Principles of Islamic economic system:
a) Sole purpose is to obey and please Allah
b) The wealth and asset in all their forms given under trust by Allah
c) Moral values and guiding factors for all economic activities
d) Maximum equitable utilization of human and material resources given by Allah
e) Human dignity and respect of labor
f) Maximum freedom for economic activity within a just framework
g) Equitable distribution of wealth and income and disciplined private ownership
h) Simplicity economy and austerity in expenditure
i) Adal and Ihsan (justice and kindness)
j) Strict prohibition of Riba, interest and usury in all forms.
Some of the principles of the Islamic economic system, as laid down by the Qur’an and the Sunnah, are discussed as follows:
1. Allah determines Right and Wrong: We have already discussed in the first chapter that Islamic economic system makes distinction between what is permitted being lawful (Halal) and what is forbidden being unlawful (Haram). To determine what is permitted or lawful (Halal) and what is forbidden or unlawful (haram) is the soul prerogative of God. None but God is empowered to pronounce what is right and what is wrong. Allah has made demarcation between lawful and unlawful in the economic sphere and has allowed man to enjoy those food items and other articles of use which are lawful and avoid those things which are unlawful.
The Qur’an says: “O ye who believe ! Forbid not the good things which Allah hath made lawful for you, and transgress not, Lo! Allah loveth not the transgressors. Eat of that which Allah hath bestowed on you as food lawful and good and keep your duty to Allah in Whom ye are believers.” (5 : 87-88)
No human being has power to say what is right (Halal) and what is wrong (Haram). The Qur’an clarifies this principle in unambiguous terms when it commands: “And speak not concerning that which your own tongues qualify (as clean or unclean), the falsehood: “This is lawful, and this is forbidden”, so that ye invent a lie against Allah…” (16:116)
2. Principle of Use: Within the bounds of lawful (Halal) and unlawful (Haram) prescribed by Allah and also keeping in view the rules of moderation and prudence, the man has been allowed to make full enjoyment of God’s gifts bestowed on him. The Qur’an says: “O mankind ! Eat of that which is lawful and wholesome in the earth, and follow not the footsteps of the devil. Lo! he is an open enemy for you.” (2:168). At another place, the revealed book of Islam states: “So eat of the lawful and good food, which Allah hath provided for you, and thank the bounty of your Lord if it is Him ye serve……..” (16:114). However, the principle of use should not be over stretched so as to indulge in extravagance and wastage of economic resources. The Qur’an brings home this point when it addresses mankind: “O children of Adam ! Look to your adornment at every place of worship, and eat and drink, but be not prodigal Lo! He (Allah) loveth not the prodigals.”(7:31)
All things have been created by Allah for man’s use and service. To restrain oneself or forbid others from the enjoyment of lawful items of food and other articles of use tantamount to renouncing the blessings and favours of Allah which has been strongly condemned. The Qur’an prohibits it in very clear words when it says : “O ye who believe ! Forbid not the good things, which Allah hath made lawful for you, and transgress not, Lo! Allah loveth not transgressors.”(5:87). In another verse, the Holy Qur’an questions those who put restrictions on the use of certain things without divine sanction: “Say! Who hath forbidden the adornment of Allah which He hath brought forth for His bondmen, and the good things of His providing?…..”(7:32). Thus the Qur’an has disapproved the ways of monks and ascetics who consider the satisfaction of physical urges an obstacle in spiritual development.
3. Principle of Moderation: Islam unequivocally discourages its followers to cross the limits and follow extremes. The Muslims have been called by the Qur’an a middle nation (2:143). Therefore, the principle of moderation carries paramount importance especially in the economic field. This principle is followed by the true believers in the production of wealth as well as in the consumption and spending of wealth. Although earning of wealth through permitted (Halal) means is allowed, yet the piety demands that a Muslim should not become mad after amassing wealth like a greedy materialist. He should exercise restraint and earn wealth to meet his lawful needs. Extra wealth, if at all is earned by him somehow, may be spent in the path of Allah on charity and relief of the poor. Similarly, in the consumption and spending of wealth, the believer is recommended to strike balance avoiding miserliness and extravagance. Miser is he who does not even provide for the legitimate needs of himself and his family let alone spending on charitable and noble causes. Extravagant or spend thrift is a person who squanders his wealth in luxury, gambling, drinking, and on lavish expenditure on festivities, weddings, day to day living. Islam condemns both miserliness and extravagance and enjoins upon a believer to exercise moderation. The Qur’an appreciates those who exercise moderation in spending when it says: “And those who, when they spend, are neither prodigal nor grudging; and there is ever a firm station between the two.”(25:67) 4. Economic Freedom: Every individual, according to Islam, is accountable for his actions done in this world. He would be rewarded for his good actions and punished for his evil actions in the hereafter. Accountability for individual’s actions is meaningless if the individual is not provided reasonable freedom to act independently. Therefore, Islam puts highest value on individual’s freedom of action in every field of human activity such as social, political, economic religious, moral, etc.
Islamic principle of economic freedom means that an individual has been allowed liberty by God to earn wealth, own it, enjoy it and spend it as he likes. It also entails freedom to adopt any profession, business or vocation to earn livelihood. But Islam has not allowed unlimited freedom in the economic sphere. As we have already discussed, Islam makes distinction between Halal (lawful) and Haram (unlawful). In the field of production, distribution, exchange and consumption, only Halal (lawful) means are permitted. Remaining within the restrictions of Halal and Haram, an individual enjoys full freedom to earn and spend wealth as he likes. Thus Islam recognises free enterprise, human initiative, and individuals potential. It also recognises role of organisation, capital, labour and market forces in economic field. No unnecessary curbs are placed on the individual or the organisation regarding earning or owning of wealth. No upper limit or ceiling is imposed on properties or holdings. Besides restrictions of Halal and Haram, other restrictions are rarely placed on economic activities, prices of goods, ownership or on monopolies unless the same are really necessary for safeguarding the common interest of Muslim community.
5. Principle of Justice: Islamic principle of justice operates in every sphere of human activity, may it be legal, social, political or economic. Islamic economic system, in fact is based upon the principle of justice which governs all the basic aspects of economy like production, distribution, consumption and exchange.
In the sphere of production, Islamic principle of justice ensures that nobody is exploited by the other and that nobody acquires wealth by unjust, unfair, unlawful and fraudulent means. The followers of Islam have been allowed to acquire wealth through just and fair means. Islam admits the right of every individual to earn his livelihood, to acquire wealth, to own property and live a comfortable life. But it does not allow that people should amass wealth through bribery, corruption, embezzlement, stealing, robbery, gambling, trade in narcotics, exploitation, gambling, interest, fraud, hoarding, black marketing, prostitution, malpractices in business, immoral professions or through other unjust methods.
In the field of distribution, the Islamic principle of justice plays the most vital role. One of the greatest contribution of Islam to humanity is that Islam ensures just and equitable distribution of wealth among the people. Justice in distribution, which is called by various names like economic justice or social justice or distributive justice, demands that economic resources and wealth should be so distributed among the members of the community that on the one hand the gulf between the rich and the poor should be bridged and on the other hand everyone should be provided with basic necessities of life. Islam discourages concentration of wealth in few hands and ensures its circulation in the community not only through moral education and training but also through effective legal measures. System of Sadaqat, Zakat and voluntary alms along with laws of inheritance helps distribution of wealth among the larger sections of society.
Difference between Islamic Economic System and other economic system: The most dominant economic systems in the modern world at present are capitalism and socialism. The capitalism is the dominant economic philosophy in the western world mainly comprising Western Europe and Northern America under the leadership of United States. The socialism has been dominant economic ideology in USSR, Peoples Republic of China and some countries of Eastern Europe. Although socialism, with downfall and dissolution of its former leader Soviet Union, has received a great setback, yet it still holds a lot of relevance as an economic philosophy.