Islamic Economics: An Introduction

 

Economics in Islam refers to examining human behaviour that utilises the natural source given by Allah.  All these sources should have been used competently and fairly in line with Sharia law.  To attain the pleasure of Allah, humans should benefit from those sources for their good.  A conventional economy is a system in which everyone has complete freedom to engage in economic activity, and it justifies the idea that individual acts are rational.

First, the Islamic economic system is based on the Islamic faith from the source aspects.  The belief is the right since it is God's Word delivered to humankind by Prophet Muhammad.  Islamic economics is also built on the foundation of the Holy Quran, al-Sunnah, as well as the scholars' and Islamic economic experts' thoughts.  Besides Islamic economics, there are the two most well-known conventional economic systems: a capitalist system and a socialist system.  The system of the conventional economic starts in 1776, along with the publication of Adam Smith's The Wealth of Nation.  Adam Smith's ideas influenced economists and government sectors for many years, which means the conventional economy is based on the results of human thoughts. 

Second, from a motive aspect, the objective of Islamic economics is to achieve al-Falah.  The Islamic economic system has been created with its purpose.  One of the main purposes of the Islamic economic system is to reach true happiness and success in both the world and the hereafter known as al-Falah.  Hence, economic activities are seen by Islam as an act of worship that must exist and be performed by every Muslim to achieve the betterment of humankind.  Since Islamic economics is considered an act of worship, it is not based on profit orientation.  Whereas the idea of the conventional system is focused solely on the world.  It aims to make the most profit feasible with limited resources.  The principles ​​of freedom to meet needs support this capitalist endeavour.  Therefore, there is a fierce struggle among humans to survive.  However, the socialist economic system aims for economic equality.

Third, from a taxation aspect, the Islamic taxation system is prescribed.  To narrow the gap between the rich and poor, Muslims are assessed by zakat and other taxes allocated to the people in need.  The collection from zakat cannot be given to non-Muslims.  Still, Muslims are encouraged to spend as much sadaqah as possible since it can be received by any people regardless of their religion and wealth.  Although zakat is allocated for Muslims only, non-Muslim people living in an Islamic country are still bounded by jizya.  While, in conventional economics, paying taxes is not mandatory, the taxpayer is obligated to pay taxes to the state and other responsibilities, namely donations and contributions made at their will. 

Fourth, from a consumption and production perspective, consumer and producer's balance orientation merely put personal profit above everything.  As stated by Adam Smith in The Wealth of Nations, the political role has been limited in the conventional economic system to give more freedom in the market.  Smith explained that a person has total control over his property and is free to exploit all factors of production in the way he desires.  The statement is not wrong, though, as Islam also encourages Muslims to have freedom in attaining and distributing their wealth.  Yet, in Islam, how assets are acquired and allocated is also debated and managed to attain the desired economic goals. 

Lastly, in the wealth distribution sector, rationalism focuses on making personal interest in conventional economics.  Profit-seekers can attain this profit through the capital generated in the economic market.  Hence, the amount of capital they possessed can be used to determine the distribution of wealth.  Since capital is a personal belonging, it cannot be regulated.  Wealth distribution will never be egalitarian.  While in Islamic economics, one of the objectives is to seek justice.  Thus, every economic gain must be allocated fairly and evenly among the community.  The mechanisms of zakat, infaq, alms, and waqf are used to achieve justice in allocating wealth.  The notion of the zakat mechanism aids the process of asset distribution by taking from the wealthy and giving to the needy, ensuring that assets are not solely rotated among the wealthy.

            To conclude, Islamic economics upholds the concept of welfare among human beings.  While the conventional economic system mainly aims for profit maximisation and selfishness.