Comparison of

system
with
capitalism

Islamic economic
socialism
and

Whenever we compare two or more than two things we must have

knowledge about the background of that thing. Now before
compare the Islamic economic system with others we discussed
them individually.

Capitalism:
Capitalism, as defined by the Collins Dictionary,
Is an economic system based on the private ownership of
the means of production, distribution and exchange.
Broadly speaking, capitalism is the name given to the economic
system in which the principal means of production, distribution
and exchange are in private (individual or corporate) hands. The
profit motive constitutes the prime stimulus to productive
exertion and the price mechanism determines what things shall
be made in what quantities and what conditions.
It is a type of economy in which capital is privately owned and may
be freely used by the owners as they wish in attempting to make
profits from their economic enterprises.
Thus in this system of economy production and trade are organised
on individualistic basis. Private individuals or private firms and
corporations with the help of previously accumulated capital, but
more often utilizing money borrowed on interest, earn profits and
build up business or industrial empires for themselves by
employing the mass of human labor for wages.

Features of Capitalism:

Chief features of capitalism include : existence of unrestricted

private ownership of means of production, exchange and
distribution; economic freedom; profit motive as incentive for
productive activity; free market and competition; existence of
monopolies; banking and institution of interest; wide disparities
in distribution of wealth; economic exploitation of the weak by
the strong, etc.

Socialism:
According to the Collins Dictionary,
Socialism is an economic theory or system in which the
means of production, distribution and exchange are
owned by the community collectively through the state. It
is a transitional stage in the development of a society
from capitalism to communism, and is characterized by
the distribution of income according to work rather than
need.
Advanced Learners Dictionary explains socialism as
A political and economic theory advocating that a countrys
land, transport, natural resources and chief industries
should be owned and controlled by the whole community
or by the state and that wealth should be equally
distributed.
Political scientists and scholars do not agree on a uniform definition
of socialism. It has been aptly remarked that there are as many
types of socialism as there are socialists. Socialism is therefore
compared to a hat which has lost its shape because everybody
wears it.
Socialism has drawn its strength from the desire of conscientious
men is all ages from Plato to Ruskin for a more equitable and fair
distribution of the income and wealth. However, the word
socialism came into general use around 1830. But it was Karl
Marx who founded it on scientific lines. Marx is known as father
of socialism. He developed the principle of scientific socialism
which came to be known later on as communism. Along with his
friend Frederick Engels, he wrote and issued the famous
communist Manifesto in 1848 calling upon the labor of the world
to unite as they were nothing to lose but their chains. He wrote
his famous book Das Capital in 1867 which is considered to be

the Bible of socialism. Philosophy of Marx is mainly based upon

the following two principles:

1.

Dialectic materialism or materialistic interpretation of history

is the most important feature of Marxism. Marx seeks to explain
every event in history on economic grounds. All wars, riots and
political movements, according to him, have their origin in
economic factors. He views history as a class struggle i.e.
struggle between the oppressor and the oppressed. Present
struggle between the capitalist class and the workers or
proletariat class would result into victory of proletariat who
would establish their dictatorship, and thus with the liquidation of
capitalist class, a classless society shall come into being and
state would wither away.

2.

Theory of surplus value is another feature of Marxian

teachings. According to Marx, the capitalist gets for his
commodity more than he has spent on labor and other costs. The
excess of market value over the costs is surplus value. This
surplus value, which according to him, is created by labor, is
usurped by the capitalist as profit.

Distinctive Features of Socialism:

Distinctive features of socialism, briefly speaking, include : Public
or state ownership of all means of production, distribution and
exchange and abolition of private property; economic equality
and provision of basic necessities of life for every citizen;
materialism and emphasis on economic factors; totalitarian state
and dictatorship of proletariat; suppression of civil liberties, etc.

Islamic economic system:

The meaning of Islamic economic system is very broad;
"Islamic economic system implies a mode of satisfying the
economic needs of the members of an organized society in
accordance with the injections of the Quran and Sunnah"

4 Key Aspects of an Islamic Economic System

1. Need Fulfillment.
2. Respectable source of earning.

3. Equitable distribution of income and wealth.

4. Growth and stability.

Distinctive features of Islamic economics:

Distinctive features of Islamic economic systems are briefly
speaking include: piety, justice, benevolence, cooperation,
brotherhood, and equality are especially important.

Islamic Economic Strategy

Consists of reorganizing the entire economic system with a set of
four indisputable and mutually reinforcing elements:

1. A socially-agreed filter mechanism.

2. A strong motivating system to induce the individual to
render his best in his own interest as well as in the interest
of society.
3. Restructuring the whole economy, with the objective of
realizing the "Maqasid" in spite of scarce resources.
A positive and strong goal-oriented role for the government.

Islam and Capitalism:

Capitalism and Islam are compared in respect of their basic
economic concepts as under:

1. Right to ownership:
The existence of right of private ownership of property is the
hallmark of capitalism. It gives unrestricted and unencumbered
full rights of ownership to the individual. The individual may
acquire, own or alienate his property in whatever manner he
likes. The system believes in the private ownership of the means
of production, distribution and exchange which are managed and
controlled by individuals or groups of individuals for private
profit. The unrestricted right to own property and earn profits
leads to concentration of wealth in few hands. This necessarily
disturbs the balance of distribution of wealth and income in

society. The economic disparities and the ever-increasing gulf

between the rich and the poor sow the seeds of discord and
destruction in the capitalist society.

Islamic concept of ownership is unique one. Ownership, in

reality, belongs to God while some rights only vest in man so that
he may fulfill the purpose of God, that is the purpose of
community by acting as a trustee for those in need. In other
words, what Allah has created for benefit of and service to man
belongs collectively to the whole humanity. As Allah says in
Quran:
"When the prayer is ended, then disperse in the land and seek of
Gods bounty" (Al-Jumu`ah 62:10).
It means that God has given us right of ownership in the earth and
adopt lawful means for earning.
Legal ownership by the individual is recognized in Islam but it is
subject to the moral obligation that in all wealth all sections of
society have the right to share. Thus private or individual
ownership in Islam is not unlimited or unrestricted. All the means
of production are not placed under private ownership as public
ownership of certain things of common utility exists side by side
with it in an Islamic state. Islamic state has also the right to
nationalize certain things which are under private ownership for
the benefit of the community. In this way the limited right of
private ownership with law of inheritance which distributes the
estate of the deceased among fairly large number of heirs averts
concentration of wealth in few hands and thus prevents classconflict.

2. Economic Freedom:
Unrestricted economic freedom and non-interference of the state
in such freedom is another feature of capitalist economy. Every
individual is at liberty to initiate, organize and establish any
enterprise, business, trade, profession, etc. He has full freedom
to earn as much income as he can and spend his wealth in
whatever manner he likes. This unrestricted economic freedom
generally leads to earning of wealth through foul means such as
gambling and prostitution. It also encourages business
malpractices such as smuggling, black marketing, profiteering,
hoarding, speculation, forward transactions, fraud, exploitation,
adulteration, etc. Thus a mad-race for earning wealth becomes
order of the day and high social and moral values such as
fraternity, brotherhood, mutual help, love, benevolence,

truthfulness give place to selfishness, callousness, hatred,

falsehood and mistrust. Capitalism, in fact, has come to signify a
religion of money or dollar dictatorship.

Islam

also allows economic freedom to an individual who is at

liberty to earn wealth, own it and spend his wealth at his
discretion. But the freedom given by Islam in economic sphere is
not unlimited. Islam makes distinction between halal (permitted
being lawful) and haram (forbidden being unlawful) in every
economic activity embracing vast fields of production, exchange
and consumption.
Allah says in Quran:
"Eat and drink of that which God has provided and act not
corruptly, making mischief in the world" (Al-Baqarah 2:60

Certain means of earning wealth such as interest, bribery,

embezzlement, gambling, games of chance, speculation,
monopoly, usurpation of wealth of orphans and other weaker
persons, prostitution, singing and dancing, sale of wine and
narcotics, short weighing and short measuring, trade in haram
things, immoral and exploitive methods, etc. are prohibited to a
Muslim.
In Quran Allah says:
"O you who believe! Forbid not the good things which God has
made lawful for you and exceed not the limits. Surely, God loves
not those who exceed the limits. And eat of the lawful and good
that God has given you, and keep your duty to God in whom you
believe"(AlMa'idah 5:87-88).
These verses of the Quran, and there are many others like these,
strike the keynote of the Quranic message in the economic field.
Islam urges Muslims to enjoy the bounties provided by God and
sets no quantitative limits to the extent of material growth of
Muslim society.
Similarly consumption of wealth on luxurious living, haram things
and extravagant spending is also forbidden. A Muslim is required
to pay Zakat and spend whatever he can for the cause of the
poor and the destitute. All these regulations promote moral
values in Islamic society and eliminate mad-race for wealth and
material gains.

4.

Monopoly:

Competition, which is another feature of capitalism, leads to the

destruction of minor enterprises and firms. This encourages
merger of smaller business organizations into major ones and
thus monopolies or cartels are established. Monopolies kill free
competition, cause inflation in prices and ultimately result into
unemployment. Thus labor and consumer are both exploited in
such a situation. Moreover, trade-cycles, unplanned production,
over-competition, increasing accumulation of capital upsets the
balance between production and consumption which sometimes
leads to economic depressions.

Islam forbids unhealthy competition and bans all the ways which
lead to it. Islam disallows establishment of monopoly
. The Prophet of Islam is reported to have said:
"Whoever monopolies is a sinner?"

Especially monopolies over food-stuffs or articles of daily use are

forbidden by Islam. Commodities and services which are of the
common interest of the community are never allowed to be
monopolized. Those essential things which are required by
everyone are generally maintained under joint ownership of the
community. Thus interests of the consumers and labor are
protected and balance between production and consumption is
never allowed to be disturbed. Whoever crossed their limits for
those people Quran says:
"Whoever turned away from my admonition, he shall have a
wretched life in the world"

4. Institutions of Interest:
The Institution of banking and interest is the life-blood of capitalistic
form of economy. For business, trade and industry especially for
big projects and economic ventures, huge funds are required
which no individual or firm can arrange. This leads to
establishment of banks who borrow capital from depositors and
investors on lower rate of interest and lend it to business
enterprises on higher rate of interest. Thus the institution of
interest has become part and parcel of capitalism.

Islam considers interest as the most exploitive institution for

humanity and has abolished it root and branch in its every form
and manifestation.
According to al-Quran
"Taking of interest tantamount to war against God and His
Apostle",
According to Prophet Muhammad (PBUH)

"Interest is worse than adultery."

According to al-Quran

"The interest that you give in order to increase the wealth of the
people does not increase in the sight of Allah" [Al-Rum: 39]

Islam builds its economy on interest free basis and promotes profit
and partnership as incentive for saving and investment.

5. Exploitation:
Unrestricted right of economic freedom and uncontrolled right of
private ownership has practically resulted into exploitation.
Economic exploitation of the weak by the strong is an order of
the day in a capitalist society. Labor is exploited by the capitalist,
farm worker is exploited by the landlord, poor is exploited by the
rich, servant is exploited by the master, people are exploited by
the rulers and above all national treasury is exploited and looted
by the persons in power. Wealth is the religion of every person
(but a few honorable exceptions) and earning of it through fair or
foul means is his creed. Consequently, everyone exploits the
other economically with a view to gather as much fortune as
possible.

Islamic economic system, on the other hand, ensures

elimination of exploitation of one man by the other. Many
effective measures have been taken by Islam to do so. Reba or
usury is one of the worst instruments of human exploitation and
this has been abolished in all forms by Islam. Other means of
exploitation such as bribery, gambling, speculative transactions,
embezzlement, and prostitution have also been prohibited.
Interests of the weaker classes of the society like women,
orphans, slaves, laborers, tenants, consumers, etc. have been

protected against their exploiters through legislation by Islam.

Islam has given these weaker sections of society many rights
which were hitherto unknown in the history of humankind.
Imam Al-Ghazali, "an Islamic philosopher, contended that the very
objective of the Islamic jurisprudence is to promote the welfare
of the people which lies in safeguarding their faith, their life,
their intellect, their posterity and their property; and that
therefore whatever ensures the safeguard of these five serves
public interest and is desirable."

5.

Extremism:

In

capitalism everything is happened at extreme level. The main

objective of capitalists is to earn more profit. Thats why in
capitalism economic fluctuations occurred on extreme level. And
when economic decline happened than in capitalism economy
face sever situation.
While in Islamic economic system everything is happened
moderately and smoothly. every corner of life , like spending
,eating, living, in business , in trade , in exchange of wealth ,
consumption of wealth ,distribution of wealth in each and every
department of life Islam teaches us about moderation and
balance of life.
Islam does not allow us that we cross our limits and boundaries.
In Islam every job has done according the Islamic rules and
regulations. And Muslims are bound to perform their duties
accordingly.

6. Distribution of Wealth:
Capitalism does not believe in fair and just distribution of wealth.
Since it believers in full economic freedom and private ownership
of means of production, wide economic disparities exist in
capitalistic economy. Concentration of wealth in few hands takes
place while huge majority of the populace is deprived of the very
basic necessities of life. The privileged few live in luxury while
poverty, ignorance, disease and unemployment are the lot of the
multitude. This disturbed balance of distribution of economic
resources and unbridgeable gulf between the haves and have-

nots ultimately leads to class struggle and ultimate overthrow of

the very system.
Islam, on the one hand guarantees provision of basic human needs
such as food, clothing and shelter to everyone and, on the other
hand, ensures fair and equitable distribution of wealth and
economic resources among all. It does not tolerate existence of
wide disparities among the rich and the poor and tries to
eliminate concentration of wealth in few hands. For bridging the
gulf between the rich and the poor and for ensuring equitable
distribution of wealth, Islam has taken many steps such as Zakat
and Sadaqat, laws of inheritance and bequest, voluntary
charities and compulsory contributions in the form of taxes and
duties. To prevent concentration of wealth in few hands Islamic
economic code has taken measures like abolition of interest,
prohibition of earning of wealth through haram means,
prohibition of hoarding of wealth, etc.
According to Quran:
"so that it does not remain circulating among your rich people
only"[Al-Hasher 59:7]
Another place Quran says:

"Spend of one's choice wealth for parents, relatives and orphans,

for the needy and the wayfarers and Allah is well aware of the
good that you do"
For those people who accumulate wealth Quran says about them:

"Give them the news of a painful torment who hoard up gold and
silver and do not expand these in the way of Allah" [al-Tauba
9:34]

Ibn Al-Qayyim, a Muslim scholar, emphasized that the basis of the

Islamic jurisprudence is wisdom and the welfare of the people in
this world as well as the Hereafter.

II- Islam and Socialism:

Socialism and Islam are compared in respect of their basic

economic perceptions as under:

1. Ownership:

State ownership of all property and means of production, as

stated earlier, is the most distinctive feature of socialist
economy. Private ownership of property and of all the means of
production, distribution and exchange is totally abolished. Land,
factories, transport, communications state control. This leads to
management of these means of production by the bureaucracy.
Bureaucratic running of economic machinery results into
inefficiency, low production and collapse since the bureaucrats
lack initiative, follow rigid rules and are not trained to run
business.

Islam

does not abolish private ownership of property and does not

place all the means of production, distribution and exchange in
the hands of the state. Although Islam upholds public ownership
of some means of production which are the common utility to the
people, but it concedes the rights of private ownership of
majority of the means of production and distribution. Unlike
socialism, Islam gives economic freedom to an individual who
can earn wealth, own it and enjoy it within certain limits provided
he does not infringe teachings of Islam in the process of earning,
owning and consuming it.
In Islam God has given the right to the people for inducement to
maximum utilization of the resources of the universe.
In Quran Allah says:
"God desires ease for you and desires not hardship for you"] (AlBaqarah 2:185).

2. Materialism:
Socialism, especially scientific socialism or communism rests on
a purely materialistic basis. Dialectic materialism or materialistic
interpretation of history is the most vital element of Marxism.
Marx has sought to explain every event in history on economic
grounds. According to him, origin of every activity of man lies in
economic factors. Marx does not believe in religion which, in his
view, is a bourgeois invention to keep the proletariat under their
perpetual control. Engels said: Matter is the only real thing in the

world. The communists believe that human reason is just a

manifestation of matter and soul has no independent existence
of its own but is a product of matter. They hold that all the
different stages of human progress are determined by the
interplay of conflicting economic forces alone, thus leaving no
place for Gods will. So communism is a purely materialistic
ideology which ridicules religion, concept of God and all forms of
spiritualism dubbing them as unscientific.

Islam

is the perfect and final religion revealed by Lord of the

universe for the guidance of mankind. Its foremost aim is to
ensure falah or well-being of humanity in this world and in the
Hereafter. It does not give importance to matter only at the cost
of spirit as does a secular ideology like socialism. Islam believes
in the material as well as moral and spiritual welfare of its
followers at micro and macro level. Followers of Islam believe in
one God, in all the Prophets and Holy Scriptures, in the Hereafter,
in the moral code and in the universal brotherhood of mankind.
In an Islamic state there exist no antagonistic classes conflicting
with each other; neither all the events in history are determined
by interplay of economic forces. Although, in the sight of Islam,
welfare of society does not lie in economic prosperity only as
moral and spiritual advancement is equally important, yet it does
not discourage pursuit of material prosperity through fair means.

Real prosperity consists, not in greed, but in giving, - the giving of

ourselves and our substance in the cause of Allah and Allah's
truth and in the service of Allah's creatures.
In Quran Allah says:

"O ye who believe! Devour not Usury, doubled and multiplied; But
fear Allah; that ye may (really) prosper."

Thus we can say that Islam just not empises on materialism instead
of that

ISLAM

eternal + material life

3. Regimentation and Totalitarianism:

Communism sets up a totalitarian state in which bourgeois class is
liquidated and strong dictatorship of the proletariat class is
established. Fundamental rights and civil liberties are crushed
and man is rendered merely to the status of an economic animal.

In the name of bread he is deprived of freedom of conscience,

freedom to think, freedom to speak and freedom to act. In order
to achieve economic objectives and in order to work the huge
productive machine efficiently, the state becomes all powerful
and establishes complete regimentation. Thus the state under
communism does not wither away, as predicted by Marx, rather
it turns out to be a worst type of totalitarian state.

Islam, on the contrary, believes in democratic form of government

as the Quran, its revealed book, enjoins upon Prophet
Muhammad (PBUH) to conduct public affairs in consultation with
his followers. Islam gives all the fundamental rights and civil
liberties to the people living in the Islamic state. All the citizens
have freedom of person, freedom of religion and conscience,
freedom of expression, right to own and alienate property, right
to protection of honor, right to criticize the government, right to
equality before the law, right to education, right to medical care
and above all right to basic human needs such as food, clothing
and shelter. Islamic state does not establish dictatorship of any
class, neither it is a totalitarian state. The state under Islam does
not wither away, rather it becomes indispensible as it discharges
all the functions of a traditional state and modern welfare state.

4.Economic Equality:
Economic equality is another claim of communism although it has
never been realized so far. In theory at least it is claimed that the
rights of the individuals in the economic sphere are governed by
the principles of equality. Every individual is provided with the
necessaries of life according to his needs.

Islam, unlike communism, recognizes that there is no equality

among human beings as regards the economic means and
possession of worldly wealth. The Quran considers these
inequalities and disparities in the distribution of wealth as part of
Divine economic order and, therefore, does not try to eliminate
them by unnatural and artificial means. The existence of
economic disparities, in fact, is a test by which Allah tries the
human beings how they behave in good and bad circumstances.
However, Islam does not permit the differences in possession of
wealth to assume such proportions that concentration of wealth
takes place in few hands that live in luxury while vast majority of
people lead a life of abject poverty, misery and deprivation. Islam
does not tolerate the existence of unbridgeable gulf between the
rich and the poor, but unlike socialism it does not believe in
equal distribution of wealth. Actually Islam believes in fair, just

and equitable distribution of wealth and in social justice. For

ensuring equitable distribution, Islam has taken many steps such
as institution of Zakat and Sadaqat, laws of inheritance and
bequest, voluntary alms and levy of compulsory contributions in
the form of taxes and duties. In addition to this it has abolished
interest, prohibited unfair and unlawful means of earning wealth
and banned hoarding of wealth so that wealth should not
concentrate in few hands.
"All men are family of Allah"[a tradition of the prophet(SAW)]

6.

Level of moderation:

In socialism all the means of production in the hand s of the

state. People are not free to do their own business thats why in
this system people become dull. There is no innovation is
happen. Because of no innovation the concept of progress are
very few people fulfill their needs on low level they are destitute
of the government. We can say that in socialism the liberty of
the people abolished. There is no moderation in communism it is
a low level of living that destroys the ability of the people. In this
society consumption is on low level.
In Islam every step of life there is a real kind of moderation. Islam
does not against the private ownership of the people.
In Quran Allah says
"Eat and drink of that which God has provided and act not corruptly,
making mischief in the world"(Al-Baqarah 2:60).
Another place Quran says

"O you who believe! Forbid not the good things which God has
made lawful for you and exceed not the limits. Surely, God loves
not those who exceed the limits. And eat of the lawful and good
that God has given you, and keep your duty to God in whom you
believe" (AlMa'idah 5:87-88).

Islam just says that everything should be do remain in limits.

Conclusion:

From the above comparison we can conclude the conclusion that

Islam is a natural economic system which shows the complete
code of the individual and collective life of human being
therefore Islamic economic system is bestowed by GOD which is
a complete being. Whereas other economic systems made by
the people itself. They have less mind abilities and have weak
perspective about world. Therefore how we can compare other
economic system with others.
Thus Islamic economic system is an exemplary system and it have
all that qualities at on the basis of man can spend prosper and
calm life.

Reference :
M.A.Mannan (economics systems)
Prof Abdul Ghani CH(BA economics)
Prof Abdul Hameed Dar & Prof Mian M.Akram(Islamic economics)
From internet