IRE6/1: ECONOMIC TEACHINGS

Question: Examine the Islamic teachings on the economic system

Economics is taken to mean the science of managing wealth. The Islamic economic system is laid on the solid foundation and divine instruction. This system is unequalled among the existing system in the world today. In fact it’s unique in its kind, combining the best qualities of capitalism and socialism without their evil or disadvantages.

Economic life in Islam is best characterized by trade or exchange of goods and services. It deals with ownership, production, consumption and distribution of wealth.

The system has been legalized by God when He says, “Oh you, who believe, eat not your property among yourselves unjustly, except let there be trade among you.”

Previously the economic life of the pre-Islamic Arabs was carried out according to their own understanding and likes, this is because the Arabs had not received guidelines/guidance therefore it was characterized by the following elements:

1) Interest/Ribbah (Usury).
This was charged by the money lenders for the use of their money by the borrowers. It was so exploitative that if one failed to pay in time, it could be doubled and if there was further delay then the borrowers property and family could be passed on to the money lender.

2) Inequality in society.
There was gross inequality in society slaves and women were among the less privileged class e.g. women were not allowed to inherit and as a result many could not participate in trade.

3) Unlawful ways of earning money.
There was a system of sellers cheating the buyers by weights and measurements. At the same time people could sell their goods before they had them.

4) Speculation was the order of the day and people would buy and sell even stolen property.

5) Exploitation of the employees by the employers was very common e.g. slaves were paid less or not even paid at all.

6) Swearing about the property sold but while just lying.

7) Hoarding/black marketing was the order of the day.

However with the coming of Prophet Muhammad and Islam, the economic system changed as taught by the Holy Quran and the Hadith of the prophet. Islam thus laid down some principles governing the economic systems.

PRINCIPLES GOVERNING THE ISLAMIC ECONOMIC SYSTEM

Ownership of resources.
i. Under the Islamic economic system, all the resources or wealth belong to Allah. The ownership is with Him as such resources like rivers, springs (water bodies), and animals etc should be used freely. No one should claim the monopoly of those resources as they were created by Allah.

ii. Man is a mere trustee and should use wealth in accordance to the rules of God, Q: 43:85, 7:128. God says,
“To God belongs all the dominions of earth and heaven and He has power over all things.” Q: 3:18

iii. Being a trustee, man questionable before God he will be asked to show how he discharged the trustee of God as He imposed it on him.

iv. Economic growth and ownership.

v. Islam gives liberty to man to exploit al the natural resources on this planet using any form of technique available to earn wealth from them as the resources for the whole universe have been created to serve man Q: 45:12-13

vi. Quran: 16:14 clearly states that, “The whole universe, the sun, the moon, mountains and earth has been created to serve man.”

vii. From the verse it’s clear that man is free to turn all these creatures into what he or can enable him to earn wealth. Therefore one is free to take up any type of work or profession given that there is nothing unlawful with it.

viii. Islam prohibits begging and it encourages Muslim to be self reliant and not to be liabilities and disgraceful to society. Q: 45:12-13.

ix. A Muslim is free to seek employment in service of government or any organization or individual as long as work is done satisfactorily and wages are paid promptly.

x. The Islamic state should protect the lives of workers. Islam condemns the act of slavery. This is because cheap and forced labour is exploitative and therefore, Islam lays down rules of eradicating slavery in society.

xi. A Muslim can acquire wealth through agriculture, trade or industry or by profession as long as it doesn’t involve unlawfulness.

xii. Islam prohibits hoarding because it creates un necessary misery to the people as it brings up artificial scarcity of goods and this therefore slows down economic development.
xiii. Financial contracts have to be written down in the presence of two men or one man and two women. This is aimed at guarding against losing a contract or avoids possible denial on the side of the signatories. Q: 2:282.

xiv. Islam encourages freedom of enterprise and individual ownership of wealth although this freedom is not to be taken for granted.

xv. Islam condemns certain groups enrolling in luxury while others continue to suffer. That’s why it puts in place the institution of zakah, inheritance and Sadaq (charity) to check over accumulation of wealth. 4:7, 4:11-12, 9:60.

xvi. Islam prohibits cheating by weights and measures Q: 17:35 God says,
“Give full measures when you measure and weight with a balance that is straight.”

xvii. Islam prohibits transaction of business in unlawful things e.g. Alcohol beverages, drugs. Swine or pork, idols, statues, gambling, prostitution, smuggling etc.

xviii. Agriculture is encouraged but it is unlawful to grow crops that can endanger the society.

xix. Islam prohibits the sale involving uncertainties or unspecific quantity of a good, selling of unripe fruits still in the field. This is prohibited because it can lead to a quarrel due to uncertainty.

xx. Under the Islamic economic system, the greedy capitalism and the destruction socialism have no room whoever advocates for the two does contrary to the Islamic teachings. An individual carrying on an enterprise is responsible for h e prosperity of the state. Therefore its one’ obligation to pay taxes for the government for his protection terms of life and property.

xxi. The Islamic economic system stands on the foundation of acceptable moral sand principles i.e. a person who is working for another or for the firm is ordained by God to do his work with efficiency and honesty. Prophet said,
“If any of you undertakes to do any work, God loves to do it well with efficiency.”
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xxii. On the other hand once the work is done, the worker is entitled to a fair wage for his services. Failure by the employer to pay a just wage, he will be punished on the Day of Judgment.

xxiii. Before any laborer is employed, wages must be agreed upon so as to avoid misunderstandings.

xxiv. A worker is not to be fined in case he /she damages the goods or appliances during work.
xxv. Islam puts a great deal of attention on business transactions and it advocates for a just transaction through individuals, companies etc. in fact, honest trade is permitted in Islam and blessed by God and He has set up rightful procedures. If rightful transaction is to be maintained. Allah says,
“Oh you, who believe, call witnesses whenever you make a commercial contract.” Q: 2:282.

xxvi. As regards income distribution, Islam doesn’t accept the fact that few should live in luxury while others live in distress. Islam prohibits accumulation of wealth there by affecting its circulation.

xxvii. Buying and selling of stolen property is also prohibited.

xxviii. Monopoly is also prohibited

xxix. Islam encourages a fair taxation system.

xxx. Islam allows bargaining because it leads to amicable arrival to the value of the commodity.

xxxi. It is discouraged to swear upon God during the process of selling because it persuades a buyer to buy but not on his own choice.

xxxii. Islam doesn’t allow the practice of middle man ship because it interferes with the free market forces where demand and supply are supposed to determine prices.

xxxiii. Women and men are all entitled to equal opportunities in the economic arena.

xxxiv. Expenditure.
Islam urges man to spend his money in the cause of Allah, for the welfare of the needy and that Muslims may also spend money on their own care and on the care of their own dependants.
Islam prohibits people from embezzlement of their wealth or wasting it improperly. This is because extravagancy leads to bankruptcy and at the same time those who misuse God’s gifts are ungrateful. Quran says,
“Spend not wastefully in the way of squandering. Verily the squanderers are brothers of the devil.” Q: 17:26-30

ii) Interest/Ribah.
In Islam, if one is to make a decent living, it has to be made through honest ways and hard work. Otherwise, whoever makes a decent living through unlawful ways like interest will be burning like fuel on the Day of Judgment. In order to avoid cheating or exploitation, Islam forbids interest and allows profits through trade. Q: 2:275 says,
“They say trading is only like Ribah but Allah has allowed trade and forbidden ribah.”

From the above we note that trade/profits and interest are not the same because people cannot stay without exchange of goods and services (trade) and one cannot provide for all his wants however, people can stay comfortably without interest
iii) Payment of zakah from one’s wealth.
Payment of zakah is recommended in the holy Quran where the righteous people are supposed to give part of their wealth to the poor. Zakah applies to possessors of wealth, provided they exceed their needs and the person to be in such possession for at least a year. This institution was put up to help the poor in the society and to control income inequalities.

iv) Administration of justice in the economic activities.
If a Muslim engages in any economic activity he should be just to his fellows and therefore cheating of any nature should be avoided thus weighing and measuring machines which are proper should be applied.
Q: 55:9 God says,
“Establish weights with justice and fall not short in balance.”
In conclusion there is no doubt that man comes on this earth empty handed and leaves it in the similar way. Surely we are born arguing and we stay on this world complaining and we die unsatisfied. Therefore man should understand that he is a mere trustee of wealth and ownership belongs to God. Thus any person in business should be able to spend in the way of Allah, contribute rightly to the distressed in society in which we live. These will safe guard us from the danger of selfishness, greed and injustice.

You can also watch the video below on Economics of Islam.