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Islam's Response to Contemporary Economic Issues

Explore the comparison of three principle economic philosophies - capitalism, communism/socialism, and Islamic system - and discover Islam's approach to economic peace. This seminar highlights the importance of ethical investment, preventing exploitation, and promoting fair wealth distribution.

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Islam's Response to Contemporary Economic Issues

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  1. ISLAM’S RESPONSE TO CONTEMPORARY ISSUESHazrat Mirza Tahir Ahmad Khalifa-tul-Masih IVRehm’Allah talla Prepared by Dr Shakeel Ahmad, National Tabligh Team, UK

  2. ISLAM’S RESPONSE TO CONTEMPORARY ISSUES Chapter wise seminars series: 1. Inter-religious peace 2. Social peace 3. Economic peace 4. Political peace 5. Individual peace

  3. SEMINAR 3 ECONOMIC PEACE

  4. Three Principle Economic Philosophies A Comparison

  5. Three Principle Economic Philosophies A Comparison - 1 • Capitalism - allows private enterprise & owning of wealth - interest based • Communism/socialism - does not allow individual ownership of wealth - state monopoly • Islamic System - allows private enterprise & owning of wealth - no usury & interest

  6. Three Principle Economic Philosophies A Comparison - 2 • Capitalism - interest is the driving force for investment - capital should grow even without effort by the owner - owner does not necessarily share risk - unscrupulous investment • Communism/socialism - no option of individual investment - lack of incentive for production • Islamic System - checks non-productive capital with zakat - driving force for investment - owner has to make the effort of investment - owner shares risk - therefore careful planning

  7. Three Principle Economic Philosophies A Comparison - 3 • Capitalism - growth is monitored against some benchmarks eg interest, inflation - its legal & possible to exploit those in need of loan - allows rich to drain wealth from poor towards themselves • Communism/socialism - lack of benchmarking for growth - lack of monitoring & accountability - more waste • Islamic System - prevents amassing wealth in the hands of few at cost of many e inheritance system and taxing the capital - prevents exploitation as any loan is either shared investment or ‘help’

  8. Three Principle Economic Philosophies A Comparison - 4 • Capitalism - raised interest puts extreme pressure on small businesses at times of recession - bankruptcies - facilitates unscrupulous investments by large financial establishments - investors are distant from investment anyway and only interested in profit which is fixed • Communism/socialism • Islamic System - no interest to pay means increased capacity to sustain recession by just sharing loss - akin to nature’s way to protect, ‘hibernation’ - honest investment is likely to grow more than dishonest competitors - investors’ discretion to select carefully as they share profit/loss - supporting honest investments

  9. Three Principle Economic Philosophies A Comparison - 5 • Capitalism - interest rise is used to control inflation - high interest reduces buying power, also undermines industrial growth - interest rate as a tool for control of national economy by the govt interferes with free economy - in long term, interest gained is below the inflation rate • Communism/socialism • Islamic System - inflation is controlled by increase in overall production – supply & demand - no power is given to govt to manipulate the free economy - profit earned in business/trade investment is real

  10. Three Principle Economic Philosophies A Comparison - 6 • Capitalism - borrowing from your own future - encourages to live beyond ones means -marketing plays with the minds of people - encourages extravagance & greed, keeping up e Joneses - excessive consumerism leads to raised inflation • Communism/socialism • Islamic System - prevents exploitation - encourages living within ones means - encourages simplicity, discourages material competitiveness - allows private enterprise but determines a code of spending behavior

  11. Three Principle Economic Philosophies A Comparison - 7 • Capitalism -raised inflation leads to recession - when poly-national a global economic recession occurs - desperate attempts to rectify - unfair trade treaties exploiting the needy countries - sometimes wars - 2:279-80 O ye who believe, fear Allah & give up what remains of interest, if you are (true) believers. If you do not, then beware of war from Allah & His messenger; if you repent you shall have your principal, you shall not wrong nor shall you be wronged. • Islamic System - prevents such negative consequences

  12. Indications of Capitalist Society in Quran • Race for worldly possessions 102:2-4 Mutual rivalry in (seeking material) increase diverts you (from God), till you reach the graves. Nay you will soon come to know (the truth) • Lack of concern for needy, monetary injustice & materialism 89:18-21 Nay but you honour not the orphan. And you urge not one another to feed to the poor. And you devour (others share of) heritage wholly. And you love wealth exceedingly. • Greed & selfishness 4:54 Have they a share in the Kingdom (of God)? Then would they not give others as much as the little hollow in a date stone? • Refusal to accept moral guidance on how to spend wealth 11:88 They said ‘O Shoib, does thy prayer bid that we should leave what our forefathers worshipped, or that we cease to do whatever we may please with our wealth? Thou surely (consider this) very intelligent & right-minded’

  13. Admonishments about Capitalism in Quran • 2:276 Those who devour interest stand like one whom Satan has smitten with insanity. Because they insist that trade is like interest, whereas Allah has made buying & selling lawful but has made interest unlawful. He who desists because of the admonishment from the Lord may retain what he received in the past, & his affair is committed to Allah. But those who revert to the practice, are inmates of fire, therein shall they abide. • 2:277 Allah will wipe out interest and foster charity. Allah loves not confirmed disbelievers and arch-sinners. • 64:16 Verily, your wealth and your children are a trial; but with Allah is an immense reward.

  14. Changing Economic Order of the World • Capitalist system – existing haves & have-nots • Soon to be added are Eastern Europe & Russian revival • US, united EU, Russia & developed capitalist Far East will compete • Poorer nations will suffer more

  15. Points to ponder 1 Current trend of the world economic order is for the better or worst? 2 What could be the likely consequences? 3 How could the course be changed? Let us explore some of the Islamic teachings on this.

  16. Islamic Economic SystemBasic Principles • To Allah belongs all who has bestowed us provisions on trust 3:190 To Allah belongs the kingdom of heaven & earth, Allah has power over all things • Natural resources are of universal ownership of mankind • Possession or absence of wealth is a trial; mindfulness towards others’ needs v selfishness & callousness 64:16 Your wealth & your children are a trial;; with Allah is an immense reward • Man to discharge this trust equitably & honestly 4:59 Verily Allah commands you to give trusts to those entitled, and that when you judge between them, judge with justice. Surely best is that with which Allah admonishes you

  17. Islamic Economic System -1Worship as means of economic unity • The five pillars of Islam: 1 affirmation of Oneness of God - oneness of mankind and all resources 2 congregational prayers - 5 times/day - equality between rich & poor 3Haj - biggest spectacle of human unity - code of simplicity is strongly emphasized 4 fasting – shared refraining from food/other worldly activities - shared Iftar 5Zakat – right of the poor from wealth of rich

  18. Islamic Economic System - 2Simplicity of lifestyle • Lavish behavior is discouraged 17:27-8 Give the due to kinsman & to the poor & the wayfarer; squander not your wealth extravagantly. Verily extravagant are brothers of Satan & Satan is ungrateful to his Lord. • Social events - Nikah in mosque - where rich & poor mix - ‘feast where poor aren't invited is cursed in eye of God’ • 7:32 O’ children of Adam! Look at your adornment at every (stage &) place of worship, and eat & drink but exceed not the bounds; surely He does not love those who exceed the bounds • Prevents class difference - expenditure is to be modest in all respects, even if affording, and to be for charitable purposes

  19. Islamic Economic System - 3Basic needs • Food, Clothing, Water & Shelter 20:119-20 It is provided for thee that thou wilt not hunger, nor wilt thou be naked. And that thou wilt not thirst therein nor wilt thou be exposed to the sun. • Collective Responsibility - not just individuals responsible for the suffering individuals - but all societies/govts, for all humanity • Ideal Islamic State - no one without these basic rights – first concept of Welfare State

  20. Islamic Economic System – 4Zakat • Literally: ‘to purify something’ • One of five basic pillars of Islam • Imposed on capital beyond a limit if unused for more than a year • Prescribed conditions of use 9:60 Alms are only for poor & needy & for those employed in connection with (collection & distribution), & for those whose hearts are to be comforted & for (freeing of) slaves & for those in debt & for those (struggling) in cause of Allah & for the Wayfarers. This is ordinance from Allah, Allah is all knowing & wise. • Promotes joint economic ventures

  21. Islamic Economic System - 5Islamic Law of Inheritance • Facilities distribution of wealth • Prevents accumulation in the hands of few • Determined shares • Only a limited amount for those selected by the will-maker • Even large inheritance is shared & spread within a few generations

  22. Islamic Economic System – 6Commercial Ethics • Main purpose - moral war against dishonesty & arrogance - to raise sensitivity to economic rights of others, so one recognises it a crime to live in luxury without concern for others’ suffering • Absolute trust & honesty - 2:283-4 • Forbids use of false measures 83:2-4 Woe to those who give short measure; those who when take by measure take it full, but when they give by measure, they give less. • Forbids selling defective goods, not to conceal defects / buyer has right to return (Hadith - Muslim) • Forbids false competition for sake of inflating price (Bukhari & Muslim) • Prohibits bribery 2:189 Do not devour your wealth among yourselves through falsehood, & offer it not as bribe to authorities so you knowingly devour others wealth through injustice

  23. Islamic Economic System – 7 Borrowing • Borrowing 2:283-4 …when you take a loan, one from another, write it down…and let one who undertakes the liability dictate…and procure two witnesses… Main points are: - purpose is to help one in need and to help one in debt, Zakat - to write down if transaction is over a term - debtor to write - to have two witnesses - testimony not to be concealed, it is sinful to do so - debtor must make best effort to return acc to promise - debtor may add a gift at return, this must not be predetermined - to allow period of grace if needed - to write off loan as gesture of kindness is better in the eye of God - to lend without interest - no room for greed on part of lender, hence no pushing of credit - buying power of borrower remains realistic

  24. Islamic Economic System – 8 Hoarding • Prohibition on hoarding of wealth - Exploitation is forbidden - capital, commodities, supplies 9:34-5 o ye who believe, surely many of priests & monks devour wealth of people by false means and turn away from the way of Allah. And those who hoard gold & silver, give them tidings of a painful punishment. On the day when it shall be heated in the fire of Hell and their foreheads, sides and their backs shall be branded with it, and it shall be said ‘this is what you treasured for yourself, so now taste what you used to treasure’

  25. Islamic Economic Principles – 9International Obligations 90:14-17 Freeing of a slave. Or feeding on a day of hunger, an orphan who is near of kin, or a poor man in the dust • Again, not only individuals – international communities / countries • Global Implication: - Freeing of a slave: aid to liberate from deprivation - forbids aid e strings attached - Feeding on a day of hunger: provision of basic needs - period of lack of resource - Orphan-near of kin: individual/nations without enough resources - Poor man in dust: individual/nations without resources & ‘alliances’

  26. Summary 1 • 3 Systems Communism/socialism– no private ownership – no incentive – slower growth – already collapsing Capitalism– interest based – exploitation of the poor – private ownership and growth but with potential for injustice – friction Islamic – universal ownership concept – accountability to God - distribution of material resources – help for needy is integrated in the system - private enterprise & growth but without opportunity of injustice

  27. Summary - 2 • Changing economic order - of the world today • Capitalist system– existing haves & have-nots – on the spread – worsening the divide and friction – major world conflicts • Islamic System– potential for respite – welfare for all mankind & aversion of humanitarian disaster

  28. Summary - 3 • Islamic Economic System – some hallmarks - All belongs to Allah - given to us on trust - a trial - Worship facilitates economic unity - Basic rights for all mankind - food, clothing & shelter - Honesty & accountability to God - Forbids interest & usury, taking away potential for exploitation - Zakat - tax on idle capital – encouraging contribution to economy - Borrowing & lending acc to given principles - Spending acc to principles - Simplicity, not lavishness - Rights of deprived, individuals and nations both - Economic equity at all levels - Prevents friction & wars - PEACE

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