Comparative Economic System

Comparative Economic System

Economic system:

An economic system is a collection of institutions set up by society to deal with the allocation of resources, production and goods and services, and the distribution of the resulting income and wealth.

Islamic Economic system:

A collection of institutions (that is, formal and informal rules of conduct and their enforcement characteristics) designed by the Law-Giver (that is, Allah (swt) through the rules prescribed in the Qur’an, operationalized by the sunnah of the Prophet (pbuh) and extended to new situations by ijtihad) to deal with allocation of scarce resources, production and the exchange of goods and services and the distribution of the resulting income and wealth.

Types of economy:

1.      Market/Capitalist Economy: is one in which individuals and private firms make the major decision about production and consumption Market economy: an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. Example-UK (came to close in 18^th century).

2.      Laissez – faire economy: the extreme case of a market economy, in which Governments keeps its hands off economic decisions, is called a Laissez – faire economy.

3.      Command/Planned/Centralized/Communist/Socialist Economy: is one in which the government makes all important decisions about production and consumption. Example-ex-soviet union

4.      Islamic Economy: the economy which runs according to the law of welfare, justice and Islamic Shariah. Example-Medina state in 7^th century, Iran (came to close).

5.      Mixed Economy: it includes the elements of both market and command economy. Example-almost all economy of the world, Bangladesh, India etc

Comparative analysis of different doctrines:

Figure-1: Economic Doctrines of life

Capitalism	Communism	Islam
Worldly life & confused about Hereafter life	worldly life is the only life & no Hereafter life	Worldly life & Hereafter life
There is a GOD but forget in daily life	There is no GOD or creator	ALLAH is the only creator and God
Self-satisfaction	Self-satisfaction through state intervention	Satisfaction of ALLAH
Self-interest &Rationalism is the sole authority of decision making	Rationalism and state is the sole authority of decision making	Individualism &Rationalism through moral filtering is a part of  decision making
Competitive market: survival for the fittest	State control the market	Combination of competition and state intervention: Humanity & Philanthropy
No value judgment	No value judgment	Value judgment, social, national, cultural values
Independent of revealed religion, Religion is unreliable	No religion	Religion is key determinant
Earning at any way	Earning at any way	Earning at honest way
Economic Laws are like physical laws	Economic Laws are like physical laws	Economic laws are like natural laws
Economics is a positive science as like as biology, physics which have no value, value neutral	Economics is a positive science as like as biology, physics which have no value, value neutral	Economics is value oriented. Permissible & prohibition have to be observed
Little concern for poor humanity	Theoretically, concern for poor humanity but not practically	Major concern for poor. Poverty alleviation by Zakat, Sadaqa & gives emphasis on economic progress

Figure-2: Stages of life and difference in Visions of two consumers (Schematic chart)

Islamic  man	Conventional man
Born (coming from Heavenly life) ↕ Education life (worldly+ Religious) ↕ Working/professional life (earning an honest way directed by Religion) ↕ Family life (Religious) ↕ Life Style (Moderate/simple life style) ↕ Worldly life (Enjoy the worldly life & Prepare for Hereafter life) ↕ Retired life (reading, travelling, Ibadah, etc.) ↕ Death (start the journey for Hereafter life )	Born (Natural Law of human life) ↕ Education life (worldly) ↕ Working/professional life (earning an any way) ↕ Family life (Wealth) ↕ Life Style (Luxurious life style) ↕ Worldly life (Enjoy the worldly life-Only place for success & rewards) ↕ Retired life (reading, travelling, etc.) ↕ Death (Natural departure)