Economic System of Islam

Economic System of Islam

The word economy (iktissad) is derived from an old Greek term, which means "the planning of home affairs", such that its able members share in producing the goods and performing the services, and all its members share, as well, in enjoying what they possess. Through time, people extended the meaning of 'home' until it meant the group of people which is governed by one state. Thereupon, it is not intended to use the word economy in its linguistic meanings which are saving or property. What is meant is the technical meaning of the word, i.e. the administration of property affairs, either by its increase, and securing of its production which is discussed in the economic science; or by the manner of its distribution, which is discussed in the economic system.
Though both the economic science and the economic system deal with the economy, their respective meanings differ significantly. The economic system is not affected by fluctuations in the amount of wealth. The fluctuations in the amount of wealth do not affect the form of the economic system. Therefore, it is a serious error to look at the economy as one subject, and to discuss it as one matter, as this leads to either an error in understanding the economic problems required to be solved, or misunderstanding the factors that increase the wealth, in the country, since the planning of the community affairs in respect of creation of wealth is one matter, and planning of the peoples affairs in respect of wealth distribution is entirely another matter. So, the subject of planning the production of economic material must be separated from the subject of planning its distribution. The first is connected with the means and the second is connected with the thought. The economic system must be discussed as a thought that is based upon the viewpoint of life (creed of a particular ideology), and economic science must be discussed as a science that has no relationship with the particular viewpoint in life. The important subject of them is the economic system, because the economic problem revolves around mankind's needs, the means of their satisfaction, and benefiting by these means. Since the means are present in the universe, their production does not cause an essential problem in satisfying the needs, but rather the needs drive man to produce these means. However, the real problem present in the relationships of the people, i.e. the society, results from enabling or restricting the people from benefiting from these means. This results from the subject of man's ownership of these means and so is the basis of the economic problem, which must be treated. So the economic problem results from the subject of possessing the benefits not from producing the means which gives the benefit.

The 'benefit' in a thing represents the suitability of that thing to satisfy the need of man. Benefit comprises two elements. One is the extent of desire for the particular thing felt by man. The second is the merits existent in the thing and its suitability to satisfy man's need, not the need of only one particular person. This benefit results from either man's efforts, or of the property, or through both of them. The form of man's effort includes the intellectual and the physical effort which he spends to develop a property or a benefit from a property. The word property includes everything possessed for utilization through buying, leasing or borrowing, whether by consumption, such as the apple or by usage such as a car; or through the benefit of using it like borrowing machinery, or leasing a house.

Property includes money such as gold and silver, commodities such as clothes and foodstuffs, and immovable properties such as houses and factories; all things which are possessed. Since property itself satisfies man's needs, and man's effort is a means to obtain the property or its benefit, then the property is the basis of the benefit.

Property is the basis of the benefit - whilst man's effort is of the means that enables man to obtain the property. Hence, man by his nature strives to obtain or possess the property. Thereupon man's effort and the property are the tools which are used to satisfy man's needs, they are the wealth which man strives to possess. Therefore wealth is the property and the effort together.

The individuals possession of the wealth occurs either from other individuals, such as in possession of a gift, or directly such as the possession of the raw materials. Possession of the matter or thing is either:

1. for consumption, like possessing an apple,

2. for utilization, like owning a house,

3. the possession of the benefit of the property, like leasing the house, or

4. for possessing the benefit resultant from man's efforts, like an architect's blueprints.

Possession, in all of its applications, is either with compensation, such as selling and leasing property, and wages of the employee; or it is without compensation such as donations, grants, presents, inheritance or loans. However, the economic problem lies in the possession of wealth not in creating wealth. The economic problem results from the view towards ownership, from the ill disposition of this ownership, and from the ill disposition of the wealth among people. The problem does not stem from any other matter, and therefore addressing this aspect is the basis of the economic system.

The basis upon which the economic system is built constitutes three principles: 1. Ownership, 2. Disposal of the ownership, and 3. The distribution of wealth amongst the people.

THE VIEW OF ISLAM TOWARDS ECONOMY
The view of Islam towards wealth differs from its view of utilizing it. Islam considers the means which gives a thing a certain benefit different than the actual possession of the benefit. So the property/asset and man's efforts are the components of the wealth, and they are the means which give the benefit. Their position in the view of Islam regarding life's affairs and in regard of their production differs from the question of using them, and from the method of possessing this benefit. Islam interferes directly in benefiting from some forms of wealth. So it prohibits the use of some properties such as wine and dead foodstuffs. Similarly it prohibits benefiting from some of man's actions, such as dancing and prostitution. It prohibits selling assets which are forbidden for eating, and it prohibits hiring for the actions which are forbidden to be performed. This refers to the benefits of the property/asset, and man's effort. However, regarding the way of acquiring the property/asset and man's effort, Islam has put numerous laws regulating this ownership, such as laws of hunting and land reclamation, and the laws of leasing, manufacturing, inheritance, donations, and wills.

This is regarding the utilization of the wealth and the manner of its initial ownership or acquisition. Regarding generating the production of the wealth, Islam encouraged it through motivating the people to earn. Islam does not interfere in defining the technical manner of increasing production, or the quantity of production, rather it left that to the people to achieve as they like. Turning to the existence of the wealth, property exists in this world naturally. Allah, the Glorified, the Supreme, has created it, and left it for man's disposal (Taskheer). Allah, the Exalted says:

"It is He Who created for you all that exists on Earth"
And said:

"Allah is He Who put at your disposal the sea so that the ships may sail by His command ,and so as you may seek His bounty" [45:12]

And said:

"He put at your disposal that which is in the heavens and that which is in the earth, all from Him"[45 :13]

And said:

"Let man consider his food. How we pour water in showers: Then split the earth in fragments. And cause the grains to grow therein. And grapes and fresh vegetation. And olives and dates, and enclosed gardens, dense with lofty trees. And fruits and grazes. Provision for you and your cattle"[80:24-32]

And said:

"And we taught him the art of making garments (of maille) for your benefit, to guard you from each other's violence" [21 : 80]
And said:

"And we sent down iron, in which is great might, as well as many benefits for mankind". [57:25]
Allah (SWT) illustrated in these verses, and others like them, that He created the property and created man's efforts, and He did not expose to things other than that related with it, which indicates that He did not interfere in the property or in man's efforts, except that He showed that He created them for people to utilize them. He also did not interfere in the production of wealth, there is no Shar’iyah text (Divine legal text) which denotes that Islam interferes in the production of wealth. On the contrary, we find the Shar’iyah texts indicating that the Shar’iyah has left the issue of mining or extracting the mineral resources, and improving man's effort. It was narrated that the Prophet (saw) said in the issue of manual pollination of date trees, "You are more aware of the daily, routine issues of your life". It is also narrated that the Prophet (saw) sent two of the Muslims to Jurash of Yemen to learn weapon manufacturing. These examples indicate that Shar’iyah has left the matter of production of property to the people, so as to produce according to their experience and knowledge.

From all of this, it is apparent that Islam looks at the economic system and not at economic science. It makes the use of the wealth, and the way of initiating the ownership of its benefit as its subject. It does address or interfere in the production of the wealth, or in the technical means of benefit at all.

THE ECONOMIC POLICY IN ISLAM

The economic policy is the goal aimed at by the laws which deal with the management of economic affairs. The economic policy in Islam is to secure the satisfaction of all basic needs for every individual completely, and then enabling him to satisfy his luxurious needs as much as he can. Mankind is referred to as a man living in a particular society which has a special way of life.

So Islam looks at every individual by him/herself rather than the total of individuals who live in the country. It looks at him as a human being first, who needs to satisfy all of his basic needs completely, then to him in his capacity as a specific individual to enable him to satisfy his luxurious needs as much as possible. Islam looks to him at the same time, considering him a person connected with others by certain relationships that is directed in a specific course, according to a particular law. The economic policy in Islam is not to raise the standard of living in the country without looking to secure the rights of life for every individual completely; nor is it just to provide the means of satisfaction in the society, leaving the people free to take from it any way that they want, without securing the rights of each individual to take; rather it is addressing the basic problems of everyone as a human being, who lives according to particular relationships, and it then enables each individual to raise his standard of living and achieve comfort for himself, according to a particular way of life. As such it is different from the other economic policies.

While putting the economic rules for the human being, Islam relates the legislation to the individual to secure the right of livelihood and to secure the luxurious needs, while it verifies that the society has a special way of life. So, it looks at what the society should be, at the same time that it looks to secure livelihood and luxurious needs. It makes its view towards what the society ought to be as a basis for its view towards the livelihood and the luxurious needs. Therefore, one will find that the divine rules (Ahkam Shar’iyah) have secured the satisfaction of all of the basic needs (food, clothing and housing) completely, for every citizen of the Islamic State. This is achieved by obligating each capable person to work, so as to achieve the basic needs for himself and his dependents. Islam obligates the children or the heirs to support the parents if they are not able to work, or upon the State Treasury (Beit el Mal) if there is nobody to support him. As such, Islam requires that the individual secures for himself and his dependents the satisfaction of the basic needs, i.e. adequate foodstuffs, clothing and housing. Islam then encourages the individual to secure the luxuries of life as much as he can.

Islam also prevents the government from taking property through the imposition of taxes, except in cases where it is obligatory on all Muslims to address, i.e. famine or jihad, and the tax is taken only on wealth which exceed that which each individual uses normally to satisfy his basic and luxurious needs. As such, it achieves the right of livelihood for everyone individually, and facilitates the securing of the luxurious needs. At the same time that Islam sets certain limits within which the individual can earn in order to satisfy his basic and luxurious needs, and organizes the relationships according to a particular way. So Islam prohibits the production and consumption of wine by every Muslim, and it does not consider it as economic material. Islam prohibits the taking of Riba (usury, interest, etc.) and its usage in transactions for everyone who holds Islamic citizenship; it does not consider Riba as an economic good, whether for Muslims or non-Muslims. So Islam considers what the society ought to be when considering any property as an economic material or good, in order for it to be utilized.

The Individual and Society

Islam did not deny individuality while it looked at the human being, nor did it deny the aspect of humanity when viewing the individual. Furthermore, Islam does not separate what the society should be from the aspect of working to secure the satisfaction of the basic needs for every individual, and then enabling him to satisfy his luxurious needs. Rather, Islam makes the satisfaction of the needs and what the society should be, as two matters which are inseparable from each other by considering what the society should be as a basis for satisfying the needs. For the sake of satisfying all the basic needs completely, and to enable the satisfaction of the luxurious needs, the economic goods should be available to the people, and the material should not come to them unless they put some effort to earn it. Therefore, Islam encourages people to earn and to seek the provision and to work in life; and it made working for earning the provision compulsory.

Earning and Enjoying Property

Allah the Supreme said:

"So walk in the paths of the earth and eat of His sustenance which He provides". [67:15]

However, this does not mean that Islam interfered in the production of the wealth, or that it demonstrated the technical matters related to increasing production, or the amount of production, because it has no relationship with that. Rather it only encourages working and the earning of property. Many Hadiths came to encourage the earning of property. In one narration, the Prophet Muhammad (saw) shook the hand of Sa'd bin Mu'adh (ra) and found his hands to be rough. When the Prophet (saw) asked about it, Sa'ad said: 'I dig with the shovel (mishah) to spend on my family'. The Prophet (saw) kissed Sa'd's hands and said: '(They are) two hands who Allah The Supreme loves."

The Prophet also said:

"Some sins are not forgiven by the fasting or the prayer. He was asked: 'What will forgive them O messenger of Allah?' He said: The concern in seeking the provisions".

It was also narrated that Omar Ibn Al Khattab passed by some people, who were known as readers of the Qur'an. He saw them sitting and bending their heads and asked who they were. He was told: "They are the dependents who depend on Allah (Al-Mutawwakiloon). Umar replied: No, they are the eaters who eat the peoples properties (Al-Muta-aakiloon). Do you want me to describe who the real dependents (Al-Mutawwakiloon) are? He was answered affirmatively, and then he said: He is the person who throws the seeds in the earth and then depends on His Lord The Almighty, The Exalted"

Thus we find that the Ayahs and the Hadiths encourage the striving to seek provision, and working to earn property, just as they encourage the enjoyment of the property and eating of the good things.

The Supreme said:

"Say: who has forbidden the beautiful (gifts) of Allah, which He has provided for his servants, and the things, clean and pure, (that He has provided?" [7:32]

And:

"And let not those who are stingy, who withhold the gifts which Allah has given them from His Grace, think that it is good for them. Rather it is worse for them. That which they hoard will be their collar on the Day of Resurrection. To Allah belongs the heritage of the heavens and the earth, and Allah is informed of what you do." [3: 180]

And:

"O you who believe! Spend of the good things which you have named, and of that which We bring forth from the earth for you." [2:267]

And:

"O you who believe! don't prohibit the good things which Allah made Halal for you." [5:87]

And:

"And eat of that which Allah provided you, Halal and good." [5:88]

These verses, and the like, denote clearly that the divine rules (Ahkam Shar' iyah) related to the economy, aim at securing and acquiring the property and enjoying the good things. So Islam obliged individuals to earn, and ordered them to enjoy the wealth that they earned, to achieve economic growth in the country, to satisfy the basic needs for every person, and to enable the satisfaction of luxurious needs.

In order to facilitate the acquisition of property, we find that Islam puts the rules related to the manner of possessing the wealth without any complications, so it made the way of initiating the

acquisition of property to be very easy. Thus Islam defined the legal means of initiating ownership, and it defined the contracts through which property/assets are exchanged, and left man free to develop the styles and means by which he earns, and it did not interfere in the production of the wealth.

Islam puts the legal means of initiating ownership, and contracts, in general guidelines that include legal standards, and as rules, under which numerous issues belong, and from which solutions to new problems can be derived.

Thus it obligated the work, detailed its rules, and left the person to work as a carpenter, manufacturer, technician, trader, etc. The Gift is legislated in such a way to include donations or grants, as means of initiating ownership. Employment was legislated in such a way to include the power of attorney, being entitled to compensation (by qiyas). Thus we find that the means of ownership, and the contracts, detailed by the Shar'iyah in general outlines and set in such a way to include any contemporary scenario, while being restricted so as not to include any new type of contracts, such as multilevel marketing. Furthermore, it is obligatory that people restrict themselves to the transactions that are defined by the Shar’iyah. The Shar’iyah is applicable to all issues and at all times.

Responsibility of the State

As such, man proceeds quickly in earning property, without being faced with obstacles preventing him from earning, through Halal means. Thus, the satisfaction of all basic needs is possible for every person. Islam does not only encourage and motivate the individual to cam, it also requires the State Treasury (Bayt al-Mal) to be responsible for the support of all the citizens. So it made the support of the mentally or physically impaired as the State's responsibility, and it made the provision of the basic needs of the nation (UMMAH) as one of its duties, because the State is charged with the responsibility of fostering the affairs of the nation.

The Prophet (saw) said:

"The Imam is in charge and he is responsible for his citizens".

In order for the State to comply with what the role placed on it by the Shariah, the Shariah gave the state the authority to collect certain revenues such as the head tax (Jizya) and the land tax (Kharaj), and made the Zakat to also be collected by the State Treasury (Bayt Al-Mal). The State is obliged to collect for that which is a duty upon the Ummah, such as the repair of roads, building hospitals, feeding hungry people, and the like.

Management of Public Property

It also is responsible for the management of public property, which is controlled by the State. The Shar'iyah prevents the individuals from administering public property on their own, because the overall responsibility is for the Imam, and none of the citizens is entitled to assume this responsibility unless if he was designated by the Imam. The public properties of water, oil, iron, copper and the like, are properties which must be utilized in order to achieve economic progress for the nation (UMMAH), because these properties belong to the UMMAH, and the State merely administers them. When the State fulfills its duty of administering the public property, discharges its duty of care taking the affairs of the people, and when every capable individual is working, then abundant wealth is available for the satisfaction of the individual basic needs completely, and the luxurious needs.
The Objective of Earning the Property

However, the economic progress through encouraging and motivating every capable individual to cam, assigning the administration of public property to the State, and utilization of the public property; are only as means to satisfy the needs, and are not for the sake of owning the property of itself, nor for boasting, nor to spend it in a sinful (ma'assi) manner, nor for arrogance and oppression. Therefore the messenger of Allah (saw) said:

"Whosoever sought the life (matters) legitimately (Halal) and decently he will meet Allah The Supreme with his face as a full moon; and whosoever sought it boastingly and excessively he will meet Allah while He is angry at him".
The Prophet also said:

"You don't have of your property except that which you ate and consumed, that which you wore and exhausted, and that which you donated and remained".
The Supreme said:

"Don't commit ISRAAF (spending or going beyond the limits imposed by Islam),surely He does not like those who condone ISRAAF." [7:31]

Islam made the aim of owning property as a means toward satisfying the needs and it did not make it for the purpose bragging or boasting. In addition it also made directing the economy as a whole according to Allah's orders, as a necessary matter. It ordered the Muslim to seek the Hereafter through what he earns, and not to forget his share of this life.

The Supreme said:

"But seek the abode of the Hereafter in that which Allah has given you, and do not neglect your portion of this world, and be kind even as Allah has been kind to you, and seek not corruption in the earth" . [28 :77]
Therefore Islam made the philosophy of economy to be: directing all economic actions by Allah as orders based on recognizing the relationship with Allah. So, the idea upon which the management of the Muslims' affairs in society is built, is directing the economic activities according to the divine rules (Ahkam Shar’iya), as a complete way of life (Deen). Similarly, the fostering of the affairs of the citizens of the State put restrictions on their economic activities, according to the divine rules. Therefore it permits what Islam has permitted, and it bans whatever Islam has banned.

The Supreme said:

"And whatsoever the messenger gives you take it, and whatsoever he forbids you abstain from it"[59:7]

And He said:

"O mankind! There has come unto you an exhortation from your Lord, a cure for that which is in the breasts." [10:57]

And He said:

"And let those who conspire to evade orders beware lest grief or painful punishment befall them"[24:63]

And He said:

"And rule them with what which Allah revealed" [5:48]
Islam secured the observance of these rules by motivating the Muslim to fulfill his duties through the fear of Allah (Taqwah), and through legislation which is applied upon the people by the State.

The Supreme said:

"O you who believe, observe your duty to Allah and give up what remains (due to you) from Riba, if you are (in truth) believers" [2:278]

And He said:

"O you who believe! When you contract a debt for a fixed term record it in writing" till He says:

"save in the case when it is actual merchandise which you transfer among yourselves from hand to hand in that case it is no sin for you if you write it not" [2:282]

Thus Islam explained the way in which these rules are implemented and the way which guarantee Muslims' adherence to these rules.

The basis of the economic policy in Islam is built on the basis of satisfying the needs of every individual, as a human being who lives in a particular society, and on the earning of the wealth to achieve and augment that which satisfies the needs. Economy in Islam is established on one idea, which is the direction of all actions by the divine rules and is implemented by every individual, throughout the consciousness (Taqwah) of Allah, and by the State through educating the people and through executing the legislation.


Note: Zakat is not part of the Islamic economic system

Public resources such as sources of water like rivers and lakes, sources of energy like electricity, and public utilities like parks, roads and railways cannot be privatized according to the wishes of the government. They remain public property as originally classified by Islam according to their nature. They will always remain public and cannot be owned by individuals who may charge excessively and prevent the vital requirements of the people getting to them, as happens in the West.

It is compulsory on the husband to work to earn his provision (nafaqah), but if he cannot do so for any genuine reason, it is the responsibility of the state to provide tangible basic needs of food, clothing, shelter; and intangible needs of education, health and security.

Hoarding of wealth is prohibited, even if you are willing to pay zakat on it. This makes it available for the markets, boosting the economy and preventing the wealth from merely making a circuit amongst the rich.

Currency in the Khilafah can only be based on gold and silver. Thus it will be of real value itself, providing stability in the economy. It cannot be reproduced or destroyed, which causes devaluation and inflation.

The Islamic system has 5 types of company structure :

anan, abdan, mudharaba, mufawadha and wojooh.
Anan - Partnership between two people, both contributing capital and effort.
Abdan - Company in which two or more persons participate by their effort only, without their capital.
Mudharaba - A company in which one part provides the capital while the other provides the effort.
Wojooh - A company involving two or more parties who provide the effort with another party who guarantees the financial support.
Mufawadha - This is a company which combines any of the other 4 types of company structures permitted by Islam.
Stocks and share companies (PLCs) are not allowed in Islam as they do not fall into any of the permitted categories, having an incorrect company structure, and so are invalid.

The Islamic economy focuses on ensuring the effective distribution of created wealth and resources, rather than amassing these in useless stockpiles. Thus the satisfaction of the basic necessities of food, clothing and shelter for all citizens be they Muslims or non-Muslims is the priority.

If you find derelict land anywhere you may make use of it without anyone's permission.

In the 8th and 9th century, Iraq under Islam had a population of 30 million (compared to 18 million today). 80% were farmers with modern irrigation systems from the rivers Tigris and Euphrates. The ratio of yield of seed for wheat in the Muslim world was

10:1 at this time compared to only 2.5:1 in Europe.

The Islamic economy focuses on ensuring the effective distribution of wealth and resources to satisfy the `basic' necessities of food, clothing and shelter, and is not merely concerned with the production of wealth.

So, You Want to Buy a House...?

The desire for economic security is a fundamental aspect of human nature. In society, the distribution of resources and commodities is regulated by the governing authority, which runs affairs according to the particular ideology that the rulers have chosen for the purpose - in our case, Capitalism. Accordingly, the people are restricted and controlled by the systems which prevail over them, and must fulfil their economic needs within the framework of these systems.

The issue of our housing is an important aspect of the economic system that we are subject to. We all need a house to shelter from the elements, and as a base for our everyday activities. But, if you think for a moment about your own situation living in the West, housing throws up many problems....

The price of even modest accommodation is staggering. If you take a house suitable for an average family (like your own), the cost of buying it would range from about œ50,000 to œ100,000 or more, depending on its location. This figure of course, goes far beyond the actual cost of the materials and labor required to build it. In fact, it is artificially inflated to create a source of business for banks and building societies from people who have to deal with them in order to buy a house.

Consider yourself. You have to provide for your family - food, clothing, bills, education etc....After all these are taken care of, does your income put you in a position to afford to buy a house? Almost certainly not!

So what are the options available to you?

Renting: This will give you housing, but would you feel satisfied with living with your family in rented accommodation? Most people would not. After all this gives no security for your future - you may have to move from place to place, depending on the whims of a landlord. This affects your job, your children's education and so on. The landlord may choose to raise the rent as he pleases.

In addition, a large proportion of your income would go towards something for which you have no permanent possession. In addition, since you do not actually own the place, you will have no incentive to spend on it to furnish and decorate it as you like - to turn the house into a home. In all, renting is unsatisfactory - you can never really see a rented home as your own home.

Mortgage: This option seems to be the only feasible alternative. In fact this is the system that most people use in your predicament. In theory, you own the house you live in, paying for it slowly as your income allows, and it appears to solve many of the problems with renting.

Unfortunately, the reality of a mortgage does not match its theory. It is riddled with even more problems than renting.

Suffering the Pains of the Mortgage Gamble :

1. With a mortgage, you don't really own your house. You have to give the regular monthly payments on time, and if you miss even one, you are subject to repossession of your home. This is whether it is your initial payment, or your last!

2. Your payments do not mainly contribute to the value of your house. Rather you are paying a large proportion towards the interest on the loan you have taken.

3. The payments are subject to the whims of the mortgage company - they can increase or decrease the rates of interest at will, without any discussion with you.

4. Very few people ever live to actually pay off their mortgage completely and thus really own their house. Thus, they never have anything to pass on to their children.

5. House prices are subject to such fluctuation that the value of the house could drop within a matter of years to even as much as half of the value you bought it for! So you are paying a debt which you could not recover even if you sold your house!

However, more important than any of these reasons, is Islam's opinion on mortgage:

Getting a mortgage is definitely and clearly haraam (forbidden) to Muslims. The paramount reasons being that,

1) The Muslim has to borrow money on interest. Allah (swt) and His Messenger (saw) have forbidden the taking and giving of interest on money. Allah (swt) says in the Qur'an,

"Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the devil; this is because they say: 'Trade is similar to interest' while, Allah has permitted trade and forbidden interest." [TMQ 2:275]

Allah (swt) also says: "O believers, fear Allah and give up the interest that remains outstanding if you are believers. If you do not do so, then be sure of being at war with Allah and His Messenger. But if you repent, you can have your capital. Neither should you commit injustice nor should you be subjected to it." [TMQ 2:278-279]

Narrated by Jabir: The Prophet (saw) cursed the receiver and the payer of interest, the one who records it and the one who witnesses it and he said, "They are all alike." (from Muslim, Tirmidhi and Ahmad). Narrated by Abu Hurayrah: The Prophet (saw) said, "Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother."

2) The contract of purchase does not satisfy a fundamental condition in Islam. In Islam, if you buy a house, you own the house. In the mortgage agreement, you do not actually own the house but the financial institution owns it until you pay all of your mortgage. You can be kicked out if you fail to keep up with your mortgage payments and all is lost! Thousands of people lost their homes in this way over the past few years, and thousands more will no doubt follow.

We can see therefore, that this simple issue of housing causes us many dilemmas. However, the Economic System of the Islamic State has solutions to these problems.

The Islamic alternative In the Khilafah, it is the right of every individual to have shelter. The Prophet (saw) said: "The son of Adam has no better right than that he would have a house wherein he may live and a piece of cloth whereby he may cover his nakedness and a piece of bread and some water." It is therefore the responsibility of the state to ensure that everybody has accommodation to live in.

So, if you are unable to provide accommodation or sustenance for yourself or your family, the Islamic State will provide these for you free of charge, for as long as you remain in that position.

Thus, if you want to buy a house, the Islamic Economic system provides you with various mechanisms of helping you to do this. These include:

1) Gift from the state: The Khaleefah can give land to you for private use which could include land for home building. By such grants, it makes it easier for you to provide shelter for you and because of this, the state would devise a deliberate policy to ensure that affordable accommodation is available through extensive home building both by the state and by private individuals who may want to build for profit. The state fulfils this responsibility by the implementation of schemes that take full account of individual circumour family. Such a grant was given to Bilal (ra) by the Prophet (saw) as the ruler of the Islamic State. The Khulafa`a who followed the Prophet (saw) continued with such grants. The state can also give direct financial assistance to the poor and needy for housing purposes, and indeed it is compulsory for the state to provide this for them.

2) Interest-free loans from the state: If you are able-bodied and working, the state can provide interest-free loans for housing. This is in response to the state's responsibility to provide shelter for all citizens.

3) Payment by installments: As an alternative to interest free loans, the state can offer to you accommodation for sale with affordable means of payment.

The above are actions that the Khaleefah can undertake to provide housing as a matter of duty to citizens of the Khilafah whether Muslim or non-Muslim. In addition to these, there are other means through which you may get a source of funding for housing. The Khaleefah would encourage these private sector sources in order to facilitate its responsibility. These include:

1) Qurd hassan from the public: These are interest-free loans from the rich. You could approach wealthy people in the state like businessmen, to secure such a loan. The rich would be encouraged to provide interest-free loans for housing.

2) Deferred payment: Owners of existing properties can sell them to you for a fixed price in the future. The price can either be the same, more or less than the current price, and you could delay payment to such a time when you are able to pay.

3) Awqaf: These are philanthropic institutions set up by individuals to provide housing and other schemes. They give these up for the benefit of the public, for the sake of Allah (swt). You could apply to these institutions for housing.

There is no concept of repossession of property in the Islamic State. In any of the above means of funding for buying a house, as soon as the contract is agreed, the house becomes entirely your own property. You are free to sell it or keep it as you like, and no one is permitted to take it from you. All that you are responsible for is your debt to the creditor.

Thus, the Islamic State provides a comprehensive economic system which solves the problem of buying a house.

Islam and the Economic Question
In order to address the Economic System in Islam, we first of all need to clarify the position of Islam in relation to the quest for material well being. This is because the word dunya,which is associated with material wealth or worldly matters has become a dirty word for many Muslims.

The separation of deen from dunya (secularism) is a Western-Christian concept that has recently become widely internalized amongst Muslims. Consequently, seeking increase in

economic or worldly matters is frowned upon, while continuous engagement in prayer and other personal ibadat is regarded as meritorious. As such, many people get confused and conduct a double life. On the one hand, money talks; it gives status and makes life comfortable, so they seek it vigorously. On the other, they feel guilty, thinking that their effort should be spent on `religious' duties.

This is due to a misunderstanding of the position of the economic question in Islam. There is no doubt that Islam is opposed to monasticism and views the economic activities of man as quite lawful and sometimes even obligatory and necessary. We find many injunctions in Islam that allude to this. For example, Allah (swt) says in the Qur'an:

"Disperse through the land and seek the bounty of Allah" [TMQ 62:10]. He also says,

"Allah has permitted trade" [TMQ 2:275], And even more directly, Allah (swt) says,

"Seek the other world by means of that which Allah has bestowed upon you, and do not be negligent about your share in this world." [TMQ 28:77]. These are all in reference to economic activity.

In the Sunnah, we find that one of the most commonly said du`as that the Prophet (saw) taught us is: "Our Lord give us the good in this life and the good in the hereafter."
But despite this, we find expressions in the Qur'an which state: "The life of this world is but a delusion"[TMQ 3:185] ;

"The mutual rivalry for piling up the good things of this world diverts you from the more serious things." [TMQ 102:1]; and many others, stating that man has lust and greed for wealth [89:20] and that he is violent at this greed [100:8] and that he becomes boastful and proud [11:10] and so on. This apparently sounds like a contradiction in terms. But actually, what we are taught by Islam is that the real objective of our existence is to worship Allah (swt) through righteous conduct by living as humans in this world. So all those things that are necessary for this life become essential for man. It is one thing to say that material well being is important and even compulsory but it is quite another to say that it is the ultimate goal and center of thought and action in life. This is where the confusion arises about the Islamic economic question. The fundamental difference between Islamic economics and all materialist ones is precisely this. The materialists view that economic well being is the ultimate end of human life, while Islam says that these things may be necessary and indispensable, but cannot be the true purpose of life. Economic endeavors only become an allurement or delusion if man loses sight of his real purpose in their pursuit.

The right path to follow therefore is to fully engage in worldly economic life in the manner prescribed by Allah (swt) and His Prophet (saw), both at a societal and individual level. The Prophet (saw) said: "Work for your worldly life as you were going to live forever, but work for the life to come as if you were going to die tomorrow."
The Economic Problem in Islam Unlike the current world view as pushed by the Capitalist west, Islam considers that the main economic problem that mankind will ever have is that of distribution of wealth and not of production. In the eyes of the Capitalist west, there is relative scarcity of resources available in the world, and people's demands for these resources are endless. Hence each nation and in fact, the world, should concentrate on more and more production. The higher the amount of wealth produced, the higher the number of people that will satisfy their demands through the process of economic activity, or so the theory goes.

Islam distinguishes between basic needs which include food, clothing and shelter, and luxurious wants which include all those things that are not necessities in life. It views that there are enough resources to satisfy the basic needs of all people all the time and to satisfy some of the luxurious wants of people, and that the economic problem is that of the correct distribution of wealth and not merely involving the increase of production. There are enough resources to feed, clothe and house everybody in the world fully as can be seen by the food mountains of Europe and the excesses of the few rich in each country, including the 3rd world countries. In accordance with their Capitalist philosophy of maximizing profit, we find governments paying farmers to produce less as in the EC countries, or even to destroy what has already been produced as happened in poor Latin America where in the past a huge amount of coffee was burnt to maintain a certain price level. Far more wealth leaves the poor countries of Africa for the rich west than vice versa due to unjust economic deals. Even at the height of the Ethiopian famine crisis in the late eighties, the country was exporting millions of dollars worth of resources to the West. Allah (swt) says in the Qur'an, "It is Allah ho created the heavens and the earth, and sent down from heaven water wherewith He brought forth fruits to be your sustenance. And He subjected to you the sea at His commandment; and He subjected to you the rivers and He subjected to you the sun and the moon constant upon their courses, and He subjected to you the night and the day, and gave you of all that you asked Him. If you count Allah's bounty, you will never number it; surely man is sinful, unthankful." [TMQ 14:32-34]. In another ayat He says, "Verily, your Lord does provide sustenance in abundance for whom He pleases and He does straiten it, for He does know and regard all His creatures." [TMQ 17:30].

These verses among many others show that Allah (swt) has pooled in this universe all the needs and beneficial things for man, and has provided sufficient resources to satisfy the material needs of man.

In Islam, a distinction is made between economic science, which is to do with the means of production, and the Economic System which is concerned with the problem of distribution of wealth, namely the rules by which wealth can be acquired, invested, used and disposed of. It is through the Economic System that is specific to Islam that wealth

is distributed equitably, while economic science is not particularly specific to Islam as such but can be acquired from any other ideology or developed as seen fit.

Objectives of the Islamic Economic System

The objectives of the Islamic economic system can be classified as follows:

•To satisfy the basic needs of each and every individual in the Islamic State completely,

•To provide the citizens of the Islamic State with the means to satisfy their luxurious needs,and

•To achieve 1) and 2) through a naturally workable system with due incentives for economic activity and an equitable system of distribution.

Principles and Policies to Achieve the Objectives

1) Ownership.

Ownership constitutes one of the important incentives for engaging into economic activity as the owner of wealth has the right to use or dispose of it. The means of acquiring such rights is one of the fundamental principles through which the objectives of the Islamic Economic System are achieved.

In the Islamic Economic System, it is understood that the real owner (Creator) of all wealth is Allah (swt). We only `own' wealth by proxy as guardians. Some of us acquire wealth by engaging in the production process and hence have a direct access to wealth. These include the factors of production as defined by Islam. Others have an indirect access to wealth simply because Allah (swt) as the real owner of wealth has stipulated that those with direct access to wealth through engagement in the production process must pass some of it on to them as He made clear in the Qur'an: "Give to them from the property of Allah which He has bestowed upon you." [TMQ 24:33]

This usually takes the form of zakat, kaffara, sadaqat-ul-fitr, inheritance, etc. which are given to the poor, the needy and later generations. It is the duty of the government to ensure that such wealth is duly transferred by law.

Notwithstanding this, Islam does not impose a limit on the amount of wealth that one can own. Rather, it controls the means of ownership such that people acquire the right to wealth in a just manner. This excludes speculation, forward transactions, lottery, and dealing with interest, among other things.

Additionally, Islam also stipulates in accordance to the ahadith of the Prophet (saw) that certain properties are to be collectively owned for the use of all citizens. These include sources of energy, pastures, natural resources including water and public services.

Through these ownership principles, Islam ensures that everyone gets what is rightfully due to him from his Creator, unlike the Capitalist system where only those who take part in the production process have the right to wealth. At the same time, it gives full incentives to individuals to fully participate in the economy by not imposing a limit on how much they can own.

2) Economic enterprises and the prohibition of interest and hoarding.

Interest rates form the backbone of the Capitalist system in many ways. It is used as a tool to regulate economic growth and monetary supply by acting as an 'incentive' for those who have surplus money to save/hoard. In Islam both interest and hoarding are prohibited. Allah (swt) says in the Qur'an: "And those who hoard up gold and silver and do not spend in the way of Allah, announce to them a painful chastisement." [TMQ 9:34]. He also says, "Allah has permitted trade and forbidden interest." [TMQ 2:275].

Owners of capital therefore have to invest it either in the form of private business or partnership.

The most fundamental criteria that must be met by all companies or partnerships are that there must be offer and acceptance between two or more parties, and that once they become partners they have equal say in the running of the company. In addition to these criteria, the manner of sharing profits and losses is dependent on the type of company and agreement made. In the Company of Equals (anan) where partnership is formed by the wealth of two or more parties, any loss suffered by the company will be shared among he partners in proportion to the capital they put in. In the Company of Persons (abdan) where partnership is based on services provided by the partners, loss is shared according to the salaries/wages of the partners. In the company of mudharaba where partnership is based on capital from one party and labor from another, loss is incurred by the owner of capital while the provider of labor loses his wage/salary. From these elementary rules and structures, many other forms of company can be formed. In all cases, profit is shared according to mutual agreement independent of the amount of capital or service/labor provided.

Through this arrangement, continuous business investment keeps employment levels high and both the rich and the poor get richer.

The Role of the State

The government plays an important role in the Economic System of Islam.

Islam makes it the responsibility of the state to provide food,clothing, shelter, education, health and security to every individual. It is also the responsibility of the state to enable citizens with the means to fulfil luxurious needs in addition to these basic needs by themselves. The state achieves this through the management of public property, through the use of income from other sources and through provision of a good economic environment so that people satisfy their needs due to their involvement in economic activity.

The Economic Policy of the State
The fixed economic policy of countries, like the Islamic world, emanates from their general concept about the universe, man and life, i.e. the Islamic 'aqeedah and whatever is derived from the 'aqeedah in terms of rules and concepts. Since the Islamic rules are fixed and since they provide a solution in the case of welfare for mankind, it would be ineffective for the Muslim world to design and plan a non-fixed economic policy, nor a policy alien to Islam. Its economic policy must be based on the Islamic 'aqeedah, i.e. the economic policy of the Islamic State should be nothing but Shari'ah laws derived from the Holy Qur'an and the Sunnah, and whatever these two sources have guided to in Ijma' of the Sahabah (consensus of the Companions) and Divine Qiyas (analogy).

The Islamic economic policy aims at dealing with the essential needs of the individual, enabling him to improve his lifestyle and achieve prosperity as an individual. The economic policy provides the individual with the means to work towards achieving prosperity, by always maintaining high values (laid down by the Shari'ah) as the dominant factor in relationships between individuals.

Therefore, the economic policy that should be adopted by the Islamic State is not with the aim of just increasing the GNP (Gross National Product), nor creating what is called 'Social Justice', or state Socialism. The policy should be to ensure the correct distribution of resources, amongst all members of the Ummah, guaranteeing thereby the basic needs for all people, and allowing every individual to satisfy his luxurious needs as much as possible.

However, the distribution of resources and wealth necessitates having the means to generate them and improve their methods of growth. The land, for instance, needs to be cultivated with the aim of increasing its output. On this basis, the economy is dealt with from two separate angles, one having no connection with each other:

1 Economic policy.

2 Economic development (generating and increasing wealth).

The Economic Policy This is drawn and shaped by considering two factors:

a) The main sources of the economy.

b) The main methods of providing the basic need

Economic Development The way of increasing wealth is a separate matter to providing the needs, as it deals with generating wealth and not with human needs, so it differs from one country to another. In Muslim countries, it is approached and dealt with chiefly by finding ways in which to improve agricultural products by launching an industrial revolution, so that industry becomes the main method used in economic development and growth.

This approach is divided into four sections :

1. The agricultural policy

2. The industrial policy

3. The financing of projects

4. Creating an external market

The Agricultural Policy This is based on increasing farm produce, and usually follows two methods :

a) Finding means of increasing productivity of the land, and

b) The method of expansion by increasing farming land.

These take place by using modern and sophisticated machinery,chemicals and by providing high quality seed. The state should provide grants (as opposed to loans) to the farmers who are unable to buy what they need in terms of machines, seed and chemicals, and it should also encourage those who are able to buy such materials.

The expansion takes place by encouraging the revival of barren land and by cultivating it. The state should grant feudal land which is improperly used or left unused, to farmers who are able to work but have no land or little land, this includes land that is under its control. Anyone neglecting his land for three consecutive years will be forced to give it up to the state, which will allocate it to people who will make use of it. Imam Abu Yusuf narrated that : "Muhammad ibn Ishaque related to me that "Umar ibn al-Khattab said addressing the people on the pulpit : 'Whoever receives dead land, (it) belong to him and whoever merely constructs a boundary wall, has no right over the land after three years. This is because people used to enclose land which they did not cultivate.'" (Kitab al-Kharaj).

By following these two methods, an increase in farm produce will be achieved, and the aim of the agricultural policy will be realized.

There are, however, issues to be considered while implementing such a policy. Once increased productivity is ensured, improving the quality of the produce has also to be considered. The policy of improving productivity has to be achieved by modernizing the machinery; this necessitates the launching of an industrial revolution to match the ambitious agricultural program, with industry providing the main means of progress.

Therefore, the agricultural policy should have three main aims in its bid to improve productivity:

1. Improving food products, with the aim of satisfying the needs of the people, and to remove the spectra of famine in case of drought, failing crops or economic embargo. Efforts should be made to improve and increase productivity of food products in both agricultural and animal produce.

2. Increasing productivity in clothing material such as cotton, wool and silk, for these are basic necessities that should be made available without having to resort to import and without creating a shortage in case of economic embargo.

3. Improving the production of goods which would have a market abroad, whether they are textiles or food products, like citrus fruit, dates etc.

Development projects like the building of dams, canals, wells etc. are to be given priority if they are indispensable, for the aim is not only to launch an agriculture revolution, but an industrial one, without neglecting the agricultural but always working towards increasing production; the aim is also to achieve material progress, and this cannot be realized without an industrial revolution.

The Muslim world is underdeveloped with an economy based solely upon agriculture and other natural resources, and there are scarcely any industries. Therefore, an immense effort is needed to put the industrial revolution into motion. The schemes of the colonial powers should be abandoned, for they aim at keeping the Islamic world relying solely on agriculture by encouraging such a policy and impeding its industrial progress to keep it dependent on the West.

It is worth mentioning here a basic economic principle in Islam that says, "Anything that reaps benefit to the Ummah should be provided if funds are available, provided that it is not indispensable", i.e. if the state has funds available, then the project should be funded, but if the state does not have funds, it should not impose taxes upon people in order to finance the project, nor borrow money for it, even from its own citizens.

The Industrial Policy

The main aim of this policy is to make the country an industrial one. The direct route towards achieving such an aim is to first of all manufacture the machines; then other industries can be introduced. The priority should be given to building factories to manufacture machines. There is no other way to turn the country into an industrial force. Only then can industries which rely on the machines produced (i.e. manufactured) locally, be established.

To claim that the manufacturing of machines takes a long time and that we should begin by introducing light industries, is baseless and a recipe for disaster; it is a plan schemed by the West to impede the main initiative of the Islamic world, to keep it concentrating on consumer goods industries and to remain a market for western industries.

It is also wrong to believe that this venture is unfeasible because it requires industrial personnel, which are not available. Firstly, Muslim countries have a large surplus of trained and qualified personnel who have no jobs due to the unavailability of technology and industry in their own countries. These people will be used by the Islamic State for participation in the industrialization process. Additionally, industrialized countries have a surplus of industrialists, engineers and technicians who can be contracted while Muslim youth are trained to acquire such knowledge.

Therefore, effort should not be wasted in light and consumer industries while the drive towards achieving industrial revolution is still under way. Thus, the first step is to manufacture the machines. The policy should be pursued simultaneously and not stage by stage. We should not wait until we reach one stage before we start another; because these obstacles will delay our progress and are imaginary in any case.

What Muslims possess nowadays in terms of consumer industries should be maintained as they are without attempting to expand, but rather concentration should be upon launching the industrial revolution. The import policy can remain in force according to the Islamic economic policy, until such machines are locally manufactured. Even state industries like mining will have to follow the same strategy. The state, being the only legal owner of such industries under Islamic law (such as oil, minerals and other natural resources) will not buy machines to extract minerals, for this will divert its efforts from manufacturing such machines and thus impede the industrial revolution.

The state will rather buy the raw materials and maintain the existing factories and plants until such time as the machines can be locally manufactured. The huge profits from such resources of the Muslim Ummah, instead of being usurped by the Western nations and the corrupt rulers of Muslim countries, will be diverted towards providing the basic needs of the people and funding the industries.

Financing the Projects The economic policy in Islam has undoubtedly determined the projects which the state should adopt, and those which the individuals should adopt. The agriculture falls into the private sector, and there is no place for the public sector in this area, except in offering farmers grants and financing building projects and developments, like dams, canals and channels.

The industries are open to the private sector as well, except where the industries are linked to resources that fall under public ownership, like oil, basic minerals etc. Such industries must fall under the public (i.e. state run) sector. Naturally,these projects, whether public or private, require financing.

As far as the private sector is concerned, it is up to the individual, the company or the partners to finance their projects in any way they deem fit by legal means.

As for the public sector, it should not resort to overseas loans to finance its projects, for this leads to increasing foreign influence, and also to poverty. Besides, such loans are subject to interest, which is forbidden in Islam. Therefore, the state should finance its own projects even by imposing taxes upon those who can afford it, in order to raise sufficient funds to launch the industrial revolution. The Islamic means of taxation apply if such measures need to be taken.

Projects can also be financed by purchasing the machinery on good terms, even if it means paying more for the machines in the long term than their actual price; this should be on a sales basis, and not on a transaction based on usury.

Establishing Foreign Markets Marketing goods is one of the major factors that generate wealth. Many countries have taken great care, past and present in finding markets for their goods and products. Many economic empires have been established on such a basis. It is essential therefore for the Islamic State to market its goods and products. However, this should not be an aim but a means to help purchase goods necessary for the industrial revolution, or to acquire hard currency or to send Muslim youth to acquire necessary education such as civil engineering, medicine etc.

On this basis, the policy of establishing foreign markets should be pursued, i.e. on a commercial and industrial basis. Attention should not be focused on the trade balance with different countries. It is insignificant for our exports to be less, more or equal to our imports, as long as the foreign policy is achieved, by being commercial and industrial at the same time, whether the trade balance is to our advantage or not, as long as this facilitates the conveying of the Islamic message to all peoples. However, it should be noted that the basis followed by the Islamic State in its trade is different from any other in the world. All other countries deal on the basis of where the goods originate from and not where the businessman comes from. The state bases its trade on the traders origin, not on the origin of the manufactured or produced goods. This should be taken into consideration while establishing trading relations. In this way, the Islamic State will not for example, be involved in any trade with countries who are hostile to it, or at war with it.

The businessmen of the state are its citizens, and they deal with others on the basis of the free trade of goods that are legal according to the Shari'ah; whereas other businessmen trade according to the foreign policy of their country. This method of trade, if pursued, will help generate and increase wealth.

In these ways, the economic policy of the Islamic State will indeed supply the basic of the people, and enable them to fulfil their luxurious needs as much as possible, while undermining all the corruption, inequality and unfairness that is manifest in the Western and socialist economic systems.

Sources of Revenue for the State

1) Taxation There are various types of taxes and revenues by which the state may fund its operations. In all cases of taxation, these can only be levied upon those who can afford to pay. Thus, there is no taxation of the poor, which is seen in Western nations in the form of, for example VAT or council tax. Broadly speaking, there are five main sources of this type of revenue in the Islamic State :

a. Fa 'i - Property captured from the enemy without fighting

b. Ghanima - Booty captured from the enemy after fighting

c. Ushr - Land Tax on unconquered land d. Kharaj - Land Tax on conquered land e. Jizya - Head-tax on non-Muslims

2) Others

a. Revenue from natural resources

b. Fines levied

The most fundamental aim of the economy of any nation is to provide an adequate supply of goods and services to its citizens and to enable each citizen to acquire and use them to raise their standard of living. This requires that wealth be created in the form of usable goods and services and that people acquire the means of owning and/or using these goods or services.

The degree to which these aims and objectives are met and the efficiency with which the citizens of the state participate depend on the specific rules of engagement, namely the economic system which the nation implements.

Apart from the general ideological framework upon which the economic system is based, the key ingredients for the economic success of any nation include:

1) Confidence in and stability of the system.

2) Workability of the system by providing appropriate economic incentives for wealth creation and distribution.

3) A just method of distribution.

Although only the Capitalist economic system is practiced in the world today, the Islamic economic system gives the best rules of engagement in economic activity and would be the most successful towards raising the standard of living of any nation.

Confidence and Stability Economic activity by its very nature is risky as those who partake in it directly can gain or lose wealth. Hence in all economic systems, there is always an understanding by those who participate that they may lose their capital or effort. However, there are other phenomena that adversely affect the economic life of a nation by artificially creating an atmosphere of insecurity, and thereby reducing the level of economic activity. These arise because of the specific economic system implemented and include the following:

i) Booms and Busts: In the Capitalist system, periods of good and bad trade have become evident from it's record. Although opinions differ widely among economists on the conditions responsible for trade fluctuations, a common feature is that the root cause of these conditions stems from the foundations of the Capitalist economic system.

ii) Runaway Inflation: The fact that money continually loses its value has become an intrinsic part of Capitalist economies. Here again there are many opinions from economists as to what causes runaway inflation. But the recipe for runaway inflation lies at the heart of established financial controls in the Capitalist system.

iii) Money market crashes: These occur irregularly in the form of sudden exaggerated changes in foreign exchange rates and sudden falls in share prices.

The most fundamental characteristics of the Capitalist economic system which form the root of these phenomena are speculation and false representation. These are manifested in : The artificial creation of money: There is nothing to prevent governments from literally creating money at will. Excessive creation of paper money which cannot be represented by real wealth is the root cause of inflation. Further, governments and banks refer to this blandly as increasing money supply, i.e. they have printed more money while the assets the money represents remain constant. In addition, high street banks can lend money that is not existent by crediting peoples accounts on paper. This false representation that is meant to keep the system going actually creates more artificial money. In Islam it is prohibited for the state to artificially alter the supply of money which is based on real tangible assets (gold and silver). Therefore there is no increase in the money supply beyond real increases in wealth and accordingly inflation is not a problem.

In such an environment businesses have far greater stability and bust/boom, inflationary/reversionary cycles will not occur. In Capitalist economies governments often use instability in money supply as a form of additional taxation upon the people. As the value of their earnings or assets and savings rapidly plummet there is a massive transfer of value to the government/banking system that controls the currency. Ex-Yugoslavia and Russia are recent examples of economies where governments used hyper-inflation for these ends. That inflation may be merely 2-6% in many western countries is little comfort as it still eats of the wealth of the people.

In conclusion, the above points clearly outline certain fundamental differences between the Capitalist economic system and the Islamic economic system. The inherent failing of Capitalist economies can be seen today throughout the world, even in Muslim countries, where it has been forcibly applied by corrupt rulers. The details of Islamic economics should fill us with confidence that Islam provides solutions to the 'economic problem', which the world around us currently faces.

TAX:

Islam has a unique system of taxation where there is no taxation of the poor. There are only three types of regular taxes levied upon those people who are able to pay:

Jizyah - Is a tax on mature male non-Muslim citizens who are able to pay it. This is much less than any tax on Muslim citizens.
Ushr - Is a tax levied on unconquered land under the jurisdiction of the state, at the rate of one tenth of the produce.
Kharaj - Is a tax levied on conquered land, whose rate is fixed by the Khaleefah.
There are no income taxes.

There is no Value Added Tax (VAT).

There are no Death Duties.

There is no Inheritance Tax.

There is no Road Tax.

All these examples are included among the taxes in the West where it is the poor that suffer the most.

The Khaleefah `Umar ibn Abdul Aziz at one stage could not find a poor person to give zakat to during his rule (7th Century CE).

In the entire history of Spain, it was economically at its most prosperous during the period of Islamic rule. Never before or since has it been so successful.

Under Islam, Africa sent food to relieve famine in Madinah. The Khaleefah - `Umar ibn al-Khattab sent the following letter to Amr ibn al-`A'as, the governor of Egypt regarding the means of transporting the supplies :

"Arrange to dig the canal from the River Nile up to the Sea even if you have to spend the entire treasury of Egypt in the undertaking."

There are no government subsidies for private industries and factories.

Summary : Economics in Islam

Many of the problems faced by the world's population have their roots in the field of economics. As a result of mismanagement of the distribution of vast resources that the earth produces, we see widespread poverty, starvation and homelessness. Most of the wealth is retained in the hands of a tiny minority, who maintain their grip by corruption and oppression of the people.

This is the case even in so-called 'civilized' nations like Britain and the USA. The evidence is clear for all to see on the streets of inner cities where extravagant buildings tower above while their doorsteps are full of homeless people who have no other place to sleep.

In Muslim countries the situation is even worse. The puppet regimes in countries like Saudi Arabia, Pakistan, Egypt, Morocco - the list goes on, are controlled by a few tiny families who, driven by their own greed and selfish desires, bow to the whims and fancies of the Western powers. While they are installed in palaces, the populations live lives of hardship where even day to day existence is a struggle.

All this while organizations like the IMF and the World Bank, the tools of economic colonization, milk the wealth of the Muslim Ummah without any resistance.

The only way out of this dire situation is to bring about the economic justice of Islam. The Economic System of Islam is a comprehensive mechanism for the fair distribution of the wealth of the world. It does not discriminate between rich, poor, Muslim or non-Muslim. Its only concern is to eliminate the oppression which ensues from the corruption of man-made rules.

Study the history of the Islamic State and see how under its rule, its citizens enjoyed prosperity and security. Human beings were cared for - they were housed, well fed and their lives were elevated to a standard of dignity. Contrast that with the predicament of people today.

This can be enjoyed again by Muslims and non-Muslims alike. The beauty of the Islamic way of life has been hidden away from us for decades. Discover it for yourself.