Seeking an Islamic Alternative to Capitalism- Communism

After a long experience of living under the colonialistic yoke of capitalism and communism, Muslims have already begun to awaken themselves towards rediscovering Islam. This awakening has not been of the same quality everywhere. Nevertheless, it has been prompted by the increasing sense of inadequacy and disenchantment that all Muslims have felt with regard to the capitalistic and Marxist systems.
Islamic Law (the Shari ‘a) is intrinsically and strongly opposed to capitalism and communism that have come to dominate the world today. It is but natural that a Muslim should ask as to whether or not Islam has a socioeconomic system capable of solving his complicated problems. The answer is in the affirmative, since the Islamic Law does contain alternative methods to solve the human problems.
The alternatives offered by Islam include an ideological basis for an appropriate socioeconomic organization. The Islamic ideology is based on the Qur’anic revelations. It encompasses every aspect of human life, so that economic principles, too, can be derived from the same, No wonder, there is wide interest in any viable alternative economy achievable through application of Islamic principles for improving the quality of human living and fulfilling the socioeconomic needs.

In the above context, we may indicate the nature and content of an economy governed by Islamic principles. A prerequisite for understanding “Islamic Economy” is suggested by the need to differentiate between “Socioeconomic Policy” and “Pure Economics”. In the Islamic perspective, an economic policy implies a regulatory system capable of progressing a society’s economic life in a socially just and equitable manner.
To illustrate the crucial point mentioned above, let us consider an example. Suppose we were to ask a father about any behaviour of his child. We could ask in two ways:
(1) What kind of behaviour would you like for your child?, and
(2) How is the behaviour of your child?
To the first question, the father may reply: “I would like my child to be a good human being, independent, and a believer in God!”; to the second question, his answer would be either positive or negative, depending on his child’s actual behaviour.
Similarly, in regard to our socioeconomic life, we may ask “What would be the best way to conduct our economic life?” Alternatively, we may ask “How is our economic life functioning at the moment?” From the viewpoint of Socioeconomic Policy, one may answer the first question by saying: “The best way to conduct our economic life is to so regulate it as to conform to our ideology and values … “.
On the other hand, the second question can be answered on the basis of pure economics and the economic facts as they exist. Thus, socioeconomic policy ought to take into consideration the quality of economic life, and ‘pure economics confines itself to an academic investigation of the actual economic phenomenon and identifies the results in quantitative terms only.
Pure Economics and the Socioeconomic Policy -Making Process
(Pure economists emphasize a theoretical and objective approach to the existing conditions of an economy. In Islamic socioeconomic practice, the existing conditions are not taken for granted and radical measures, consistent with Islamic ideology, can be expected-Ed.)
Both Islamic formulators of socioeconomic policy and non-Islamic economists may be interested in a supply-demand -price situation. For instance, a book on Arithmetic is priced at five Tomans in a market governed by free competition. Subsequently, it is selected and prescribed as, a text-book by the competent authorities. Then, its price goes up simultaneously with an increase in the demand. This may be viewed differently by the pure economists and Islamic policy-makers.
In the above case, pure economists tend to take it for granted that prices under free competition are not susceptible to any control or official measures for their stabilization. On this assumption, they would proceed to investigate the relationship between the price and demand increases and fluctuations in supply and demand. Yet, in all probability, their scientific and objective assessments will not basically alter the economic situation indicated in the above example.
On the other hand, formulators of an Islamic socioeconomic policy are likely to evaluate any free market pricing, in terms of its social ‘costs’ or impact and social benefits. They may seek a just and equitable solution to any problem created by any undue price increases. They may take into consideration the relevant factors, such as supply and demand, without necessarily determining their inter-relationship, with their terms of reference often broader in scope than those of the theoretical economists.
The question as to whether or not any concepts of justice and equity can be reflected in a freely competitive market may be extraneous to the realism of the knowledgeable economists. However, it is crucial to formulators of Islamic economic policy. For they are bound by Islamic principles to so regulate economic activities as to identify and uphold all that is just and equitable for the transacting parties without accepting any status quo in this regard.
On the other hand, economic theorists cannot determine as to whether or not any transactions under free competition have been carried out on a just and equitable basis of meeting the people’s socioeconomic needs. They can measure and quantify supply, demand and price trends, as a part of an assessment of the existing free market conditions only. The protagonists of Islamic school of economic thought may not be able to assess the same in the manner of pure economists.
A classical economist, David Ricardo (1772- 1823), for instance, theorised that a worker’s wages, offered independently and not under any government prescription, would not generally attain a level of sufficiency (that leaves a surplus above his living wages – Ed.). Any exception in this regard are said to be of a temporary nature, so that these revert to their earlier state of equilibrium at a below sufficiency level. If and when the normal wage level goes up, one eventual consequence will be excessive supply of labour resulting from earlier marriages of workers in favourable conditions of earning.
This, in turn, causes an inadequacy of the positions and wages offered. Thus, according to Ricardo, the tendency of wages is to return always to a lowest possible level. He implies that low wages increases the mortality rate and eventually reduces the number of workers; so as to raise the wage level before it comes down once again. He calls it the “iron law” of wages.
Ricardo’s theory of wages is based on the natural and social realities that tend to stabilize wages at a low and insufficient level. He theorized on the basis of what was happening in reality. He did not propose any method to basically improve the situation. His investigation was confined to the limited scope of classical economics. In contrast, any socioeconomic policy-maker can be expected to conceptualize the phenomenon in the overall regulatory context of meting out socioeconomic justice.

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