Articles on Islamic Economics
Islamic injunctions put huge emphasis on making best use of the resources provided by Allah. Cultivating barren land and dignity of labor is given significant value and regarded as virtues. In an Islamic economic framework, the demand for economic resources, i.e. land, labor and capital is driven by the interest free and productive asset/activity based voluntary exchanges in a market economy.
Scarcity of resources is the basic premise on which the theories of classical and neoclassical economics are based upon. It implies that resources are scarce relatively as compared to the wants that are unlimited. But, this premise uses the word ‘wants’ in a general sense which includes both necessities and luxuries that people desire to have.
With higher levels of investment, circulation of wealth and competitive markets, innovation and quality enhancement will be the only means of sustaining the edge for firms in an Islamic economic framework. Hence, there will be more focus on innovation, customer satisfaction and hence speed of innovation and productivity is expected to increase. The supply side of innovation, which is the human capital, will also be incentivized through employment creation as a result of removing concentration and idleness of wealth.
When we look at Islamic environmental ethics encapsulated in Islamic principles, we find that they compliment these SDGs and can act as a catalyst to foster commitment, responsibility and affirmative action for sustainable and congenial co-existence with environment.
Most developing countries are going through a perpetual debt trap which takes away resources that could have been used on development, but instead are used to service compounded debt.
“The term riba encompasses interest in all its manifestations irrespective of whether it relates to loans for consumption purposes or for productive purposes, whether the loans are of a personal nature or of a commercial type, whether the borrower is a government, a private individual or a concern, and whether the rate of interest is low or high” (Council’s Report, 1980).
As per Islamic principles, within certain bounds, the market forces can operate and will determine which goods should be produced and offered at what price. The major difference from capitalistic system is that rather than having a fixed compensation, the capital will only earn a share in actual profit/loss out of the production process in which it is used.
A market in which there are many producers serving differentiable products is known as monopolistic competition. In this market type, often producers adopt certain marketing strategies and execute marketing plans to increase their product’s appeal, demand and hence increase the sales and thereby profits. It also helps them to create brand loyalty for their products. From an Islamic perspective, there are certain principles and broad guidelines that must be followed and taken care of while advertising the products.
In a capitalistic democracy, the elite class is able to expend on political campaigns and hence take part in politics and where crony capitalism results in business and political class combining to pursue their self interest.
The idea of material progress and well being enabling the people to forget fear and religion and Question of ‘why we exist’, has failed. Ignoring the purpose of existence and trying to replace it with material self pursuit does not and has not solved the fundamental human quest of ‘why we exist’.
Islamic Economics Project 