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Islamic Economic System- Perfect Balance


Firstly, let me define Economic system:

An organized way in which a state or nation allocates its resources and apportions goods and services in the national community.

A few years ago one could have indeed argued that capitalism has succeeded in the industrialized countries of the Northern Hemisphere. But even in the countries with high per capita income there were and still are tremendous disparities. Under capitalism wealth is not evenly distributed and even in the USA, 25% of the people live below the poverty line. Can we really say that we have an ideal or even a well-working economic system when millions of people are struggling just to survive?

The current global financial crisis underscores the inequality, fragility and unpredictable future of the capitalist economic system.  While the US government gets ready to bail out banks and financial institutions that have failed due to their reckless greed, no one is there to save the thousands of ordinary people who are about to lose their homes and life savings.

Some of the primary criticisms of socialism are claims that it creates distorted or absent price signals, results in reduced incentives, causes reduced prosperity, has low feasibility, and that it has negative social and political effects.

The national economy develops relatively slowly,there is an inability to obtain the upmost profit from the use of resources, labors and land;places that have a geographical advantage lose chances to develop better and people who have intelligence and wealth lose chances to make their businesses become bigger and more powerful and people lose initiative to work and enthusiasm to study as doing more isn't rewarded.

So , both capitalism and socialism has drawbacks as they are man made.
 Now, let us compare these systems with Islamic Economic System.

The best in the use of productive resources:
In capitalism most of the productive resources are privately owned and the use of these resources is aimed at maximization of personal gain. while in socialism there is state ownership of all productive resources.The state uses such available resources to attain the objective of maximum benefit.In Islamic economic system a balance set-up is maintained between objectives of personal gain and social benefit.Islam permits the private ownership of productive resources.

The Best to describe what we should produce:
In capitalism the firms produce only those goods, which bring in maximum profit.while in socialism all goods are produced by the state which are required to fulfilled the people’s desires not to earn super normal profit.In Islamic system the production of profitable goods is allowed but they can earn only normal profit.they do not produce the luxury goods even if the production of such goods may be highly profitable.

The Best to describe the amount to be Produced:
In capitalism the firms extend their production to that point where they can earn the highest possible profit.The firms are in equilibrium positions when marginal revenue and marginal cost of production are equal.while in socialist system the state enterprise produce all kinds of goods to satisfy the requirement of the people.In Islamic system it is moral as well as religion duty of entrepreneurs to make the best use of their available resources so that goods of common and daily use are available at reasonable prices.They can earn normal profit.

The Best to describe the people for which we Produce:
In capitalism people are free to choose any profession and produce anything according to the trend of prices but in socialism all means of production is held by the government and production is aimed to satisfy the needs of people.Sate project produce according to the target determined by the central planning authority.Now in Islamic system the goods are produced for those people who have the capacity to purchase them.Firm produce essential goods ,services and people can also find essential goods and services.


Capitalism and socialism both aim at the material well-being of the people.the Islamic system is blend well-being of materialism and spiritualism. In Islamic economic system all activities are to be carried to increase the FALAH(success) in this world and world hereafter.In capitalism the interest is the center –piece.
,in Socialism the Role of interest is nominal while in Islamic system the interest in forbidden. That is interest free and most of the economists, today encourages the interest free economic system because is has been studied that the main reason why our system is drowning is "Interest".

That's why I say 
"Islamic Economic System brings the perfect balance in our economy and life".
Hope You understand.




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