, illustrate their falsehood and destroy them intellectually. He has to address the various new issues of life and show the Islamic solutions to these issues as divine rules which must be followed, because they are rules derived from the Qur’an and Sunnah, or from what these two evidences have directed to, and not from the perspective of whether or not they are suitable for this time. That means they have to be taken based on the Aqeedah and not based on their perceived benefit. So each rule has to be given along with the divine evidence from which it was derived, or by explaining the divine reason (Illah) which the rule or the text brought.

The thoughts related to the ruling system and economics are the thoughts which most fascinated the Muslims, and made them suffer the severest tribulations in their lives. The Muslims generally admired these thoughts, and the West tries to practically apply these thoughts, and persists in its endeavours to implement them. Although the Ummah is theoretically governed by democracy on purpose by the infidel colonialists, in order to protect the Western system and colonisation, she is governed practically by the Capitalist economic system in all the economic aspects of life. Therefore, the Islamic economic thoughts are those which will have the greatest influence in the economic life of the Islamic world, so much so that they will turn it upside down and they will be most opposed by the agents of the infidel colonialist, and those who are fascinated by the West, namely those who are pleased to live in the darkness, the defeatists and the rulers.

Therefore, it is necessary to give a clear picture of the Capitalist economic system, which classifies the basic thoughts upon which the political economy in the West is established, so that those who have become fascinated with the Western economic system can come to see the corruption of this system and its contradiction with Islam. They will then examine the Islamic economic thoughts which address the problems of economic life in the correct manner, and present them as a unique way of life which contradicts the Capitalist life in both its general principles and in its details.

The Capitalist Economic System

If we examine the Capitalist economic system we find that, in their view, it deals with man’s needs and the means of satisfying those needs. It only addresses the materialistic side of man’s life and it is established on three principles:

1. There is a relative scarcity of commodities and services in relation to needs. This means the insufficiency of commodities and services to meet the ever-increasing needs of man. This is the society’s economic problem from their viewpoint.

2. The value of a product which is the basis of most economic research and study.

3. The price, and its role in production, consumption, and distribution.

The price is the cornerstone of the Capitalist economic system. With regard to the relative scarcity of commodities and services, this situation exists because the commodities and services are the means which are used to satisfy man’s needs. They say man has needs that require satisfaction, so there must exist the means to satisfy them. These needs are purely materialistic; they are either tangible, such as the need for food and clothing, or they are needs which are sensed by man but are intangible, such as the need for the services of, for example, doctors and teachers. As for the moral needs such as pride and honour, or spiritual needs such as the sanctification of the Creator, they are not recognized economically, and are therefore disregarded and have no place in economic studies.

The means of satisfaction are called commodities and services. Commodities are the means of satisfying the tangible needs, whereas services are the means of satisfying the intangible needs. What makes commodities and services satisfy the needs, in their viewpoint, is the benefit in these commodities and services. This benefit is an attribute which renders the thing desirable for satisfying a need. Since the need means the economic desire, then the economically beneficial thing is everything desired, whether it is essential or not, and even if some consider it beneficial and others consider it harmful. It is considered economically beneficial as long as there is someone who finds it desirable. This makes them consider things as beneficial from an economic viewpoint even if the public opinion considers them of no benefit, or harmful. Thus wine and hashish are beneficial things to the economists since there are people who want them.

The economist looks upon the means of satisfaction, that is, the commodities and services, from the viewpoint that they satisfy a need, without taking any other factor into consideration. Thus, he looks at the needs and the benefits as they are, not as they should be i.e. he looks at benefit as satisfying a need, without taking anything else into consideration. So he would look at wine in its capacity of having an economic value because it satisfies the needs of some people, and he perceives the wine maker as a person who provides a service, considering this service as having an economic value, because it satisfies the need of some individuals.

This is the nature of needs in Capitalism and the nature of the means of satisfying these needs. Hence, the economist does not care about the nature of society, but cares about the economic material resources (economic commodities), since they satisfy a need. Therefore, the function of the economist is to supply commodities and services i.e. to provide the means of satisfying man’s needs, irrespective of any other consideration. Accordingly, the economist strives to make available the means of satisfaction. Since the commodities and services, which are the means of satisfaction are limited, they are not sufficient to meet all of man’s needs, because these needs in their view are unlimited and constantly growing. This is because there are basic needs which man as a human must satisfy, and there are needs which increase in number as man proceeds to a higher level of urbanisation. These needs multiply and increase and they all need complete satisfaction, a situation which cannot be fulfilled no matter how much commodities and services increase. From here the basis of the economic problem emerged, which is an overabundance of needs and the shortage of the means of their satisfaction i.e. the lack of commodities and services to completely satisfy all of man’s needs.

From this perspective, the society faces an economic problem, which is the relative shortage of commodities and services. The inevitable result of this shortage is that some needs are either partially satisfied or not satisfied at all. Since this is the situation, it is necessary that the members of society agree on rules that decide which needs have to be satisfied and which needs are to be deprived. In other words, it is necessary to set a rule that decides the manner of distributing the limited resources over the unlimited needs. So the problem to address in their view is the needs and resources and not the man. Thus, the problem is to make available the resources so as to satisfy the needs, but not necessarily the needs of every individual. Therefore, it is necessary that the rules which are laid down, be rules which guarantee the achievement of the highest possible level of production, so as to achieve the highest supply of resources i.e. to supply the goods and services to the nation as a whole, but not necessarily to each individual. Therefore, the problem of distributing the goods and services is closely connected to the problem of production, and the objective of economic studies and research is to increase the goods and services which are consumed by the society. It is not surprising therefore, that the study of the factors which affect the size of the national production (GDP and GNP) takes precedence over all economic studies. Because the study of increasing the national production is one of the most important studies to solve the economic problem, that is the scarcity of the commodities and services in relation to the needs. For they believe that poverty and deprivation cannot be solved except by increasing production. Therefore, solving the economic problem facing society is only by increasing production.

The value of the product means its degree of importance, whether relative to a particular person or relative to another thing. In the first case, it is called ‘the value of the benefit’. In the second case, it is called the ‘value of exchange’. The value of the benefit of a thing can be summarised as: the value of benefit of any unit of a thing is evaluated by its marginal benefit i.e. by the benefit of the unit that satisfies the weakest need. They called this ‘The Theory of Marginal Utility’. This means that the benefit is not evaluated according to the viewpoint of the producer alone i.e. evaluated by the costs of its production, since this would mean consideration of supply without demand. Nor is it evaluated from the viewpoint of the consumer alone i.e. evaluated by its benefit and desirability, as well as looking at its relative shortage, because this would mean the consideration of demand without supply. In fact, they claim that benefit should be observed from the viewpoint of supply and demand together. Thus the benefit of a thing is assessed at the last point that satisfies the need i.e. at the minimum point of satisfaction. Therefore, the value of a loaf of bread is assessed at the minimum point of hunger not at its maximum, and at a time when there is an availability of bread in the market, not at a time when there is a shortage.

As for the value of exchange, it is an attribute which makes a thing suitable for exchange. The strength of exchange of a thing is measured relative to another, so the value of exchange of wheat relative to corn is estimated by the units of corn which should be conceded to obtain a unit of wheat. They refer to the value of the benefit using the term ‘benefit’ only, and refer to the value of exchange using the term ‘value’ only.

Exchange occurs between two commodities or services which are similar or close in their values. Hence, the study of value was necessary for economists; because it is the basis of exchange, and it is a utility which can be measured; it is a scale with which the commodities and services are measured and by which actions are judged as productive or not.

Production, in their view, is creating a benefit or increasing it, which is accomplished by work. So, to identify works as being productive or not, and to know which are of greater productivity, there must be an accurate scale for the various products and services. This scale is the societal value of the various products and services. In other words, it is the collective evaluation of the work spent and the service provided. Such an evaluation became necessary, because in the modern time, production for the purpose of exchange has replaced production for consumption. The situation now arises whereby virtually every person exchanges his production with other people’s production. The exchange is achieved by the existence of compensation for the commodity or service, so there must be an estimation of the value of the commodity in order that it can be exchanged. Hence, knowledge of the value in terms of what it is, is an essential factor in production and consumption i.e. an essential factor towards satisfying man’s needs, by using these means.

In modern history, this value of exchange has been identified by one of its values, and this type of value has become predominant. In developed communities, the values of commodities are not related to each other but are related to a certain commodity called money. The exchange ratio of a commodity or a service with money is called its price.

The price therefore, is the amount of exchange of a commodity or a service relative to money. Hence, the difference between the value of exchange and the price is that the value of exchange is the ratio of an exchange of one thing with another, whether that thing is money, commodities, or services; while the price is the exchange value of a thing with money. This means that it is possible that the prices of all goods rise at any one time, and all fall at any one time, whilst it is impossible that the exchange values of all commodities relative to each other rise or drop at any one time. It is also possible for prices of commodities to change without resulting in a change in their value of exchange. Therefore, the price of a commodity is one of its values; in other words it is the value of a commodity relative to money only. Since the price is one of the values, it is natural for price to be taken as a scale for deciding whether a thing is beneficial or not, and the degree of benefit of that thing. Therefore, the commodity or the service is considered as productive or beneficial if the society evaluates this particular commodity or service by a particular price. The degree of benefit of this commodity or service is measured by the price which the majority of the consumers agree to pay for possessing or utilising it, whether this commodity is an agricultural or industrial product, and whether the service is that of a trader, transportation company, doctor, or engineer.

As for the role which the price plays in production, consumption, and distribution, it is the price mechanism that decides which of the producers will enter the production race and which will be excluded. In the same manner, price decides which of the consumers will satisfy their needs and which consumers will not be able to do so. The production cost of a commodity is the principal factor which governs its supply in the market, while the benefit of the commodity is the principal factor which governs the demand in the market for it, and both are measured by the price. Therefore, the study of supply and demand is the fundamental issue in the Capitalist economy.What is meant by the supply is the supply of the market, and what is meant by demand is the demand of the market. As demand cannot be defined without mentioning the price, supply too cannot be evaluated without the price. However, demand changes inversely proportional to the change in price i.e. if price increases, demand decreases, and if price decreases then demand increases. This is contrary to supply which changes directly proportional to the price i.e. the level of supply increases as the price increases and it drops as price decreases. In both cases, price has the greatest effect upon supply and demand, that is, it has the greatest effect upon production and consumption.

The price mechanism in the view of the Capitalists is the ideal method of distribution of commodities and services amongst individuals in society, since the benefits are the result of the efforts which man expends. So, unless the compensation is equal to the effort, then, no doubt, the level of production will drop. Therefore, the ideal method to distribute commodities and services in a society is that which guarantees the highest possible level of production. This method is the price method which is also called the price system or the price mechanism. They consider that the price mechanism produces economic equilibrium automatically, since it gives the consumers the choice to decide for themselves the distribution of the resources owned by the society over the various economic activities, through the consumers demand for some commodities and their turning away from others. Hence they spend their income by buying what they need or what they like. Thus, the consumer who dislikes wine will abstain from buying it and spends his income on other things. If the number of consumers who dislike wine increased, or if all came to dislike it, then the production of wine becomes unprofitable due to decreasing demand. Thus, production of wine would stop naturally, and the same rule applies to other commodities and services. The consumers themselves define the level and kind of production by being left free to decide what to buy and what to leave. Via the price itself, the distribution of commodities and services occurs whether or not the price is available to the producers, and whether or not they give it to the producers.

The price mechanism is the incentive for production, it is the regulator of distribution, and the link between the producer and the consumer i.e. it is the means which achieves equilibrium between production and consumption.

The price mechanism is the incentive for production, because the principal motive for man to undertake any productive effort or sacrifice is his material reward. The Capitalist economists exclude the possibility that man expends effort for a moral or spiritual motive. The moral motive, when they do recognise it, is attributed to a materialist compensation. They consider that man expends his efforts to satisfy his materialistic needs and wishes only. This satisfaction is either through the consumption of commodities which he produces directly, or through receiving a monetary reward that enables him to obtain the commodities and services produced by others. Since man depends in satisfying most of his needs, if not all of them, on exchanging his efforts with others, then the satisfaction of needs is focused on obtaining a monetary reward for his efforts. This monetary reward allows him to obtain commodities and services, and accordingly he is not focused on obtaining the commodities which he produces. Therefore, the monetary reward, which is the price, is the motive for man to produce. Hence, the price is the means which motivates the producers to offer their efforts. Thus the price is the incentive for production.

The price is the means which regulates distribution, because man likes to satisfy all of his needs completely and he strives to obtain the commodities and services which satisfy these needs. Had every human being been left free to satisfy his needs he would not stop short of possessing and consuming whatever commodity he likes. Since every man strives for this same aim, everybody has to stop in satisfying his needs at the limit at which he can afford to exchange his efforts with others efforts, that is at the limit of the monetary compensation which he receives for expending his effort i.e. at the limit of the price. Therefore, the price is the constraint which acts naturally to restrict man in his possession and consumption to a level which is proportional to his income. So the existence of the price makes man think, evaluate, and differentiate between his competing needs which require satisfaction, and he takes what he finds necessary, and leaves what he finds of less importance. Thus, the price forces the individual to settle for partial satisfaction of some of his needs, so as to be able to satisfy the other needs which he considers no less important.

So, the price is the tool which regulates the distribution of utilities required by individuals. The price also regulates the distribution of limited utilities amongst the consumers who demand these utilities. The disparity in income of the consumers makes the consumption of each individual confined to that which his income allows. This makes some commodities confined to only those who can afford them, while the consumption of other commodities would become common amongst people who can afford the lower prices. Therefore, the price will become the regulator in distributing utilities amongst consumers by setting a high price for some commodities and services and a low price for others, and also by the suitability of the price to some consumers more than others.

The price achieves equilibrium between production and consumption, and it is the link between the producer and the consumer, because the producer who fulfils the desires of the consumers is rewarded through profits. On the other hand, the producer whose products are not accepted by the consumers, would end up with losses. The method through which the producer can detect the desires of the consumers is the price. If the consumers demand any particular commodity its price will increase, and the production of that commodity will increase, in fulfilment of the consumer’s desires. If consumers turn away from buying a particular commodity, its price will drop in the market, and so production of this commodity will decrease. So, the resources assigned to production increase as the price increases, and decrease as the price decreases. In this way the price is the tool which achieves equilibrium between production and consumption, and it is the link between the producer and the consumer, and this process occurs automatically. Therefore, the price is the basis on which the economy is established in the view of the Capitalists, and it is the cornerstone of the economy to them.

This is a summary of the economic system in Capitalism, which is called the political economy. By studying it thoroughly, the falsehood of the Capitalist economic system can be shown from many aspects:

1. Mixing the Needs and the Means of Satisfaction

Economy in Capitalism means to address man’s needs and the means of their satisfaction. Hence the production of commodities and services, which are the means of satisfying the needs, together with the distribution of these commodities and services are considered in their view, one subject. The needs and the means of their satisfaction are considered to be interrelated such that they are one subject, inseparable from each other, as if one of them is included within the other. So, the distribution of commodities and services is included in the subject of the production of these commodities and services. Thereupon, they look at the economy from one angle which includes the economic commodities and the method of their possession, without separation between them and without differentiating one of them from the other. Thus, they hold one view towards the economic science and the economic system without differentiating between them. However, there is a difference between the economic system and economic science.

The Economic System versus Economic Science

The economic system is that which determines how to distribute the wealth, how to possess it, and how to spend or dispose of it. This determination follows a particular viewpoint in life, or ideology. Therefore, the economic system in Islam is different from that of Socialism/Communism and that of Capitalism, since each of these systems follows its own ideological viewpoint of life. Economic science discusses production, its improvement, invention and improvement of its means. Economic science, as is the case with other sciences, is universal to all nations and is not associated with a particular ideology. So for example, the view towards ownership in Capitalism differs from that of Socialism/Communism, and differs from that in Islam. However, discussing the improvement of production is a technical issue, which is purely scientific, and the same for all people, no matter what their viewpoint about life is.

This merger between the study of the needs and the means of their satisfaction i.e. between producing the economic material and the manner of its distribution, and bringing them as one issue and one subject, is an error, which resulted in mixing and interference in the capitalists studies of economy. As a result the basis of the Capitalist economy is wrong.

2. Needs are only Materialistic

The reference to the needs which require satisfaction as being purely materialistic is an error, and contradictory to the reality of needs. In addition to material needs there are moral and spiritual needs, each requiring satisfaction, and each requiring commodities and services for their satisfaction.

3. Commodities and Services are not related to the structure of the society

The Capitalist economists look to the needs and benefits as they are, not as the society should be, which means that they look at man as a purely materialistic creature, empty of spiritual needs, ethical thoughts, and moral objectives. Similarly they do not care about how the society should be structured in terms of moral elevation, by making the virtues the basis for society’s relationships or what should prevail in the society by way of spiritual elevation i.e. making the realisation of man’s relationship with Allah (realising the existence of Allah) the driving force behind all relationships, for the sake of attaining the pleasure of Allah. The Capitalist economist would not care for this since his interest is purely material in terms of what satisfies the materialistic needs. So, if man does not cheat in selling it is because he believes his trade will profit, while if he were to profit by cheating, then cheating would be legal for him. He does not feed poor people in response to the order from God for him to give charity, rather he feeds them so that they do not steal from him. If, however, their starvation increases his wealth then he would leave them to starve. Thus, the main concern of the Capitalist is to look for the benefit which satisfies a materialistic need only. The individual that looks at others based on his own benefit, and establishes economic life on this basis, is the most dangerous person to society and people.

This is from the aspect of needs and benefits. From the aspect of resources and efforts, which are called commodities and services, the individual strives for them to obtain them, so as to gain benefit from them. The exchange of resources and efforts among people creates relationships among them, according to which the structure of the society is formed. So it is necessary to look at what the structure of the society should be, both in general and in detail, when evaluating the resources and the efforts.

So caring for the economic commodity with respect to its fulfilling a need, without caring for what the society should be, is a detachment of the economic commodity from the relationship, which is unnatural. This economic commodity is exchanged among the people thereby creating relationships among them, and the relationships form the society, so the effect on society should be perceived when considering the economic commodity. Therefore, it is incorrect to consider a thing as beneficial just because there is somebody who likes it, whether it is itself harmful or not, and whether it affects the relationships among people or not, and whether it is prohibited or permitted in the belief of the people in the society. Rather things should be considered beneficial if they are really beneficial in respect of what the society should be. Therefore, it is incorrect to consider cannabis, opium and the like as beneficial commodities and to consider them economic commodities just because there is somebody who wants them. Instead, the effect of these economic commodies on the relationships between people in society must be considered when considering the benefit of things i.e. when considering the thing as an economic commodity or not. Things should be viewed in relation to what the society should be. It is wrong to look at a thing merely as it is, regardless of what the society should be.

By including the subject of satisfying the needs within the subject of the means of satisfying needs, and by viewing the means of satisfaction only as satisfying a need, and not by any other consideration, economists concentrate on production of wealth more than distribution of wealth.

The importance of distribution of wealth to satisfy the needs has become secondary. Therefore, the capitalist economic system has one aim, which is to increase the country’s wealth as a whole, and it works to arrive at the highest possible level of production. It considers that the achievement of the highest possible level of welfare for the members of society will come as a result of increasing the national income by raising the level of production in the country, and in enabling individuals to take the wealth, as they are left free to work in producing and possessing it. So the economy does not exist to satisfy the needs of the individuals and to facilitate the satisfaction of every individual in the community, rather it is focused on the augmentation of what satisfies the needs of the individuals i.e. it is focused on satisfying the needs of the community by raising the level of production and increasing the national income of the country. Through the availability of the national income, the distribution of income among the members of society occurs, by means of freedom of possession and freedom of work. So it is left to the individuals to obtain what they can of the wealth, everyone according to what he has of its productive factors, whether all the individuals or only some individuals are satisfied.

This is the political economy i.e. the capitalist economy. This is manifestly wrong, and contradicts reality; it does not lead to an improvement in the level of livelihood for all individuals, and does not fulfil the basic welfare of every individual. The erroneous aspect in this view is that the needs which require satisfaction are individual needs, they are needs of a man; so they are needs for Muhammad, Salih and Hasan and not needs for a group of human beings, a group of nations, or a group of people. The one who strives to satisfy his needs is the individual, whether he satisfies them directly such as eating, or he satisfies them through the satisfaction of the whole group such as the defence of the nation. Therefore, the economic problem is focused on distributing the means of satisfaction for individuals i.e. the distribution of the funds and benefits to the members of the nation or people, not on the needs which the nation or the people require without regard to every individual within the nation. In other words, the problem is the poverty which befalls the individual not the poverty which befalls the nation. The concern of the economic system must only be in satisfying the basic needs of every individual, not the study of producing economic commodity.

Consequently, the study of the factors that affect the size of national production differs from the study for satisfying all the basic needs of all individuals personally and completely. The subject of study must be the basic human needs of man, as a human being, and the study of distributing the wealth to the members of society to guarantee the satisfaction of all their basic needs. This should be the subject of study, and should be undertaken in the first place. Moreover, the treatment of the poverty of a country does not solve the problem of poverty for individuals, individually. Rather, the treatment of the poverty problems of the individuals, and the distribution of the wealth of the country among them, motivates all the people of the country to work in increasing the national income. The study of factors that affect the size of production and the increase of the national income, should be discussed as economic science, that is, in the discussion of the economic commodity and its increase, rather than in the discussion of satisfying the needs, which are regulated by the economic system.

The Capitalists claim that the economic problem which faces any society is the scarcity of commodities and services. They also claim that the steadily increasing needs, and the inability to satisfy all of them i.e. the insufficiency of commodities and services to satisfy all of man’s needs completely, is the basis of the economic problem. This view is erroneous and in fact contradicts with reality. This is because the needs which must be met are the basic needs of the individual as a human (food, shelter and clothing), and not the luxuries, although they too are sought. The basic needs of humans are limited, and the resources and the efforts which they call the commodities and services existent in the world are certainly sufficient to satisfy the basic human needs; it is possible to satisfy all of the basic needs of mankind completely. So, there is no problem in the basic needs, quite apart from considering it the economic problem that faces society. The economic problem is, in reality, the distribution of these resources and efforts enabling every individual to satisfy all basic needs completely, and after that helping them to strive for attaining their luxuries.

With reference to the steadily increasing needs, it is not a subject related to increasing basic needs, because the basic needs of man as a human do not increase, whereas, it is his luxuries which increase and vary. The increase in needs which occurs due to the progress of a human in his urbanised life is related to the luxuries rather than to the basic needs. Man works to satisfy his luxuries, but their non-satisfaction does not cause a problem; what does cause a problem is the non-satisfaction of the basic needs. Besides all of this, the question of the increasing luxuries is a question which is only related to some people who live in a certain country and not to all individuals of that country. This question is solved through the natural urge of a human to satisfy his needs. This urge, resulting from the increase in luxuries, drives man to work towards satisfying them, either by expanding the resources of his country, working in other countries, or through expansion and annexation of other countries. This is different from the issue of completely satisfying the basic needs of each and every individual in society. This is because the problem of distributing the wealth to each and every individual to satisfy his basic needs, and enabling every individual to satisfy his luxuries, is a problem related to the viewpoint in life, which is particular to a certain nation carrying a particular ideology. This is contrary to the question of increasing national income through increasing production, which is related to the situation of particular countries, and could be achieved through utilising the resources of the country, emigration, expansion, or merging with other countries. This issue of increasing wealth depends on the practicality of the solution, and is not related to a particular viewpoint, and not related to a particular nation or ideology.

The economic principles which have to be laid down are the principles which guarantee the distribution of the country’s internal and external wealth to each and every individual of the nation, so that they secure the complete satisfaction of all basic needs for each individual, and then enable every individual to seek the satisfaction of the luxuries. However, raising the level of production requires scientific research, and its discussion in the economic system does not solve the economic problem, which is the complete satisfaction of the needs of each and every individual. An increase in the level of production leads to a rise in the level of the wealth of the country but does not necessarily lead to the complete satisfaction of all the basic needs of each and every individual.

The country could be rich in natural resources, as in the case of Iraq and Saudi Arabia, but the basic needs of most of their citizens are not satisfied completely. Therefore, the increase of production by itself, does not solve the basic problem which must be treated first and foremost, which is the complete satisfaction of the basic needs of each and every individual, and following that enabling them to satisfy their luxuries. Therefore, the poverty and deprivation required to be treated is the nonsatisfaction of the basic needs of man as a human being (i.e. food, shelter and clothing), not the increasing luxuries resulting from urban progress. Hence, the problem to be treated is the poverty and deprivation of every individual in the society, not the poverty and deprivation of the country measured as a whole. The poverty and deprivation from this perspective (i.e. for every individual) is not treated by increasing national production, rather it is treated by the manner in which the wealth is distributed to the individuals in society enabling complete satisfaction of all their basic needs, and then enabling the individuals to satisfy their luxuries.

Capitalism considers value as being relative and not real, and so it is treated as a subjective measurement. Hence, the value of a yard of cloth is the marginal benefit of it assuming its availability in the market. Its value is also the quantity of commodities and efforts that could be exchanged for it. The value becomes a price if what is obtained for the yard of cloth is money. These two values, in their view, are separate, and they have two distinct names; benefit and the value of exchange. The meaning of value according to this definition is wrong, because the value of any commodity is the quantity of benefit in it, taking into account the element of scarcity. So the real view towards any commodity is to observe its benefit whilst taking into account its scarcity, whether it is possessed by man from the start like from hunting, or by exchange like selling; and whether this was related to the person or related to the thing. Thus, value is a name for a designated thing which has a specific reality, and not a name for a relative thing, which applies to it in one respect and is not applicable in another. So the value is an objective measurement and not a relative thing. Therefore, the view of the economists towards value is wrong from its basis.

What is referred to as the marginal utility value is an estimation meant to concentrate production based on the worst case scenario of distributing the commodities. Thus the value of a commodity is estimated based on the lowest limit so that production proceeds on a guaranteed basis. The marginal utility is not really the value of the commodity, nor even the price of the commodity, because the value of the commodity should be estimated by the amount of benefit in it at the time of estimation, taking into account the element of scarcity at that time. Its value would not drop if its price decreases later on, nor would it rise if its price increases as well, because its value was considered at the time of its evaluation. Therefore, marginal utility theory is a theory for price and not a theory for value, and there is a difference between price and value, even in the view of Capitalist economists. What governs the estimation of price is the abundance of demand together with the shortage of supply or the abundance of supply together with the shortage of demand; these matters are related to the level of production of a commodity, and not related to its distribution.Whereas value is estimated by the quantity of benefit present in the commodity at the time of evaluation, bearing in mind the element of scarcity, without considering it as part of the estimation; so supply and demand do not utterly affect the value.

Therefore, the subject of value is wrong from its basis, and any subject based on it is definitely wrong since the basic concept is false. However, if the value of the commodity was evaluated in terms of its benefit measured by the benefit of a commodity or an effort, then such an evaluation would be correct and would lead to much greater stability over the short term. If the value was estimated by the price, the evaluation would be relative not real, and it comes closer to changing every time according to the market. In this latter situation, it is false to refer to it as a value, and so the term value would not truly apply to it. It would rather become a means to obtain money according to the market and not according to what it possesses of benefits.

The Capitalists say that benefits are the result of the efforts which man expends. So, if the reward was not equal to the work then no doubt the level of production declines, and they conclude from this that the ideal method to distribute the wealth among the members of society is that which guarantees to achieve the highest possible level of production.

This approach is totally wrong, since in reality the resources, which God has created, are the basis of the benefit in the commodities. And the expenses spent in increasing the benefit of these resources, or initiating a benefit in them together with the work, are that which made them in the form that provides a particular benefit. So considering the benefit as a result of the efforts only is completely wrong and it neglects the raw material and other expenses. For in some cases, these expenses could be a compensation for a raw material, and not for an effort. Thus, the benefit could be a result of man’s efforts or could be a result of the existence of the raw material, or could be a result of both of them, but it is not only as a result of man’s efforts.

As for the decline in the level of production, it does not result solely from a decrease in the reward for work, since it could also result from the depletion of the wealth of the country, or from war, or for other reasons. As an example, the decline of production in both Britain and France after the Second World War did not result from a reduction in the reward to work, it resulted from the shrinkage in their influence over their rich colonies, and their involvement in the war. The decline in production of the US during the Second World War did not result from a reduction in the reward to work, it resulted from its involvement in the war against Germany. The decline in the Islamic World today did not result from a reduction in the reward to work, it is as a result of the intellectual decline into which the whole Ummah fell. Therefore, the inadequacy of the reward to work is not the only reason for decline in production, and it is false to assume from this premise that the ideal method of distribution is to secure the raising of the level of production. Arriving at the highest possible level of production has no relationship with the distribution of wealth amongst individuals.

The Capitalists say that the price is the incentive for production, because the motive for the person to expend any effort is his reward materially. This view is incorrect and contradicts reality. Man often expends effort in return for a moral reward such as the attainment of a reward from God, or for the sake of achieving ethical merit such as returning a favour. The needs of man can be materialistic such as material profit, they can be spiritual such as sanctification, or moralistic such as praise. So taking into consideration materialistic needs only is incorrect. In fact, a man could expend resources in satisfying a spiritual or a moral need more generously than he spends in satisfying a materialistic one. Therefore, the price is not the only incentive for production. Accordingly a stonemason could designate himself to work for months in cutting stones for building a mosque, a factory may assign its production for some days of the year for distribution to poor people, and a nation could allocate some or focus all of its efforts on preparing to defend its territories. Such production is not motivated by price. Moreover, the materialistic reward itself is not confined to price, it could come in the form of other commodities or services. Hence, considering the price as the only incentive for production is incorrect.

One of the great anomalies of Capitalism is its consideration of price as the only regulator for distributing wealth amongst the members of society. They say that the price is the only constraint that forces the consumer in his possession and consumption to accept a limit comparable to his income, and it is the price which restricts the consumption of every individual in acceptance to what his revenues permit. Accordingly, through the rise in price of some goods and drop in the price of others, and in the availability of money to some people and its non-availability to others, the price regulates the distribution of wealth amongst consumers. Thus, every individual’s share of the wealth of a country is not equal to his basic needs, but is equal to the value of the services in which he has contributed in producing commodities and services i.e. equal to what he owns of land or capital, or equal to what he carried out of work, and projects.

From this principle, which makes the price the regulator of distribution, Capitalism has effectively decided that man does not deserve life unless he is capable of contributing to the production of commodities and services. The person who is incapable of contributing, whether he was born with a physical or mental disability, does not deserve life, and does not deserve to take from the wealth that which satisfies his needs. Also the person who was born strong in body or in mind, and who is more capable of creating and possessing wealth however he wishes, deserves to consume luxuriously and deserves to practice control and mastery over others with his wealth. Also the one whose motivation to seek material gains is stronger will exceed others in possessing wealth whereas, the one whose adherence to spiritual and moral values (which control him during the earning of wealth) is stronger, will have less than others in possessions or wealth. This approach excludes the spiritual and moral elements from life and produces a life built upon a materialistic struggle to gain the means of satisfying materialistic needs. This eventually occurs in all countries which adopt and apply Capitalism. The domination of Capitalist monopolies has developed in countries adopting Capitalism, with producers exercising control over consumers. A small group of people i.e. the owners of large oil, automotive, and heavy industry corporations, have come to dominate consumers, reigning over them by imposing certain prices for the commodities they produce. This has led to attempts to “patch up” the economic system. They did this by giving the State (government) the right to intervene in fixing the price (price control) in special circumstances to protect the national economy, to protect consumers, and to reduce consumption of some commodities, as well as limiting the authority of monopolies. They also included in the regulation of production certain public projects directed by the government. These measures contradict the basis of their economic system, which is economic freedom, and they are only applied in specific circumstances. Moreover, many Capitalists do not adopt this interventionist approach (Conservatives) and they scorn it, contending that the price mechanism alone is sufficient to achieve harmony between the interest of the producers and the interest of the consumers, without any need for governmental intervention. These patchwork solutions which are recommended by the supporters of intervention (Liberals), are only applied in certain circumstances and conditions, and even in these circumstances, the distribution of wealth amongst the individuals does not achieve the complete satisfaction of all basic needs for each and every individual.

The poor distribution of commodities and services, which resulted from the concept of freedom of ownership and from the concept of making the price the only mechanism for distributing wealth, will continue to dominate every society that applies Capitalism. With regard to American society, many Americans had a sufficient share of the wealth of the country, to satisfy most of their basic needs completely, and to satisfy even some of their luxuries. This situation occurred due to the immense wealth of that country which had reached a level by which there was an opportunity for every individual to satisfy all of his basic needs and some of his luxuries. However, this was not due to making the share of the individual equal to the value of the services he contributed in production. Furthurmore, putting the price mechanism as the controller of distribution has caused Capitalist monopolies in the West to look abroad to other countries for new markets, from which to gain raw materials and to sell their products.What the world suffers from, in terms of colonisation, regions of influence and economic invasion, is merely a result of these monopolies and making price a tool in the distribution of wealth. Thus, the resources of the world are accumulated on this basis into the hands of Capitalist monopolies. All this is due to the false rules and principles established by Capitalism.

The Socialist Economic System

As for the Socialist economic system, with Communism being a part of it, it contradicts Capitalism. Most of the Socialist ideas appeared in the Nineteenth century. The Socialists fought fiercely against the opinions of the liberal school of thought i.e. they fought the Capitalist economic system. The powerful emergence of Socialism was due to the iniquity which the society suffered under Capitalism and owing to its many fallacies and inadequacies. By reviewing the Socialist schools of thought, it appears that they agree on three issues, which distinguish them from other economic schools of thought.

1. Achievement of a type of actual equality.
2. Abolition of private property either completely or partially.
3. The organisation of production and distribution of the commodities and services by means of all of the people.

However, despite their agreement over these three issues, they have fundamental differences over many points, the most important of which are:

Firstly: The Socialist schools of thought differ in the form of the eventual equality they aim to achieve. One group advocates arithmetic equality which means equality in every thing of benefit, thus each person is given an identical amount. Another group suggests common equality, which means observing the ability of everyone when distributing work and looking at the needs of every individual when distributing products. Equality in their view is established when the following principle is applied: “From each according to his strength i.e. his ability (meaning by this the work which he performs), and to each according to his need (meaning the distribution of production).” A third group adopts equality meet the needs of all individuals, the basis of distribution becomes: “From each according to his strength i.e. his ability, and to each according to his work.” So equality is achieved when each person is facilitated of the means of production the same as others.

Secondly: The Socialist schools of thought differ in the quantity of private property which is to be abolished. One group adopts the abolition of private property completely, which is Communism. Another suggests the abolition of private property related to the means of production which is called capital i.e. factories, railways, mines and the like. Thus they prohibit the possession of any commodity which is used for production. Hence, one cannot own a house for the purpose of leasing it, nor a factory, nor a piece of land, but they may keep certain types of property for the purpose of consuming them. It is allowed for them to own everything they consume, so for example they can own a house to live in, and what the land and factories produce but not the land/factory itself. This is called Socialism of Capital. Another group does not advocate the abolition of private property except that which is relevant to agricultural land, these are the Agrarian Socialists (Agrarian Reformers). Yet another group says that every case in which public interest invites the transforming of a private property to public property, has to be studied. They call for restricted ownership of private property in many areas by putting laws for the maximum limit of interest and rent, a minimum limit for wages, and strive to give workers a share in the capital. This is called State Socialism.

Thirdly: The Socialist schools of thought differ in respect of the means they adopt to implement their objectives. Thus, revolutionary Socialism (Revolutionary Syndicalism) depends upon liberating the labour force by what it calls direct action i.e. the efforts of the labour force themselves, such as disruptive strikes, sabotage of machinery, and propagating the ideas of a General Strike amongst workers. They work to mobilise them around this idea, until the time comes when they are able to implement a General Strike, thus paralysing economic activity, which would eventually result in the demolition of the present economic system. As for the Marxist Socialists, they believe in the natural law of evolution in society and believe that this alone is sufficient to destroy the current system, which will then be replaced by another system built on Socialism. As for the advocates of State (Government) Socialism, their means to implement their thoughts is through legislation. So, by issuing canons they warrant the preservation of public interests and improvement in the conditions of the labour force. Additionally, by levying taxes, particularly phased-in taxes on capital and inheritance, they suggest that they will close the gap between private properties.

Fourthly: The Socialist schools of thought differ with respect to the structure which is needed to administer the projects in the Socialist system. For example the Capital Socialists want to assign the organization of production and distribution to the government (State), while the Syndicalists want to confer management to organised groups of labour, headed by their chiefs (Guild Socialism).

The most famous and influential among Socialist theories are those of the German, Karl Marx. His theories have dominated the Socialist world, and upon them the Communist Party and the Union of Soviet Socialist Republics (USSR) in Russia were established. His theories continue to have a great impact until today.

One of the best known theories of Karl Marx is the theory of value, which he took from the thinkers of Capitalism, and upon which he attacked Capitalism. Adam Smith, who is considered the leader of the Liberal School of Thought in England and is viewed as the person who put the basis of the political economy i.e. the Capitalist economic system, defined value by saying: ‘The value of any commodity depends on the magnitude (quantity) of effort spent in its production.’ So the value of the commodity whose production needs two hours is worth twice the value of the commodity whose production needs only one hour. Ricardo who came after Adam Smith, explained his theory of work, when he defined value, saying: ‘What determines the value of the commodity is not only the quantity of work spent directly in its production, but also the work spent in the past, in producing the tools and machines used in the production process as well.’ This means that Ricardo believed that the value of the commodity depends on the expenses incurred during production. He referred these expenses to one element, which is the work.

After this, Karl Marx used Ricardo’s theory of value in Capitalism as a weapon to attack the concept of private property and Capitalism as a whole. He said that the only source of value is the work spent in a commodity’s production, and that the Capitalist financier buys the energy of a worker with a wage that does not exceed the limit necessary to keep him alive and able to continue working. The financier then exploits the energy of the worker by making him produce commodities, whose value greatly exceed that which is paid to the worker. Karl Marx called the difference between what the worker produces and what he is actually paid, the ‘surplus value’. He determined that this value represents what the landlords and the business people usurp from the worker’s rights, in the name of revenue, profit or rate of return on capital, a matter which he did not acknowledge as valid.

Karl Marx was of the opinion that the Socialist schools which came before him had envisioned the success of their ideas to be dependent upon the inherent nature of the human being in his love for justice and support for the oppressed. These schools used to adopt new methods which they believed in, for their application upon society, and they presented these ideas to the governors, business people, and the enlightened people, urging them to implement their ideas. Karl Marx however, did not build his school of thought on this idea nor did he follow this approach. He built his school of thought on the basis of a philosophical doctrine known as the Theory of Historical Evolution, which is referred to as the Dialectic Theory. He conceived the establishment of the new system in society through the functional operation of the economic laws, and as a result of the law of evolution in society, without the intervention of a manager, a lawmaker, or a reformer. Karl Marx called this type of Socialism ‘Scientific Socialism’, to differentiate it from the Socialist methods that came before it and which were called ‘Utopian Socialism’. The Socialist theory of Karl Marx is summarised as follows:

The system of the society in any age is a result of the economic situation. The transformations which affect this system all come as a result of a class struggle to improve their material situation. History tells us that this struggle ends with the victory of the class which is greater in number and worse in condition, over the wealthier class which is fewer in number. He called this the law of social evolution. It applies to the future as well as the past. So, in previous ages this struggle existed between the freemen and the slaves, then between the nobles and the subjects, then later on between the nobles and the serfs (peasants), and between the leaders and chiefs in the order of sects. This struggle always ended with the victory of the oppressed class, which was greater in number, over the oppressor class, which was smaller in number. But after its victory the oppressed class turned to become a conservative oppressor class. Since the French revolution this struggle existed between the middle class (Bourgeoisie) and the working class. The first class became the masters of the economic projects, the owners of the capital, and became conservative. Facing it was the working class which owned nothing of the capital, but was much greater in number. Consequently, this situation led to a conflict of interest between the two classes, the origin of which was based on economic reasons.

The production fashion today, does not conform to the system of ownership. Production no longer remains individualistic i.e. being performed by the person alone, as it was in past ages, but rather has become associative i.e. conducted by individuals together. At the same time however, the system of ownership has not changed. So individual ownership continues and is still the basis of the system in current society. As a result of this the working class, which participates in production, does not have a share in the ownership of the capital, and remains under the mercy of the Capitalists (the owners of the capital), who do not by themselves participate in production. The Capitalists exploit the labour force, paying it only subsistence wages, and the workers are compelled to accept it since they have nothing but their efforts to sustain themselves. The difference between the value of the product and the labour wage, which Marx calls the surplus value, constitutes the profit which the Capitalist monopolises, while justice assumes it should be the share of the workers.

So the conflict would continue between these two classes until the system of ownership conforms with the system of production i.e. when ownership becomes Socialist or collective. This struggle will end with the victory of the working class according to the law of evolution in society, since it is the oppressed class and is greater in number.

Regarding the manner in which the working class will succeed, and the reasons for its success, this is based on the law of evolution in society. The current system of economic life bears within itself the seeds of the forthcoming community, and this current system will vanish due to the effects of the economic laws to which it is subjected. There was a time when the middle class conquered the nobles and played an important role in economic life, since it became the owner of the capital. However, as the argument goes, its role has ended, and the time has come for it to relinquish its position to the working class.What obliges it to do so is the law of concentration and process of free competition. By the effect of the law of concentration the number of Capitalists (owners of the capital) diminishes, and the number of the working class increases. Through the effects of free competition, production surpasses every limit, and the quantity of production exceeds that which the consumers of the working class can buy with their low level of wage. This leads to a crisis causing some of the owners to lose their capital and enter the labour market. As the system progresses the intensity of crises increases, the gap between their occurrences closes, and the number of Capitalists decreases gradually. Then it is not long before a crisis greater than all the preceding crises occurs, of such major proportions that it demolishes the pillars of the Capitalist economic system, with the system of Socialism to be then established upon the Capitalist ruins. Marx conceived the emergence of Communism to be the last stage in the historical evolution, because it demolishes private property, and hence no more reason exists for the conflict of the classes in society, due to the absence of differences between them.

Karl Marx illustrated that the law of concentration was a part of the Capitalist economy. In summary, there is a migration of work and capital from some projects to others, so that some increase while others decrease. All these are scenarios which show the occurrence of concentration in production. If one investigated the number of projects in one branch of industrial production, such as chocolate factories for example, one would find that the number of projects had diminished gradually, over time, while the average number of the production work force increased in every project. This is an evidence that concentration occurred in this branch of production, since the greater sized production replaces the smaller production. So if the number of factories were for example, ten, they will in time become four or five large factories, and the rest will disappear.

Marx’s determination of free competition meant the principle of the
freedom to work, which means that every person has the right to produce
whatever he likes in the way he likes.

The economic crises, according to Marx, apply to every sudden disturbance that affects the economic equilibrium. The specific crisis includes all the kinds of crises which befall a particular branch of production, due to the imbalance between production and consumption. This incident occurs either due to overproduction or underproduction, or due to over-consumption or under-consumption. As for the recurrent (periodic) major crisis, it appears in the form of violent convulsions which shake the pillars of the whole economic system, and becomes the point of separation between the period of economic boom and the period of economic depression. The periods of boom vary between three to five years in length, as do the periods of depression. Recurrent, major crises have special characteristics which distinguish them. These characteristics fall under three main qualities, which are: Firstly, the quality of generalisation. This means that in one country, the crisis hits all aspects of economic prosperity, or at least most of them. This general crisis appears at first in one country where it dominates, and then spreads to other leading industrial countries which were linked together by some permanent relations. The second quality is that it is recurrent. This means that the crisis occurs in repetitive and cyclical periods. The period which separates between one crisis and another fluctuates between seven and eleven years. Its occurrence is not over a fixed time although it is recurrent. The third quality is that of excessive production, such that the owners of the large projects face great difficulty in disposing of their products, so the supply exceeds demand for many products leading to the crisis.

Karl Marx considered that these major crises force some people to lose their capital, so the number of owners diminishes and the number of workers increases. These occurrences are what will lead finally to the major crisis in the society which demolishes the old system. This is a summary of Socialism including Communism as one of its forms. From this summary it appears that the Socialist schools of thought including the Communists, strive to achieve real equality amongst the individuals; either equality in benefits, equality in the means of production, or absolute equality. Any kind of such equality is impossible to achieve, and it is nothing but a hypothetical assumption. It is impractical and therefore impossible. This is because equality in itself is unreal, and thus impractical. People by the very nature with which they were created vary in their physical and mental capabilities, and they vary in the satisfaction of their needs. So equality amongst them cannot be achieved. Even if one distributed equal shares of commodities and services among the people by force, it would be impossible for them to be equal in using this wealth in production or utilisation. And it would be impossible for them to be equal in terms of the quantity they need to satisfy their respective needs. Therefore, equality between them is a speculative and hypothetical concern.

Moreover, equality by itself amongst people, while they are different in strength/power, is considered far from the justice which the Socialists claim they try to achieve. The disparity between people in terms of ownership, and in the means of production, is inevitable and quite normal. Every attempt at achieving equality is destined for failure as it contradicts with the natural disparity existent amongst human beings. Regarding the complete abolition of private property, this contradicts with man’s nature, because ownership is a manifestation of the survival instinct, which is definitely existent in man. Being natural in him, a part of him, and a manifestation of his natural energy, it is impossible to be eliminated since it is instinctive. Anything that is instinctive in man cannot be eliminated from him as long as he is alive. Any attempt to abolish private property is nothing but a suppression of the human beings natural instincts, and can only lead to anxiety. Therefore, it is natural to organize this instinct rather than trying to eliminate it.

With regard to the partial abolition of ownership, it has to be studied. If what is meant by this is to put a ceiling on the magnitude of commodities that can be owned, then this would be a limitation in quantity, which is wrong, since it limits the activity of man, obstructs his efforts, and reduces his production. By preventing people from owning that which exceeds a certain level, this effectively stops them at that limit, interrupting the individuals from their activities, and thereby depriving the community from benefitting from the activities of these individuals. However, if ownership of commodities and services is restricted to a certain manner without restriction in the quantity owned, this would be acceptable, as it does not obstruct the activity of man. This approach organises the ownership of property among individuals, and encourages them to expend more effort and increase activity.

If the partial abolition of ownership means that the individual is prevented from owning certain properties, whilst other properties can be owned without any limit over the quantity, this has to be examined. If the beneficial nature of these properties cannot be enjoyed by the individual alone, except by depriving the public of that property, then it is natural to prevent the individual from owning that property individually; such as public roads, town squares, rivers, seas, and the like. The restriction is decided by the nature of the property. There is, therefore, nothing wrong in banning the individual ownership of those properties which are of
associative benefit, because this ownership was determined by the nature of the property itself.

If the nature of the property does not require prohibition of individual ownership, further analysis should still be conducted; if the property can be included under the first type i.e. properties whose individual ownership would deprive the community, such as water and mineral resources, then there is nothing wrong in banning their individual ownership. The issue which makes this type of property included under the first type is that by its nature if it was owned individually it would deprive the community of it. However, if owning the property does not deprive the community of it, then there should be no restriction on its ownership. To do so would unfairly limit ownership for no reason. This would be like limiting the ownership by quantity which will only result in restricting man’s activities, interrupting his efforts, reducing his production, and stopping him from work when he reaches the set limit of ownership.

The partial abolition of ownership in Socialism is a limitation of ownership by quantity, rather than by the ways and means of ownership. It prevents ownership of some properties, which by their nature and by the nature of their origin should be individually owned. Socialism either limits ownership in magnitude, such as limiting ownership of land up to a certain area, or it limits ownership of certain properties such as the means of production. Many of these properties, by their nature, could be owned by individuals. Ownership restrictions of this type of property restricts activity whether the restriction was pre-specified by the law, such as preventing inheritance, ownership of mines, railways, or factories; or if it were left to the State to decide, on a case by case basis, to prevent possession wherever public interest requires it to do so. All this is restriction of the activity of individuals, for these properties by their very nature can be owned by individuals.

The organisation of production and distribution through people cannot (and should not) be achieved by inciting disturbances and anxiety amongst people, or by inciting hatred between them. This can only lead to anarchy, rather than organisation. Furthermore, the organisation of production in the community cannot be achieved naturally by making the working class feel the oppression of business people, since the business people could be smart and ingenious enough to satisfy the needs of the labour force, as is the case with the factory workers in the United States. So the working class do not feel the oppression in terms of having the fruits of their efforts exploited. In this way the evolution which would better organise production and distribution would not occur. This organisation should come through proper laws and solutions which are built on a definite basis that deals with the real nature of the problems. Socialism relies on organising the production and distribution, whether by inciting tension and disturbances amongst the working class, or by the natural law of evolution in society, or through manmade (Wadh’iya) legislation and canons that do not emanate from a definite basis or creed.

Therefore this organisation is false from its basis. This outlines the fallacies of Socialism. With regard specifically to the Socialism of Karl Marx, its fallacy appears in three aspects:

Firstly: His opinion on the theory of value is erroneous and disagrees with reality. The opinion, stating that the only source for the value of the commodity is the work spent in its production, disagrees with reality since the spent work is only one but not the only source of its value. There are other elements, besides the work, that enter in the value of the commodity. There is the raw material upon which the work was carried out, or the demand for the benefit of the commodity as well. The raw material could contain a benefit that exceeds the work spent in its procurement such as in hunting for example. The benefit of the commodity could have no demand in the market, and be forbidden for export, such as wine for Muslims. So putting work as the only source of value is incorrect, and does not conform to the reality of the commodity as it is.

Secondly: His opinion states that the social order existing at any time, is a product of the economic situation, and that the various transformations which befall this system are all due to one reason, which is the struggle of the classes for the objective of improving their material situation. This opinion is erroneous, baseless, and built upon a doubtful and hypothetical assumption. The reason for its error and disagreement with reality is obvious from historical events and the current situation.We see that the transformation of Russia into Socialism did not occur due to a materialistic evolution, nor due to a class struggle that led to the change of the system. Rather, a group took over through a bloody revolution, and started to apply its thoughts upon the people, and changed the system. The same happened in Socialist China. The application of Socialism in East Germany rather than West Germany, and Eastern Europe rather than Western Europe did not occur as a result of any class struggle. Rather it occurred through the conquering of these countries by a Socialist State which imposed its system upon the conquered nations. The same occurred with the Capitalist states, with the Islamic State, and with any other system. Furthermore, the countries which this law predicted would change their system through class struggle, namely Germany, England, and the United states, are all Capitalist countries where the owners of capital and workers are many. They were not Czarist Russia or China, which were agricultural rather than industrial, and where the number of owners of capital and workers were much fewer in comparison to the West. Despite the overwhelming presence of the two classes in Western Europe and the United states, they were not converted to Socialism, and they all still apply Capitalism till this day. The presence of these two classes (i.e.capital owners and workers) did not have any effect on their system. This alone is enough to refute this theory from its basis.

The third appearance of error in Karl Marx’s theory appears in what he said about the law of social evolution, that the system of economic life is destined for extinction by the effect of the economic laws which control it, and that the middle class which won the battle against the class of the nobles i.e. the owners of the capital will ultimately evacuate their place for the labour class, due to the law of concentration. The theory of Karl Marx concerning concentration of production, on which he builds the increase in the number of the workers and the decrease in the number of the owners of capital, is false. This theory is false because there is a limit which concentration of production cannot overstep. So it arrives at a certain limit and stops and thus will no longer be a catalyst in the evolution imagined by Marx. Moreover, concentration of production does not exist at all in one of the main branches of production, namely agriculture. How then can the law of evolution occur in society? Besides, Karl Marx asserts that concentration of production is followed by concentration of wealth (resources), which results in a reduction in the number of financiers, and an increase in the number of workers, who own nothing. This view is erroneous, since the concentration of production could result in an increase in the number of capital owners, and could result in the working class becoming capital holders. The major projects, which are conducted by the large Corporations, usually have shareholders from the working class, which is an example that refutes this theory. Moreover, many of the working class in the factories have high salaries, such as engineers, chemists and managers, thus being able to save a great part of their salaries, and becoming investors themselves, without the need to establish independent projects. Therefore, what Karl Marx propounded about workers and evolution does not apply to them. This is but a brief examination of the principles upon which the Capitalist and Socialist, from which came the Communist, economic systems are established. From this examination the fallacies present in these principles are apparent. This is on the one hand; on the other hand, both systems are contradictory to the Islamic method in addressing the problems and contradictory to Islam itself.

As to their contradiction to the Islamic method of solving the problems, one finds that the Islamic method in solving the economic problem is the very same method Islam uses in solving any of the other human problems. The common approach of Islam is to study the reality of the economic problem, understand it, and then deduce a solution for the problem from the Shari’ah texts after studying these texts, and to ensure that they apply to that particular problem. This is different from the Capitalist and Socialist method. In Capitalism, the situation which resulted from the problems, is used as a source for the solutions (pragmatism). In Socialism the solutions are taken from hypothetical assumptions which are imagined to be existent in the problem, and the solutions are put according to these assumptions. Each of these two methods is different to the method of Islam, so it is not allowed for a Muslim to adopt them.

The contradiction of the Capitalist and Socialist, and from it the Communist, economies to Islam is that Islam adopts its solutions as divine rules (Ahkam Shari’ah) derived from the legislative sources while the Capitalist and Socialist economic solutions are not divine rules, but are from a system of Kufr. Judging on things according to them means ruling with other than what Allah has revealed, which is not allowed for any Muslim to adopt in any way. Their adoption is an open sin (Fisq) if their adopter does not believe in them. But if he believed that they are the proper rules and that Islamic rules do not suit the modern age and do not offer solutions to the current economic problems, then this is kufr, may Allah SWT protect us from it.

One thought on “The Economic System of Islam”

  1. Assalamu’alaikum,

    Saya ingin tahu bagaimana sebenarnya MEKANISME sistem ekonomi Islam berkembang atau berkitar? Bagaimana ianya bermula? Kebiasaanya, bahan bacaan berkaitan sistem ekonomi Islam banyak berkisarkan penekanan kepada penggunaan dinar emas/perak. Tetapi kurang menyebut bagaimana mekanisme sistem ekonomi Islam bermula, berkembang dan berkitar.

    Saya percaya bahawa kurniaan Allah S.W.T kepada sekelian makhluk di muka bumi ini sebenarnya mencukupi (tetapi tidak melebihi), tetapi manusia salah mengagihkan kerana menggunakan sistem berdasarkan kehendak/nafsu manusia (yang tak pernah cukup) -jika saya tidak salah-

    Bukan sistem ekonomi sahaja, malah sistem politik juga adalah berdasarkan kehendak manusia. Jika kehendak mereka tidak dipenuhi, maka jangan mimpi dapat undi.

    Bagaimana sistem ekonomi berdasarkan akidah ini dapat mencukupi keperluan manusia /sekalian makhluk – lebih-lebih lagi manusia akhirzaman ini (yang telah biasa dimakansuap)?

    Yang mana perlu datang dulu, sistem ekonomi Islam atau manusia yang benar-benar Islam (berserah/tunduk pada Allah S.W.T)?

    Terima kasih.

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