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R. L. Mellema, Holland, Anthropologist, Writer and scholar : "Despite the growth of antagonism, Moslem (Muslim) rulers seldom made their Christian subjects suffer for the Crusades. When the Saracens finally resumed the full control of Palestine the Christians were given their former status as dhimmis. The Coptic Church, too had little cause for complaint under Saladin's (Salahuddin) strong government , and during the time of the earlier Mameluke sultans who succeeded him the Copts experienced more enlightened justice than they had hitherto known. The only effect of the Crusaders upon Egyptian Christians was to keep them for a while from pilgrimage to Jerusalem, for as long as the Frank were in charge heretics were forbidden access to the shrines. Not until the Moslem victories could they enjoy their rights as Christians."
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Islam and Economy

One of the most important functions of government is to ensure the economic needs of the people are met. Rather than vague notions of a "growing" economy , trickle down effects and maximising gross national product, Islam deems it essential that each and every person in society has certain basic needs met. The inalienable rights which Islam sets out are for food, shelter, clothing, education and basic healthcare. The provision of these needs is of paramount importance.

The main economic problem we experience is not a lack of resources. Allah (God)stresses in the Quran:

"Let man consider his food. How we pour water in showers. Then split the earth in fragments. And cause the grains to grow therein. And grapes and fresh vegetation. And olives and dates, and enclosed gardens, dense with lofty trees. And fruits and grazes. Provision for you and your cattle." (Quran chapter 80, verses 24 - 32)

"So walk in the paths of the earth and eat of His sustenance which He provides." (Quran chapter 67, verse 15)

Contrary to what some want to publicise, there is no lack of resources in the world to meet the basic food, water and shelter needs of the whole worlds population. The problem is gross unfairness of distribution of the worlds wealth. The US, with only 5% of the world population, manages to consume 25% of its resources, yet still with its Capitalism cannot meet the basic food, shelter, and healthcare needs of all its population a damning indictment of Capitalism.

Islam, in stark contrast to Capitalism, defines the key economic problem as being distribution of the wealth rather than production. Capitalist theory posits that production must increase to meet an ever increasing number of needs, but doesn't distinguish between the critical basic needs versus luxurious needs.

Article Contents:
Distribution of Wealth^

Rather than the communist dream of enforcing some form of equality amongst citizens, Islam sets out clear guidance on ownership, taxation and trade to encourage all to be successful in seeking wealth, but also fair in the relationships between citizens and between citizens and the state.

This is achieved by setting out clear laws, which are scrupulously applied to citizens, both Muslim and non-Muslim, and to anyone in a position of ruling.


All assets are categorised as either public, private or state. The public properties which include water, electricity, oil/gas, solid/liquid/gaseous minerals and public spaces cannot be sold or privatized, thereby recognising their critical importance to all. As public assets include mineral and oil wealth, which in the words of the Prophet salla Allahu alayhi wa salam     : "the people are partners in" means that they form an important part of the revenue of the state to be utilised for the benefit of all. The brutal privatisation programmes we currently suffer from deprive the people from benefiting from these public assets. One of the reasons for the failure of the Capitalist economy is its vesting ownership of public utilities and properties, like petrol, gases, energy sources, heavy and even strategic arms industries, to individuals, enterprises and companies. The Capitalist state is shut out of these markets. Effectively shut out of managing the very things that it was responsible for.

In Islam, state property, which is strictly under the custodianship of the Khalifah (Caliph) and his administration, is well defined. Political leaders cannot treat state assets as their own, as is unfortunately rife throughout the world today. Tax revenues, including Zakat, must be distributed in accordance with Islamic law. Elected officials of the state, as was a common practice throughout the ages of the Khilafah (Caliphate), were paid a small stipend to meet their basic needs. Public office is in no way a path to accumulating a fortune in Islam. Seeking a greater reward in the hereafter for their efforts is of much greater concern.

The Messenger of Allah salla Allahu alayhi wa salam     said: "Seven Allah will give protection with His Shade on the Day of Judgment, and they are: a just ruler"

Aside from the clear rules of ownership regarding state and public property, the individual is encouraged to be successful in trade, service or industry. And as the rules of ownership and transaction law have not changed in over 1,400 years, the necessary regulatory stability is achieved. Unlike communism, there are no limitations on the scale of ownership, so there is encouragement to be successful; and unlike Capitalism, success is not unduly taxed. Ownership of non-public land, land which is not being used, manufacturing, industry, and salaried employment are good routes to ownership and wealth. Gaining ownership is far easier than many may imagine. The Prophet salla Allahu alayhi wa salam     said: "Whoever cultivates a dead land it is his". If agrarian land is not used for 3 years, it reverts to the state to be available for anyone that can use it.


Unlike Capitalism, Islamic law maintains a simplified system of taxes, which is progressive and wealth oriented, rather than income oriented. Zakat is an annual requirement (indeed is an act of worship - one of the 5 pillars of Islam) and is based on 2.5% of non-utilised wealth. Accordingly, there is no disincentive to be wealthy and, additionally, it provides a major incentive to utilise (invest fully) what wealth one does have, as opposed to leaving it in a bank account. Compare this to the ever higher growing rates of income and consumption tax (VAT, council, rates, etc) where, due to the sheer weight and multitude of taxes, many choose not to exert to the highest levels when they are so punitively taxed.

Kharaj and Ushr taxes are upon the productive capacity of the land and are reduced where the land has been developed. Emergency tax, for example following natural disasters, can only be raised based on wealth and not income, in the way that zakat is levied.

With capitalist governments increasingly using taxpayer money to bail out failed companies (during financial crises), the incentive for hard work is further eroded.


There can be no confidence in trade and industry without clear regulation and stability in the economy . Islamic society establishes this in several ways. Firstly there must be stability in the currency. This is achieved via the gold and silver currency standard. This means currency has real meaning i.e. it is the means of exchange of products and services and, as gold and silver have intrinsic value, it means traders can have confidence in what they are dealing with. Paper currency must be fully backed by gold/silver reserves held by the state treasury and cannot simply be printed to hide the excesses of government .

Islam prohibits interest. Banks, without the means to make business from "money", can only survive by providing real services to society, for example in structuring company re-organisations or in bringing investors together. With most future-oriented and derivative-type contracts also forbidden by Shariah, most of the excesses and turbulence brought by these types of "gambling" contracts are also removed.

Thirdly, the markets in Islam have certain fixed rules of regulation including clearly defined company structures, trading with real products and services, no price fixing and no customs taxes. Within this Shariah regulatory framework trading is open and transparent. A government heavily influenced by big business cannot emerge in the Islamic state, as the Shariah rules are fixed, including those relating to governance over the economy .

A crisis free economy^

Some will ask, how can rules revealed 1400 years ago be relevant in delivering a prosperous economy today? In truth, economics addresses the basic fundamental nature of man, which itself is unchanged, and mans business relationship with others, which again is unchanged (based on trust etc). Questions of what should be private and public properties are just as relevant today as they were 2000 years ago. Islam addresses all these in a consistent and unchanging manner, ensuring stability and certainty, and hence confidence crucial for economic progress.

From the first economic principle of providing for the basic needs of all in society, to clear guidance on ownership and contracts, Islamic economy is distinctive and refreshing. Capitalist economies have been subject to extraordinary excesses, from selling off the base public assets of the people, to allowing banks to print their own money and charge interest thereon, to the melt down in markets brought on by the gambling finance industry. The divisions between wealthy and poor are at record levels and the "free market" economy has been thoroughly discredited.

The laws set down by our Creator, in marked contrast, provide stability, meet the needs of the people and provide an even playing field for all. The Islamic economic system has addressed and treated all economic problems and crises resulting from man's heartlessness and thoughtlessness. This is the system mandated by the Creator of the universe who knows what is most beneficial for His creation.

"Is not He, Who has made the earth as a fixed abode, and has placed rivers in its midst, and has placed firm mountains therein, and has set a barrier between the two seas (of salt and sweet water)? Is there any ilah (god) with Allah? No, but most of them know not!" (Quran chapter 27, verse 61)


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Categories: Challenging Myths, Islam Explained, | Tags: economics, economy, ownership, tax, trade,

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Cached: 21/8/2009 at 11:24