Islam & Economics

Islamic economics make allusion of a economic system that based on Islamic scripture and traditions followed by our Prophets and Caliphs. The main features of an Islamic economic system are based on "behavioral norms and moral foundations" which is derived from the Quran and Sunnah,  Zakat tax for Muslims and jizya for non-Muslims as the basis of Islamic fiscal policy and prohibition of Riba(Interest).

Islamic economic system always wants to ensure the equal distribution of wealth among all, its an ultimate goal of this economic system to reduce the gap between the rich and the poor, Islam always encourages trade, and Its one of the greatest sin in Islam for the people who are involving in the hoarding of wealth and those who deals in interest (riba). In Islamic economic wealthy people are taxed through zakat, but you do not have to pay taxes for your trade. Hoarding of food and waiting for the rates to go up, is also discouraged grabbing someone's without having authority or permission from the owner is also prohibited.

There is a concept of social cohesion, the greater the social cohesion, the more complex the successful division will be, there will be greater economic growth because growth and development positively stimulates both supply and demand, and that the forces of supply and demand are what determines the prices of goods. The macroeconomic forces of population growth, human capital development, and technological developments effects on development, it means the population growth is directly related to a function of wealth.

If we compare Islamic economics and social economic policies there are some similarities. Islamic economists said that privatization of resources of oil, gas, and other fire producing fuels, animal pasture, and water is forbidden. The principle of public or joint ownership has been drawn by Muslim economist from the following hadith of the Prophet of Islam:

"Its price is Haram (forbidden)"Jurists have argued by qiyas that the above restriction on privatization can be extended to all essential resources that benefit the community as a whole as long as there is no evidence to the contrary"

 

 

The proto-capitalism and free markets is followed since the time of Caliphate. A monetary economy developed to ensure the proper circulation of local currency and there were policies to  integrate the previous independent monetary areas. Business techniques and forms of business organization employed during the time of caliphate which also includes early contracts, bills of exchange, long-distance international trade, early forms of partnership (mufawada) such as limited partnerships (mudaraba), and early forms of credit, debt, profit, loss, capital (al-mal), capital accumulation (nama al-mal), circulating capital, capital expenditure, revenue, cheques, promissory notes, trusts (waqf), savings accounts, transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers, deposits, assignments, the double-entry bookkeeping system and lawsuits. Organizational enterprises similar to corporations independent from the state also existed in the medieval Islamic world. Many of these concepts were adopted and further advanced in medieval Europe from the 13th century onwards.

The concepts of welfare and pension were present in early Islamic law as forms of zakat one of the Five Pillars of Islam, since the time of the Rashidun caliph Umar. Taxes  including zakat from Muslims and Jizya from Non-Muslims, collected in the treasury (bayt al-mal) of an Islamic government were used to provide income for the needy, including the poor, the elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058–111), the government was also expected to stockpile food supplies in every region in case of disaster or famine. The Caliphate was thus one of the earliest welfare states.