The study of the economic system of Islam could help Muslim countries to solve their economic problems and lead to development and flourishing.
When we talk of the economic system of Islam, we point to a particular plan that Islam has for organizing the economy in the best manner. The economic teachings of Islam are not restricted to some normative restrictions on the inquiry of wealth. Instead, Islam develops a particular economic system, which differs from other available economic systems such as capitalism and socialism.
The study of the economic system of Islam could help Muslim countries to solve their economic problems and lead to development and flourishing. Nowadays, many Muslim countries followed the prescriptions of Capitalistic and Socialistic economic systems. Not being compatible with the institutional setting of Muslim countries, the adopted economic policies were not successful.
We could analyses the Islamic economic system in both theoretical and practical levels. A theoretical concern is to illustrate the particular plan of Islam for solving economic problems and building a prosperous economy. The practical aspect of the economic system of Islam is related to the performance of this system and its ability in solving economic problems. In this book, I mainly elaborate the economic system of Islam theoretically. I also take practical considerations into account when I consider issues like the Islamic banking and finance.
In this book I used a vide notion of the term “economic system of Islam”. The term does not only refer to the institutional aspects of the Islamic economy or its normative aspects. It also refers to what we could call the science of Islamic economics, which deals with economic regularities and laws. Moreover, I used the term to cover also discussions on the philosophical aspects of Islamic economic to which we refer as the “philosophy of Islamic Economics”.
The book contains 32 lessons. The first five lessons are devoted to the introduction and evaluation of three rival economic systems, namely, capitalism, socialism and mixed economies. In lessons 6 to 13, the economic system of Islami is introduced by reference to the Islamic viewpoints on property rights, resource allocation mechanism, distribution mechanism, production and consumption. There is also a reference to the performance the economic system of Islam. Lessons 14 to 18 are mostly related to some philosophical and methodological aspects of Islamic economics. From lesson 19 to 21, some discussions on Islamic microeconomics are presented including theories of consumer and producer behavior from an Islamic viewpoint. The following three lessons, namely, lesson 22 to 24, are related to Islamic macroeconomics, including the ideal of Tayyib Gross Domestic Product.
Lessons 25 and 26 are related to the theory of Islamic development to which I referred as flourishing. Lesson 27 is about the theory of international economic from an Islamic perspective. Finally Lessons 28 t0 32 are devoted to different aspects of Islamic banking and finance.
I would like to thank all who helped me in writing this book. I particularly appreciate the helps of authorities of Al-Mustafa Virtual University, who facilitated the publication of the book. It is my pleasure that the readers of the book help me to improve it by sending their remarks and suggestions.
Table of Contents
Lesson 1: An Introduction to the Economic System of Islam
Introduction
Economic Systems
Rival Economic Systems
Basic questions
Does Islam Have an Economic System?
The Islamic Economic System as a Part of a Whole
Characteristics of the economic system of Islam
Distinctive Features of the Islamic Economic System
Summary and Conclusions
Questions for Discussion
Lesson 2: Rival Economic Systems
Introduction
Criteria for Classifying Economic Systems
Three Basic Metrics for Differentiating Economic Systems
Rival Economic Systems
The Evolution of Economic Systems
Basic Claims of Economic Systems
Summary and Conclusions
Questions for Discussion
Lesson 3: Capitalism or the Free Market Economic System
Introduction
Background of Capitalism
Philosophical Foundations of Capitalism
Basic Claims
Features of Capitalism
Pros and cons of Capitalism
Summary and Conclusions
Questions for Discussion
Lesson 4: Socialism or Planned Economic System
Introduction
Historical Background
Philosophical Foundations
Features of socialism
Socialism in comparison with Capitalism
Breakdown of Socialism
Summary and Conclusions
Questions for Discussion
Lesson 5: Mixed Economies
Introduction
Historical Background
Two Types of Mixed Economies
Main features of mixed economies
Property rights
Resource allocation mechanism
Redistribution of Income
Strategies of welfare states
(a) Regulation
(b) Nationalization
(c) Labor Movement
(d) Fiscal Policy
(e) High Growth
(f) Full Employment
Decays of welfare states
The logical flaws
Increasing budget deficits
Persistent Inequalities
High Tax Levels and Deficits
Summary and Conclusions
Questions for Discussion
Lesson 6: The Economic System of Islam
Introduction
Historical Background
Underlying Assumptions
Basic Claims of the Economic System of Islam
Characteristics of the Islamic Economic System
- i) Three forms of ownership (Property Relations)
- ii) Resource Allocation Mechanisms
iii) Distribution and Redistribution Regimes
Summary and Conclusions
Questions for Discussion
Lesson 7: Property Rights in an Islamic Economic System
Introduction The Philosophy of Ownership
Three Forms of Ownership
Respected Private Ownership
Public Ownership
State Ownership
Regulation on Private Ownership
Summary and Conclusions
Questions for Discussion
Lesson 8: Resource Allocation Mechanism in the Economic System of Islam
Introduction
From the invisible hand of the market to the visible hand of the state
Resource Allocation Mechanism in Islamic Economics
A Regulated Market
A Responsible State
Moral Filter (Morality Mechanism)
The Functioning of the Islamic Allocation System
Summary and Conclusions
Questions for Discussion
Lesson 9: Pre-production Distribution in the Economic System of Islam
Introduction
Fair Distribution of Natural resources
Categorization of Natural Resources
Land
Raw Materials and Waters
Other Natural Resources
Summary and Conclusions
Questions for Discussion
Lesson 10: Islamic Post-production Distribution System
Introduction
Principles of Distribution
Bases of Distribution
Economic Work
Need
Other Factors
Diversity of Payment Contracts
Return to the Factors of Production
Summary and Conclusions
Questions for Discussion
Lesson 11: Redistribution of Income in Islamic Economics
Introduction
The Philosophy of Income Redistribution
The Islamic Income Redistribution System
Characteristics of the Islamic Redistribution System
Summary and Conclusions Questions for Discussion
Lesson 12: Production and Consumption in an Islamic Economic System
Introduction
Doctrinal and Technical Aspects of Production
Doctrinal/Intellectual Strategy
Legislative Strategy
From Consumer Sovereignty to Consumerism
Summary and Conclusions
Questions for Discussion
Lesson 13: The Performance of the Islamic Economic System
Introduction
Two Views about the Performance of the Islamic Economic System
The Functioning of the Islamic Economic System
The Economic Performance of Early Islamic States
The Economic Performance of Contemporary Muslim Countries
Summary and Conclusions
Questions for Discussion
Lesson 14: Islamic Economics as a Discipline
Introduction
Doctrinal Aspects of Islamic Economics
Scientific Claims in Islamic Economics
Reinterpreting Sadr
Summary and Conclusions
Questions for Discussion
Lesson 15: Early Islamic Economic Thoughts
Introduction
The Fallacy of the ‘Great Gap’ Theory
Multidisciplinary Development Approach
Division of Labor, Specialization, Trade, Exchange and Money and Banking
Demand and Supply
Public Finance
Stages of Development
Muslim Intellectual Decline
Summary and Conclusions
Questions for Discussion
Lesson 16: The New Islamic Economics
Introduction
Islamic Economics as a Discipline
Islamic Economics before Sadr
Contributions of Sadr to Islamic Economics
Islamic Economics after Sadr
Summary and Conclusions
Questions for Discussion
Lesson 17: Philosophical Foundations of Islamic Economics
Introduction
Philosophical Foundations of Economics
Philosophical Foundations of Islamic Economics (IE)
The Epistemological Foundations of IE
The Ontological Foundations of IE
The Axiological Foundations of IE
Summary and Conclusions
Questions for Discussion
Lesson 18: Methodology of Islamic Economics
Introduction
The Nature of Islamic Economics
The Discovery Methodology
Stages of the Discovery methodology
Hypothetical Deductive Method
Summary and Conclusions
Questions for Discussion
Lesson 19: The Theory of Consumer Behavior from an Islamic Point of View
Introduction
Micro- Macro-economic Analytical Tools
The Functioning of Micro-and-Macro-economics in Conventional Economics
Islamic Micro-and-Macro-economics
The Theory of Consumer Behavior
Matured Economic Men
Moderate Consumption
Two Types of Expenditure
Legal and Illegal Consumptions
Four Stages of Decision-making
Summary and Conclusions
Questions for Discussion
Lesson 20: The Theory of Producer Behavior from an Islamic Perspective
Introduction
Normative vs. Positive Theory of Producer Behavior
Different Views about the Theory Producer Behavior from an Islamic Viewpoint
The Culture of Halāl and Ṭayyib Production
Summary and Conclusions
Questions for Discussion
Lesson 21: Fair Prices and Adequate Production
Introduction
Free Market Failures
The Problem of Overproduction
Filtering Needs in Islamic Economics
Tayyib (Pure) production
Fair Prices
Summary and Conclusions Questions for Discussion
Lesson 22: The Islamic Economic System at an Aggregate Level; the Demand Side
Introduction
Properties of a Macroeconomic Approach
Islamic Macroeconomic Analyses
Aggregate Demand and Supply
The Performance of an Islamic Economy at an Aggregate level
The Allocation of Income in an Islamic economy
Summary and Conclusions
Questions for Discussion
Lesson 23: Ṭayyib Gross Domestic Product (TGDP)
Introduction
From the Demand Side to the Supply Side of an Islamic Economy
The Supply Side of an Islamic Economy
Green GDP
Ṭayyib GDP
Measuring Ṭayyib GDP
Summary and Conclusions
Questions for Discussion
Lesson 24: The Islamic Economy and Business Cycles
Introduction
Business Cycles
Islamic Economics and the Business Cycle
The Functioning of a PLS Model
A self-regulating System
Practical Problems of PLS
Summary and Conclusions
Questions for Discussion
Lesson 25: The Theory of Development and Flourishing
Introduction
The concept of development
Flourishing as an Islamic Concept
Causes of Development
The Theory of Trigger Mechanism
Summary and Conclusions
Questions for Discussion
Lesson 26: Flourishing Strategies
Introduction
Development Strategies
Flourishing strategies
A Multidimensional Strategy for Flourishing
Summary and Conclusions
Questions for Discussion
Lesson 27: The Theory of International Trade from an Islamic Perspective
Introduction Early Theories of Free International Trade
New Theories of International Trade
Evaluation of the Free Trade Theory
Towards an Islamic Theory of international Trade
Summary and Conclusions
Questions for Discussion
Lesson 28: The Foundations of Islamic Banking and Finance
Introduction
The Need for Islamic Banking and Finance
The Foundations of Islamic Finance
Sharia Regulations on Islamic Banking and Finance
Sharia Goals in Islamic Finance
Summary and Conclusions
Questions for Discussion
Lesson 29: Mobilization of Resources in the Islamic Banking
Introduction
Investment and Non-investment Accounts
Non-investment Accounts in Islamic Banks
Three Arrangements in the Mobilization of Investment Accounts
Summary and Conclusions
Questions for Discussion
Lesson 30: Facilities in Islamic Banking
Introduction
Three Types of Facilities
Qard al-Hassan
Exchange Facilities
Joint-venture Facilities
Summary and Conclusions
Questions for Discussion
Lesson 31: The Islamic Banking in Practice
Introduction
Islamic banking as the fastest growing segment of the Islamic Economy
Development of Islamic Windows of Conventional Banks
Challenges and Opportunities for Islamic Banking
Summary and Conclusions
Questions for Discussion
Lesson 32: Islamic Finance and Financial Crises
Introduction
Financial Crises
Causes of Financial Crises
Causes of Financial Crises from an Islamic Perspective
Islamic Policy Recommendations
The performance of Islamic Banks during the financial crisis of 2008
Summary and Conclusions
Questions for Discussion
Bibliography
Bibliographic Information
Title: The Economic System of Islam
Author (s): Mohammad Javad Tavakoli
Publisher: Al-Mustafa International Publication and Translation Center
Length: 208 Pages
ISBN: 978-1627798556
Pub. Date: 2022