Economic System in Islam
Economic System in Islam
Economic System in Islam
In America:
In America:
37 million people live below the official poverty line12.6 percent of the total population At least 2.3 million people experience homelessness at some point each year, including nearly 1 million children The richest among them has more wealth than the bottom 45 percent of the households combined
Capitalist system:
Microsoft CEO Bill Gates has more wealth than the bottom 45 percent of American households combined.
Business Week reports that in 1999 top executives earned 419 times the average wage of a blue-collar worker, up from 326:1 in 1998. In 1980, the ratio was 42:1.
Pakistan's misery due to the rotten Capitalist system not because of lack of resources!
Comparison
Economic Problem
Khilafah
Human needs are of two types
Basic Needs (limited) Luxurious Needs
Democracy
Human needs are unlimited while there are limited resources to fulfil them
World resources are enough to fulfil basic needs of all the people of world 1 Solution: Solution: Distribution of wealth and resources to Needs of all the people wont be guarantee all basic needs to each fulfilled individual Increase Production to fulfil Create opportunities so that maximum needs of as many people as number of people can work to fulfil there possible luxurious needs Rules related to collection of funds and its distribution constitute Economic System and cannot be taken from other than Islam Methods to increase production is Economic Science and can be taken from other civilizations including the West
Ownership
Economic System:
Economic System:
To Be privatized
OGDCL, PSO, PPL, SNGPL, SSGPL NIT, ICP Sindh Engineering, Bolan Textile Lyallpur Chemical and Fertilizer Co. Javedan Cement, Karachi Shipyard Republic Motors, Lasbella Textiles Heavy Mechanical Complex HPFL (Hazara Phosphate Fertilizer Limited) Jamshoro Power Co, Pak Arab Fertilizer, Mustahekam Cement
In first ten month of 2004-2005 assets worth $3.6 billion has been sold: Survey 2005:2006 Current year privatization target is 75 billion rupees.
Taxation
Taxes in America
Who Benefits from Bush's Tax Cuts?
George Bush's 2001 $1.3 Trillion tax cut was the largest in US history The Top 1% supper-rich got 37 % of Bush's tax cut as saving ($481 billion) Whilst the bottom 80% of Americans only got 29 % of the total tax cut ($377 bn)
The tax cut savings clearly shows that Bush works for the Super-Rich, and that he is willing to promote their interests above those of all other Americans
Taxes in Pakistan
Agriculture sector in Pakistan contributes 40% to the GDP whilst astonishingly its contribution to the tax revenue is a meager 1%
GST, which is an indirect tax extracted from common man, constitutes 37% of the total tax-revenue of Pakistan
No Zakat taken from the land mafia which owns billions of rupees of land for the last decade or so. Islam requires a Muslim to give two and half percent of the value of the tradable goods in alms as Zakat
Currently No Ushr and Kharaj being levied on Agriculture produce No wonder in democracy the elite legislate laws to tax the poor and give tax breaks to themselves
Taxes Comparison
2009-10
Other, 1560, 0% Carbon Surcharge on POL, 122000, 8% Carbon Surcharge on CNG, 12000, 1%
2008-9
Other 2% FED 9% Income taxes 37% sales tax 38% customs 14% customs, 167200, 11%
FED , 137400, 9%
Evidences
Economic System:
Taxes
Khilafah
No Taxes on common man1
Capitalism
GST, Income Tax, Withholding tax, toll 63.93% (Rs 840 billion) of revenue of Pakistan comes from taxes on the people taxes etc are all haram and will be as per the budget 2006-07 figures. abolished
of these taxes billion) There will be following permanent Out indirect taxation67.66% (Rs 569paid by are that are to be sources of revenues even a beggar, unemployed, handicapped, 2
Al-Kharaj Al-Jizya 3 Al-Ushr 4 The fifth of Al-Rikaz 5 (hidden treasures minerals) Import and export duty on foreign traders 6 Zakat on import and export of the Muslim Trader 7 Hima (Protecting from public properties)
Economic System:
Capitalism
lands Leasing of agricultural lands is permitted
Agricultural land if not used for 3 No such restriction applies to an years will be confiscated2 and owner. He is free to do whatever allotted to someone who would he pleases cultivate it Anybody who occupies a dead land No such incentive in the current (outside the planned city area) and Pakistani system revives it by building a house or a factory etc becomes the owner of the land as well
Prohibition of Muzarat coupled with obligation to cultivate land will give rise to land distribution of optimum productivity Eradicates injustice to Muzarays. Delivers a fatal blow to the colonialist Feudal system (jageer darana nizam)
Evidences
1. 2. 3. 4. It was narrated by al-Bukhari that the Messenger of Allah said: Whoever has land let him plant upon it or grant it to his brother. If he declined let him hold his land. Muslim also narrated, The Messenger of Allah forbade a rent or a share be taken for the land. The Sunan of An-Nisai states: The Messenger of Allah forbade leasing the land.We said, O Prophet of Allah, can we then lease it for some of the grain. He said, No. We said, We used to lease it for the straw. He said, No.We said, We used to lease it in return of that on the irrigating Rabeea. He said, No, plant it or grant it to your brother. Abu Dawud has narrated from Rafia ibn Khadeej that the Prophet also said, Whoever has land, he has to plant upon it or let his brother plant upon it, and he cannot lease it for its third or fourth or a specified food.
Evidences
1. 2. 3. Bukhari related from Aisha (ra) that the Messenger of Allah said: Whosoever cultivated a land that is not owned by anybody, then he deserved it more. Abu Dawud narrated that the Messenger of Allah said: Whosoever fenced a (dead) land it becomes his Bukhari narrated from Umar (ra) that he said: Anyone who cultivated a dead land it becomes his. Muslims and the Dhimmi are equal in this matter, because the Hadith is general in its words.
Evidences
1. By completing the revival, ownership is completed and the land is officially transferred to the peasant. All this must happen before the end of three years after the allocation. This came in the narration narrated by Tawus from Umar ibn Al-Khattab who said: The muhtajir (who shield a land) has no right after three. Umar implemented this ruling while Sahabah were present and they all approved of this. Hence it becomes Ijma as-Sahabah for us and a Shari daleel.
Residential Land
Khilafah Capitalism
The State guarantees housing for The system doesnt allow the the one who is in capable to build a people to use the resources which house for himself and his relatives Allah has bestowed to man are also poor cannot support him The Prophet (SAW) said: The Son of Adam has rights to food, clothing and shelter.
Common mans biggest problem in building a house is the inflated prices of residential land that can easily be solved through the Khilafah state.
Currency
Currency
Khilafah
Metallic Currency
Gold Silver Any other precious metal Currency notes can be used in lieu of gold and silver Dollar Euro
Capitalism
Fiat currency backed by confidence
Protects the currency from foreign control Puts a check on devaluation and fake inflation Return of the Gold standard will strike a fatal blow to the colonialist economy
Riba
Riba
Khilafah
Interest transactions not allowed1
Capitalism
Freedom of ownership allows people to hoard money No interest based debt servicing Encourages the wealthy to under Riba is the bate for the people to take money out of circulation/ investment take local investment rather than and to put into deposit account depositing their money in high interest deposit accounts In 2006:07 Pakistan will pay 295 billion rupees in interest payment. This is 55 billion more than all foreign loan and grants for the year.
Relief to common man/ investor No interest servicing to IMF and WB.
Evidences
1. That is because they say: Selling is just like usury. Whereas Allah permitted selling and prohibited usury. [AlBaqarah: 275]
Inventor
Entrepreneur
Bank
Banks Profit = (20-12)%
Islamic Banking
$ $ $
Entrepreneur
Bank
Banks Profit = (20-12)%
Banking System
Khilafah Capitalism
Bank do not serve as financial Banks acts as financial intermediaries intermediaries. Hence in capitalist sense there are no banks. They provide services like debit card, LC for import export, Online fund They will provide services of the transfer, internet payments, credit like debit card, LC for import cards. Financing for various heads on export, Online fund transfer, interest etc internet payments, etc. They will facilitate/establish communication between the A source of hoarding of wealth investor (Muwakkil) and worker (Mudharib)
Khilafah takes advantage of financial institutions providing financial services and networking whilst protecting the masses from the current banks system which spread their evil through hoarding of wealth, marginal reserve system and interest etc.
Investor
Trader
Investor Investor Investor Businessman
Inventor
The banks can also act as financial advisors and facilitate the marriage of investors and entrepreneurs /businessmen etc. Government bank will also provide grants and interest free loans to its citizens to enhance economic activity
Only introduces the two parties and takes service charges for its effort
Bank
Bank is not a part of the financial contract Bank is only a financial adviser and facilitator similar to that of a property dealer
Company Structure
Company Structure
Khilafah Capitalism
All contracts should conform to Man made laws aimed at benefiting contracts laid down by shariah. corporates are to be complied. Hence exploitation of the needy is Rules have been written to benefit not possible those who wrote them. Golden rule! he who has the gold rules Public limited companies Illegal. Stock-exchange an integral part of i.e. no stock exchanges, futures western corporate business. trading etc. in Khilafah Speculative contracts lead to fiat (Alternative) economy and indexes which is used by the corporations to loot common mans money while keeping them in dark as happened in the latest saga of energy giant Enron and second largest telecom company WorldCom. Khilafahs economy will be protected from economic crisis as were witnessed in South East Asia during the late 90s when Asian Tigers were wiped by the powerful foreign investors
Stock exchanges
Khilafah Capitalism
No stock exchanges are there in A major portion of investment is done Khilafah. in stocks whose more than 90 % portion has nothing to do with real trade. No speculative transactions are allowed as per Islam. Investment is done only in real trade Real trade has gradually been strengthening economy. reduced to less than 10 % of international trade and 90% is only financial transaction. No chance of drowning of money in stocks as recently happen when 4 billion dollars of small Last year stock market crashed investors were lost in a matter of several times drowning trillions of a week when KSE index dropped rupees of investors. from 10,000 to 7000 points.
Stock exchanges are a source of diversion of investment from real trade to speculative business. If all the money that is invested in stocks is directed to real trade it will give rise to a robust economy
Capitalism
Public Limited Company Private Limited Companies
Guarantee Limited
Unlimited Company
A Man is not separate from his The Company and the owner company are two separate distinct bodies He is responsible for the debt of the Owner is not responsible for the company. He the stake holder money is debt of company beyond his safeguarded investment A man can not hide behind the Owners always hide behind the corporate rules at the time of corporate rules at the time of bankruptcy bankruptcy.
Zakat
Zakat
Zakat is only taken from Muslim citizen after the passage of one year if his wealth exeeds Nisab which is different for different catagories
Liquid Currency Stocks (Raw material or Finish Goods) Receivable Debts Live Stock Land (Ushr) Any tradable commodity including property
Hence as a whole more than 2.5% of the total wealth of the economy is collected from the society and injected back into the poorest echelons of the society. This is a tremendous mechanism of producing a balance in the distribution of wealth within the economy apart from other Ahkam of Islam which allow the down trodden people to improve their economic situation
Foreign Loans
Evidence
Economic System:
Merchants from countries in a state of war with the State are prevented from trading in the State, unless given a special permission
Any country with whom we have actual war with, its citizens (such as Israel) is excluded from these rules. The rules applicable to the actual land of war (Dar al-Harb Falan) apply to such country in all the relations
Trade
Economic System:
Local Traders
Khilafah Capitalism
Merchants who are subjects of No such provision, hence Pakistan is the State are prevented from helping India fulfil her energy needs exporting any goods that the by building two gas pipelines. Which enemies could benefit of would further strengthen Indian militarily, industrially or industry and Military to be used economically against Muslims of Pakistan
This Trade Policy protects the state from potential enemies in the future
They are not prevented from The government hurts the local trader importing any property they own under the pretext of Smuggling while under the pretext of protecting reduces import duty to give monitory the local industry benefit to the foreign trader under the guise of foreign investment
There is nothing known as Smuggling in Islam as long as the citizen of the state imports Halal items
Miscellaneous Ahkam
Evidences
1. The hoarding of gold and silver was prohibited explicitly in the Quran. Allah (SWT) says: And let those who hoard gold and silver and do not spend them in the way of Allah know that a severe and painful punishment is awaiting them. [At-Tauba: 34] This warning of severe punishment for those who hoard gold and silver serves as a clear evidence that the Law Giver has decisively ordered us to refrain from doing so; it is therefore forbidden to hoard gold and silver. Islam prohibited pricing absolutely, due to what Imam Ahmad narrated from Anas who said: Prices increased at the time of the Messenger of Allah , so they said, O Messenger of Allah, we wish would you price (fix the prices). He said: Indeed Allah is the Creator, the holder (Qabidh), the Open-handed (Basit), the Provider (Raziq), the Pricer (who fixes prices); and I wish I will meet Allah and nobody demands (complains) of me for unjust act I did against him, neither in blood or property. Also Abu Dawud narrated from Abu Huraira, he said, A man came and said, O Messenger of Allah, fix prices. He said: Rather Allah reduces and increases. Said ibn Al-Musayyab narrated from Muammar ibn Abdullah Al-Adawi in Bukhari that the Prophet (saw) said: No one monopolises except the wrongdoer. Al-Athram narrated from Abu Umamah, he said: The Messenger of Allah (saw) forbade that a foodstuff be monopolised. And Muslim narrated through his chain of narrators from Said ibn AlMusayyab that Muammar said: The Messenger of Allah (saw) said: Whoever monopolised is a wrongdoer. Monopoly is prohibited (Haram) in all things without a difference between the human foodstuff or animals foodstuff, a foodstuff or not, and of the peoples necessities or luxuries. This is because the linguistic meaning of the word monopolised (Ihtakara) is to compile a thing in its absolute sense (without specification). The word monopolised did not come in the meaning of compiling the foodstuff or the peoples necessities, rather compiling the thing, so it should not be confined to other than its linguistic meaning. 2.
3.
Evidences
Evidences
Economic System:
Hoarding of wealth (money) is People are free to hoard wealth for no haram and state will take practical reason 1 steps to prevent it
Islamic system ensures circulation of wealth In Capitalist system banks offer interest to encourage people to inject money into economy Islam prohibits price fixing 2 Islam prohibits monopoly 3 Capitalist are still in dilemma as to how to get rid of monopolies; e.g. Microsoft break up litigation
Evidences
1. The Islamic economic system came to secure basic needs, irrespective of market conditions for such products. Muhammad (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. According to this principle the Islamic State must ensure for all its citizens (Muslims or Non-Muslim) of the Islamic State a security which western people will never achieve in the heartless obduracy of the application of its free market.
Economic System:
Economic System:
State Revenues
Khilafah
Sources of Bait -ul-Mal
Capitalism
Predominant source of income is Taxes from The booties and the spoil of war1, Al-Fai2 and the fifth3 the common people. Al-Kharaj People in the west are Al-Jizya taxed upto 35% of Protecting some Public property (Hima) 4 their income State property of land, building utilities and their
revenues) Al-Ushur Money attained illegally by the rulers, the employees of the State, illicit money and money from penalties The fifth of Al-Rikaz (hidden treasures) minerals 5 The inheritance property of the one who has no inheritors 6 The property of apostates 7 Charity Funds Zakat Taxes (only from the rich Muslims and in specific situations)
Decision making
Legislative Mubah
(General issues)
Mubah
(needing expertise)
The ruler
The ruler
The ruler
Economic
Ruling
Social
Judicial
Education Policy
Foreign Policy
Decision making
Legislative Mubah
(General issues)
Mubah
(needing expertise)
Elite Group
Elite Group
Elite Group
Economic
Ruling
Social
Judicial
Education Policy
Foreign Policy
Mubah
(needing expertise)
Allahs Ahkam
Are implemented derived from the sources, Quran, Sunnah, Ijma us Sahaba Qiyas
Khaleefah
is final authority after discussing with experts
People
Through their representatives decide based on Majority (if Khaleefah asks them)
Economic
Ruling
Social
Judicial
Education Policy
Foreign Policy
Evidences