What should economic systems, principles and basic rules be like according to Islam?
Submitted by on Mon, 24/12/2012 - 13:45
Dear Brother / Sister,
The Islamic economic system accepts neither the oppressing capitalism nor the brutal and dreamy socialism. Every wrong system can have some right aspects. Islam does not reject the right aspects of the systems that it rejects. For instance, issues that are accepted by capitalism like individual enterprises, private property, trade, art and free market economy that is based on murabaha/profit making can exist and exist in the Islamic economic system as long as they are not contrary to the spirit and ethics of Islam. On the other hand, struggle against unlawful profits, the claim to end the gap between the rich and the poor, the general attitude against interest in economy, which seem to be on the foreground in socialism can be accepted as right points by Islam.
Elements that result in deceiving and being deceived and bring about unlawful profits like the exploitation of interest are ruled out in the Islamic economic system.
The framework of Islamic economy is evaluated on the basis of principles but the economic details to be applied are left to the conditions of the time and place as long as this framework is not exceeded.
Principally, Islam shows respect to the right of private property and individual freedoms. The owner has the right to use his property however he wishes within the legitimate framework unless he is a child or insane. If he is not qualified enough to use his property, this right is removed from that person. Excessive waste and extravagance is an important reason to remove this right. This principle is also valid in current civil code.
However, Islam regards extravagance and stinginess among unethical acts and tries to keep people away from them by defaming them. Since Islam has a content related to the hereafter, it regards a person religiously responsible though these acts are not included in the formal law. This protects Muslims from extremes and drives them toward the economical/moderate way.
We advise you to read the following article called THE QURAN AND ECONOMY by Prof. Dr. Osman Eskicioğlu:
In this article, which we found it appropriate to entitle the Quran and Economy, we will try to explain Islam first and economy after that and then try to seek and explain the connection between them.
I should immediately say that the Quran addresses man but it is a divine book that mentions Allah, angels, prophets, the hereafter, man, animals, plants and non-living beings and that explains the universe. That is, the Quran mentions everything that can be perceived by senses and also extrasensory beings. Therefore, I think it is a waste of time to ask whether economy exists in the Quran or not.
As for the economy, there are tens of definitions for economy in domestic and foreign resources but we want to define economy compactly as “the science of working and living” or “the system of working and living”. Economy is regarded as a separate branch of science by the civilization today but, in our opinion, its laws and rules have not been completed yet; we claim that it is a field that has certain deficiencies and faults. We think the civilization of Renaissance became successful in terms of things but it became unsuccessful in terms of human and human sciences. If we give an example from economy here, we can say that no tax applied in Turkey or abroad is scientific, logical, reasonable, just and humane.
Before starting to deal with the issue, we will have some presuppositions so that our viewpoint will be understood better and the economic world that we understand will turn in a useful way in its orbit. In this sense, the world and the universe have a natural divine order. It looks as if man works as an employee in this factory of the universe, whose owner is Allah and whose laws, rules and regulations have been imposed by Allah. What this employee has to do is to search, to understand how the factory works, and work and produce in accordance with the conditions of the factory. The means and field of learning for man are the sources of religion and science. Science is the laws and rules that address our senses and of the substances and happenings that can enter laboratory. Religion is the laws and rules that address our heart and of our acts and deeds that are based on our acceptance. Therefore, man is a being that lives on the plane that passes the point where religion and science intersect. Voluntary and involuntary acts exist in the structure of man. Man gets hungry, sweats, gets tired and feels cold; that is, involuntary acts happen in man. They are not related to religion; they are not sinful or meritorious in terms of religion. However, to eat, drink, get dressed, work and produce are acts that are done voluntarily; so, they are included in the scope of religion and they are evaluated as rewards or sins, right or wrong and useful or harmful. Another definition of religion is based on the will; therefore, all of the acts and deeds that are done voluntarily are related to religion; in a sense, they form the religion. Man will be accounted for his deeds, acts and behavior that he did voluntarily in the hereafter. These deeds can be, right or wrong, useful or harmful and sins or rewards. Thus, man can learn the aspect of the economy related to matter and things from science and its aspect related to the individual and society from religion; then, he combines them and establishes his system of working and living. The rules of religion and science were imposed by Allah; what man is supposed to do is to find and apply them.
Therefore, man, as an individual and as the community, has no right, power or authority to intervene in this established system arbitrarily by any means. Man’s wishes and demands cannot be religion or science because man’s life is a part of the universe and economy is a part of man’s life. The universe is a combination of laws and rules. They are interconnected like this. Even the sun has been at man’s disposition (assigned to produce for man freely, without any charge). Human body consists of balances; similarly, there are natural-divine balances in man’s life. Unfortunately, today’s civilization has tried to form artificial classes and parties so that the fields in man’s life will be maintained and a balance will be established but we can say that it has brought about harms instead of benefits in economy. Therefore, in our opinion, terms, definitions and classifications especially in social sciences should be arranged again; the book of the universe should be read again and its alphabet should be rewritten.
There exists production, consumption, cooperation and sharing in human body just like in the universe and economic life. The respiratory, digestive, circulatory and excretory systems take part in both production and consumption. For instance, blood, which is a produced substance, is shared in such a way that there is no need for fighting, enmity among classes, strikes or lockouts; thus, everybody meets their needs in the best way. Muslims will establish such an economic system, if God permits, in the light of science and religion and under the enlightenment of the Quran and the Sunnah just like the human body.
The following is stated in the Quran: “Allah hath permitted trade and forbidden usury.” (al-Baqara 2/ 275) Thus, the Islamic economy is stated to be different from the others. In another verse, the following is stated: “O ye who believe! Eat not up your property among yourselves in vanities: but let there be amongst you traffic and trade by mutual good-will” (an-Nisa 4/ 29); with this verse,free market economy is pointed out because the condition of mutual good-will is necessary in trade. “Mutual good-will” is the consent that forms in the heart as Tabari puts it. (Ikhtilaf al-Fuqaha, p. 146) This can be realized only in a system in which supply and demand occur spontaneously, production and consumption are not intervened in and in free economy in which the market is not forced, and base price, maximum price and official fixed prices are not determined by governments. However, when I say free market economy, I should state here that Islamic economy is a sui generis system with all of its fields and layers.
In Islam, ownership is essential in production because the following is stated in the Quran: “That man can have nothing but what he strives for.” (an-Najm 53/ 39). Therefore, Everybody will own what they produce and they will sell them at market price without profiteering. Man owns his labor, too; therefore, trade unions that market the labor of workers do not exist in the Islamic system. However, there is an important point here. Those who produce own the goods that they produce but consumption belongs to the community in which the goods are produced. That is, everybody has the right for those goods whether they work in the production or not. Therefore, everybody has the right to live in the Islamic society. Hz. Prophet stated this fact in two hadiths that seem to contradict each other. Expressing the right that the state will take legally and by using force, Hz. Prophet said, "There is no right other than zakah in goods." (Ibn Majah Zakah, 3) On the other hand, by referring to sadaqah, which the individual is to give as a religious, ethical and conscientious right spontaneously, he said, "There is another right other than zakah in goods." (Tirmidhi, Zakah, 27, No: 659; Darimi, Zakah, 13) Ahmad Naim combined the meaning of these two haadith as follows: The narration of Tirmidhi stating that there is another right refers to sadaqah (that is, all kinds of charity and money given to the poor for God's sake); and the narration of Ibn Majah stating that there is no right refers to zakah (that is, the tax collected by the Islamic state). (Ahmad Naim, Tajrid Sarih, I, 314).
Muhammad Hamidullah says that zakah is a tax collected by the Islamic state by the following sentence: “In the Islamic culture, the term zakah is used in the sense of the tax given to the state every year.” (Modern İktisat ve İslam, İstanbul–1963, p. 17). As I mention in the research called “İslam ve Çağdaş Vergi Anlayışının Eleştirisi” (Islam and the Criticism of Contemporary Understanding of Tax) published in the website of www.enfal.de, the most important bond between the citizen and the state is tax. In our age, it is fashionable to govern the state like children playing at families; so, tax has transformed into a toy in the hands of the governments. I should confess that I could not find a proper definition of tax and true and useful sentences expressing why tax is collected in economy books because this civilization of Renaissance has not been able to know the state and its functions very well and to know whether the state is a commercial firm or an institution working for money and salary or an organ that serves its citizens freely as a natural family. Based on the following hadith of the Prophet, we, as an organic society, regard the community and the state as a natural organ like a family not as a social contract: “Believers are like a body in terms of loving one another, showing mercy to one another and protecting one another. When one organ of the body becomes ill, the other organs also become ill and suffer sleeplessness.” (Riyadu’s Salihin (Bukhari, Adab 27; Muslim, Birr 66). A family serves his members without charging any money; similarly, the state should serve its citizens freely, without charging any money. Consequently, the state serves its citizens not because it collects tax from them but because it is the protector and the state. If the state were a commercial institution or a company that worked on the basis of money, would it not be necessary for equality to exist between tax and service? However, it is not possible by any means. In Islamic understanding, the state is the protector; it collects tax because it contributes to production and it spends the taxes it collects to serve the community. The issue of expenses in the budget in the Islamic economy is explained in verse 60 of the chapter of at-Tawba as 8 groups.
In the Islamic economy, the cause for tax is production; and tax is laid on production. It is explained clearly in the books of Islamic law and fiqh. It means the state collects tax as part of its share because it contributes to production. However, tax is collected from both production and consumption under the name of tax today. Thus, in a medium where terms of information society are produced, drawing two conclusions from two opposite things is appropriate for science and logic or illogicality. It is not something understandable. So many contradictions are applied in information society by the state and economists keep silent.
When we say, "Every system works in its own structure", what needs to be understood from it is this: economy is harmonious in its own field and it is necessary to provide harmony among the fields that form the community like law, ethics and economy. Therefore, the goods produced by the economy have to be religiously legitimate and permissible and, what is more, ethical. I want to mention a very important question here. The economy understanding of the Renaissance civilization or capitalism is unethical. Şükrü Baban states the following in his series of books called "İktisat Dersleri" (Economy Lessons): “Economics views events from the viewpoint of benefit. However, if it views the same event from the viewpoint of justice, it will be law. If we consider it from the viewpoint of ethics, it will be "ethics". Opium is beneficial for a hashish addict. This understanding is in compliance with the principle of - everything that meets a need in economy is beneficial. However, it might not be true ethically.” (p. 7). This mentality is wrong because the systems in the human body do not come into conflict with one another; they work in harmony. The fields in the community are like this or they should be like this. If science or religion says no to what economy says yes, if religion or economy says no to what law says no, it means there is a struggle among fields in such a community. In conclusion, there will be not be a healthy economy, law and religion in such a society. When one organ of the body is ill, the body becomes ill.
If economic life does not comply with the commands and prohibitions of religion, such an economy will not be healthy according to Islam. For instance, alcoholic drinks cannot be produced by Muslims in the Islamic economy just because people find jobs and buy and sell. The following is stated in the Quran: “O ye who believe! Intoxicants and gambling, (dedication of) stones, and (divination by) arrows, are an abomination― of Satan's handiwork: eschew such (abomination), that ye may prosper. Satan's plan is (but) to excite enmity and hatred between you, with intoxicants and gambling, and hinder you from the remembrance of Allah, and from prayer: will ye not then abstain?" (al Maida, 5/90–91) In a hadith, the Prophet (pbuh) stated that a person who produces, makes others produce, drinks, carries, makes others carry, sells, earns from, buys, serves alcoholic drinks and spends the money earned from alcoholic drinks are damned and he condemned them. (Abu Dawud, “Ashriba”, 2; Tirmidhi, “Buyu‘”, 58; Ibn Majah, “Ashriba”, 6). As it is seen in the verse and hadith above, alcoholic drinks are forbidden; then, we conclude that they cannot be produced and consumed by Muslims.
As we clearly see from the practices, all of today's economy practices are related to money. Therefore, we can say that all of the economies of this age are based on money. However, this is something wrong and harmful because banknotes are prevalent in the market today. However, these banknotes themselves have no value at all. You cannot meet any needs by paper. They have nominal value. Nominal value is something that s not real; it is assumed and imaginary value. Then, can something that has no value itself be a measurement of value just because it is called money? How realistic can such money be in measuring the value of goods? Thus, it can clearly be seen that the economies that are based on money are faulty.
In Islamic economy, money exists. In the Quran, the words "dirham" and "dinar" are mentioned in addition to "asset". “Send ye then one of you with this money of yours to the town.” (al-Kahf 18/ 19) The word asset is the name given to silver, whether it is coined or not. Coined dirham or money is called riqa, al-wariq. The interpreters stated the following: They had coins that had the picture of their king, the king of the city called Tarsus today. (see Fakhruddin Razi)
“The (Brethren) sold him (Joseph) for a miserable price for a few dirhams counted out: in such low estimation did they hold him.” (Yusuf 12/ 20). Raghib explained the word "dirham" as silver coin through which people bought and sold. (Mufradat item) On the other hand, the word "dinar", which means gold coin, is also mentioned in the Quran. (A. Imran 3/ 75) Hasan Basri Çantay made the following sentence while translating the verse in which this word was used: “If you entrust him gold coin, he will not pay it back.” (Kur'an-ı Hâkim ve Meali Kerim, I, 94). Thus, after the words gold coin and silver coin, the metals of gold and silver are also used in the Quran; tax is levied on gold and silver metals whether they are coins or bullions. Kasani, the great Islamic fiqh scholar, states the following in his work called Badayi'(I, 16): 5 dirhams are paid as tax (zakah) when gold, which is absolute money, and silver have the weight of 200 dirhams. The following is stated in a verse: “And there are those who bury gold and silver and spend it not in the way of Allah: announce unto them a most grievous penalty…” (at-Tawba 9/ 34) In conclusion, fiqh scholars called gold and silver absolute money because the word money was used in the Quran for gold and silver; Elmalılı stated the following in his book: "The duty of gold and silver and the reason why they were created in terms of the benefit of humanity is that they are means of exchange, that they ease buying and selling and that they are spent on the real needs of people." (Hak Dini Kur'an Dili, IV, 324). Therefore, we regard it very useful for economic life if gold and silver are used as money in circulation as they were used in the past. We think the crises that arise in economic life today, especially the last crisis called the global crisis that was on the agenda all over the world, originate from the monetary policy. Gold and silver coins have their own value as much as their worth. Silver coins can be used as national money and gold coins can be used as international and universal money; thus, the games played on the pieces of paper will end. These banknotes cause the governments to issue credit money, which is a wrong policy; on the other hand, they cause some forgers to issue counterfeit money.
In addition, in the income distribution of the capitalist system that is theoretically and practically current almost all over the world today, money is also hired. However, this hire purchase called interest is uncovered because the banknote itself has no value; it cannot meet a need like goods. Secondly, money is not harmed as it is used. Hire purchase (rent) is paid because the thing that is used is harmed or worn. Until the beginning of the 16th century, when capitalist understandings started to emerge, interest was not accepted as legitimate by any religions, philosophies, people and institutions; it was forbidden and rendered haram; however, it was regarded as legitimate by Jean Calvin, who was a French reformer and the founder of Calvinism who lived between 1509 and 1564, for the first time in the world. After Calvin regarded interest as legitimate, the civil code of Genoa, which was the cradle of Calvinists, legitimated interest. John Knox in Scotland and Henry VIII in England the abolished the prohibition of interest.
50 years after Calvin, Claudius Salmosius, one of the Calvinist leaders, rendered interest completely free and legitimate.
Western economists who tried to make interest seem legitimate struggled a lot for it. Anwar Iqbal Qureshi states in his doctoral thesis called “Islam and the Theory of Interest” that they put forward the following thought, which seems to be the most reasonable one: When a person lends his money to another person or a bank for one year, he gives up his right to use it for one year. This person gives his right to use the money to somebody else and he is deprived of his right to use it. Interest is the return of it. This explanation might seem reasonable and sensible but money is not worn or harmed when it is used and it does not lose its value; therefore, this explanation is insufficient. Then, we can say this: Money is such an instrument that it cannot produce any value unless some act, risk or similar things are added to it. If the person who lends the money to the bank puts it in his own safe instead of the bank, will his money increase one year later? What is the difference between putting the money in his own safe and in the bank? There is no difference. Then, why should the money in the safe increase when it is put in the bank? The Quran states that the systems based on interest will have crises like the epileptic people have epileptic seizures: “Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: "Trade is like usury, but Allah hath permitted trade and forbidden usury.” (al-Baqara 2/ 275)
There is one more thing about money in the Islamic economy. As it is known, in the tradition of Islam, issuing and coining money belongs to the state; the gram of money (gold and silver), the value of money and protecting its value are to be under the control and supervision of the state. Thus, the rights over money belong to the state and goods belong to the nation and the individuals. That is, individuals can sow, plant, produce and sell goods without asking for permission from any authority within the balance of supply and demand, and production and consumption. The state has no duty regarding the production, price fixing, sale and planning of goods; similarly, individuals and the community have no duty regarding money; it is the duty of the state, because the following is stated in the Quran: “and establish regular Prayer and give regular Charity; and loan to Allah a Beautiful Loan.” (al-Muzzammil 73/ 20) In the verse, the phrase "loan to Allah" is a metaphorical expression. In Islamic law, "rights (law) of Allah" means "public law". Some rights are called like that because they do not belong to individuals and they are related to public use. They are called rights (law) because of their importance. (Ö. N. Bilmen, Hukuk-ı İslamiyye, I, 226) That is, we can conclude that in banking system, interest free banks are essential; there can be no private banks; only state banks can exist. Since the Islamic economy is an economy of balances in a sense, individuals and community, individuals and state will balance each other in terms of field; on the other hand, goods and money will balance each other; goods belong to the nation and money to the state.
Hz. Shuayb (Jethro) was the prophet of the people of both Madyan and Ayka. (Qurtubi, XIII, 135) The people of Madyan worshipped idols. Shuayb called them to oneness. They always deceived people through their measures, scales and coins of low value. (Tajrid, VII, 295–296). Shuayb said to his people,“O my people! Worship Allah: ye have no other god but Him. And give not short measure or weight: I see you in prosperity, but I fear for you the Penalty of a Day that will compass (you) all round. And O my people! Give just measure and weight, nor withhold from the people the things that are their due: commit not evil in the land with intent to do mischief.” (Hud 11/ 84–85) These verses show that Hz. Shuayb warned people to obey justice while buying and selling goods and not to deceive people while measuring, weighing, etc. He also gave them clear orders about not decreasing the value of the things (goods and money) of people, which covers especially inflation of our age. Verses similar to ones in the chapter of Hud are also present in the chapters of al-Araf and ash-Shuara. You can refer to them and compare. (al-Araf 7/ 85–93; ash-Shuara 26/ 176–191)
When these verses are examined, it is understood from the advice he gave and the measures he took that the Prophet Shuayb was sent in order to ameliorate a depressed economy. One of the most important things he did was his struggle against inflation. Since inflation is the source of all kinds of injustice and immorality and since those who caused inflation by trimming gold and silver coins caused injustice along with inflation, the Prophet Shuayb prohibited it. According to the narration of Zayd b. Aslam, The people of Madyan clipped the gold and silver coins like gold and silver; then, they gave them to people by counting them but when they took these clipped coins from people, they weighed them. When they took the sound coins from the people, they counted them but they weighed the clipped and low value coins when receiving them. This meant deceiving people. This attitude of theirs, that is, sometimes counting and sometimes weighing coins, caused loss in goods and injustice. Allah sent wrath to the people of Madyan because they did not give it up and He punished them. (Tabari Jami’ul Bayan, XII, 102; Ayni XII, 246; Tajrid, VII, 295–296). That is, if we interpret it with today's terms, we can say that the people of Madyan were destroyed because of inflation.
According to a narration from Ibn Abbas, they were a rough-rampant people. They always wronged people. When a stranger came to their country, they would stop him before he entered their city and take the sound coins from him, saying his money was counterfeit or clipped and paid him less money. This was injustice. In fact, they were prohibited from not only counting and weighing wrongly but also all kinds of financial wrongs. (see Alusi, Ruh-ul Maani, VIII, 177)
The following is stated in the tafsir of Qurtubi: they were prohibited from clipping coins but they did not obey this prohibition; therefore, they were destroyed. They used to clip sound coins in order to gain unfair benefits. When they dealt with sound coins, they counted them but when they dealt with clipped coins they weighed them and deceived people. (Qurtubi, al-Jami li-Ahkam-il Qur'an, IX, s. 88). They did not obey their Prophet , Shuayb and they made fun of him by speaking arrogantly: “Oh Shuayb! Does thy (religion of) prayer command thee that we leave off the worship which our fathers practised or that we leave off doing what we like with our property?” (Hud 11/ 87). Thus, they said they would use their goods as they wished; they would cut, throw them away or burn them. (Tabari, Jami’ul Bayan, XII, 102). However, it is necessary to pay men due amount without any decrease no matter whether the goods are measured by weight, volume or any other measurement. (Tabari, XII, 99; XIX, 108).
The Prophet Shuayb was sent to both Madyan, where he lived, and to Ayka, another city. He addressed the people of Ayka as follows: “Give just measure and cause no loss (to others by fraud). And weigh with scales true and upright. And withhold not things justly due to men, nor do evil in the land, working mischief.” (ash-Shuara 26/ 181–183). What is meant by "cause no loss to others" is do not clip the coins and do not violate people's rights by deceiving them. (Alusi, Ruh-ul Maani, XIX, 118).
As it can be seen, when the verses are examined carefully, men do not have the right to use their goods however they wished. By saying, "We leave off doing what we like with our property", they talk mockingly and by saying "does your prayer command you this?" they act as if they have the right to do whatever they wished with their goods. It is understood form the verse that man cannot do whatever he wishes to his goods and treat them as he wishes. Goods have laws and rules that they are subject to; that is, they have rights. The seal of nature present on each natural being has been impressed by the divine power. Beings have the seal of divinity on them; so the laws and rules inherent in their nature cannot be changed by themselves or by people. Human life and the lives of all living and non-living beings have been programmed by the will of Allah. Therefore, Mawdudi states the following while interpreting this verse: “The demand by the tribe of Hz. Shuayb to use their goods as they wished shows that something new was not added to the theory of dividing life into two as religious and worldly.”(Tafhim, II, 418)
Elmalılı wrote the following regarding the issue: They regarded it something that prevents freedom or stupidity to worship only Allah by getting rid of being slaves of various kinds of gods and to obey the rules of law and ethics in trade and politics. Hz. Shu'ayb did not ask them not to do whatever they wished to their goods. He said, "Do not wrong the goods of people." It did not mean preventing freedom; on the contrary, it meant determining and confirming freedom. Nobody could be sure of their rights and do whatever they wished to their goods if the goods of people were not secured. However, they regarded other people's goods as their own goods and they wronged people as much as they could. They never cared about rights and justice; they did not avoid harams. They regarded the warnings of Hz. Shu'ayb as obstacles to their freedom. They tried to mock him through demagogy: "Does your prayer command you that we leave off doing what we like with our property? Hey pious man! You are very clever!" Thus, on the one hand, they worshipped idols and on the other hand, they acted conceitedly toward Allah and despised prayer. Besides, to commit fraud, disrespect to rights and arrogance under the name of freedom and trade, and to insult prophethood are among the illnesses of the Era of Jahiliyya that are also very common among the unbelievers of today. Therefore, the people of today should listen to the story of Shuayb and the end of the people of Madyan very carefully. (Elmalılı, Hak Dini, IV, 561–562).
Duties like protecting the religion, mind, soul, generation and property were regarded among the inevitable elements and necessary areas of life by many scholars from Juwayni (419–478/ 1027–1098), the teacher of Ghazzali to Ghazzali himself and Shatibi. Protecting the property, which is one of those five areas, does not consist of prohibiting theft only. It consists of a set of laws and rules that cover the whole economic area and protects the property by applying the natural law of property.
There is something interesting here, too; according to this, the economic area covers 1/ 5 or 20% of the necessary areas. The same amount is in question for the share of the state in the booty mentioned in the Quran: “And know that out of all the booty that ye may acquire (in war), a fifth share is assigned to Allah and to the Messenger and to near relatives, orphans, the needy, and the wayfarer…Allah hath power over all things.” (al-Anfal, 8/ 41) Based on this fact, we understand and accept that the economic area has an area, time, place and value of 1/5, indicating that the state has an authority of 1/5 in economy. We can say that in the Islamic economy, private enterprise has an area of 80% and the state has an area of 20%. Therefore, we can say that the economy suggested by the Quran or the Islamic economy is a free market economy.
When we say free market economy here, there is something that we need to explain at once. This expression is has a Western patent and a seal of the civilization of Renaissance. We cannot reach the Islamic system through Western words and definitions and the ideas and thoughts produced by Westerners. That is, there might be some similarities between the freedom of Islamic economy and free market economy, but there are differences, too. In fact, the understanding of freedom of the West means to free the individual from the area under the command of the state. So to speak, we can say that the people and the state are always cross with each other because the Western understanding cannot determine the place of the individual and the state properly. However, something like that is impossible in Islam. The individual is fard ayn; the community (the state) is fard kifayah. The discrimination of Republicans and Democrats in the political life in the USA shows this controversy and contradiction clearly, which is definitely wrong. If we liken the state to the ceiling of a house, the floor will be the people. Some of the people living in this house hold up the ceiling and support it; the others support the floor or the foundation. Is something like this possible? Can there be a house without a ceiling or without foundations? Therefore, in an Islamic community, an individual supports both individualism and statism. This case is similar to the case of a person living in a family. Every member of the family has to appreciate, care about and think of both themselves and the family; they have to balance both. We say, every branch of science, every civilization and system have terms, definitions and classifications peculiar to them. We, as Muslims, have not been able to produce our own words and terms and to establish our own community; therefore, we have to use the words and terms in the market by saying there is free market economy in Islam. However, if there exists the right or application of establishing a private bank in free market economy, and if it is a necessity of this freedom, we need to say that there is no such freedom in the Islamic economy and that banks belong to the state in Islam.
When we say free market (serbest piyasa) in Turkish, the origin of the word "piyasa" is the Italian word “piazza”. This word means square, shopping center and market. The origin of the word "pazar" in Turkish comes from Persian "bazaar"; it means the place of shopping, uncovered place for shopping. In Turkish both words are used for the word “marché” in French and “market” in English. (H.Atıf Kuyucak, İktisat Dersleri, İst. Üni. İkt. Fak. Yayınları, 1960, p. 197, footnote: 2)
The phrase free market completely has the Western thought and understanding of economy. It should be understood and accepted so. If we say there is or there is not free market in Islam in the sense of what classic economists mean, we will make a mistake because the term free market uttered by a classic economist and a Muslim economist does not mean the same thing.
Samuelson makes a remarkable explanation about these terms. Samuelson's following words can be regarded as the confession of the weakness by the Western civilization regarding social sciences and especially economy. Besides, in our opinion, the Western world has not made economy a science by completing its terms, definitions and classifications. After saying that we should protect ourselves from the oppression of the terms especially in social sciences, Samuelson states that we should not use two terms for the same concept and should indicate two different happenings with one single term. Then, he gives the following example to clarify the issue: Jones says the following to Robinson, who claims that what causes the crisis is extreme savings: "You are wrong; the real cause is insufficient consumption." Schwartz, who hears them, intervenes and says, "Both of you are talking nonsense; the real cause is insufficient investments." As a matter of fact, if they stop arguing for a moment and analyze and compare the terms they use, they will see that all of the three claims which seem to be different are indeed the same and that the difference originates from the confusion of the terms. (Paul A. Samuelson, Economics, p. 10)
The terms of modern economy and the terms of the Islamic economy are different from each other. The best example of it is the word "mal" (goods, property). In Islamic law or economy, something has to be religiously legitimate and has to have the power to meet a need in order to be regarded as "mal". Accordingly, wine and pork, which are rendered haram, are not regarded as "mal" for a Muslim; similarly, a few grains of wheat are not regarded as "mal" because they cannot meet a need. (see Ibn Abidin, IV, 3; M. Mutahhari, İslami İktisadın Felsefesi, trans: Kenan çamurcu, İst. 1995, p. 33; Majalla, items 126 and 127)
The word liberalism is the name of a school in the history of economics. This school is called liberalist school as well as classical school. The followers of this school do not accept the intervention of the state in economy; they hold the view that individuals have liberty. (İbrahim Fadıl, İktisat, İst. 1928, p. 43–45). They developed the idea of the natural-divine law of Physiocrats, who emerged as a reaction to Mercantilists, and claimed that economy would be governed by an invisible hand with the liberation of individuals. The phrase “Laissez faire, Laissez passer” (Let do and let pass) coined by Gournay, who is a Physiocrat, became a motto of the school of liberalism. (Feridun Ergin, Ak İktisat Ans. S. 355) Naturally, man reached this idea of liberalism in economy after some economic stages, after experiencing the harms of prohibition, restriction and intervention.
Liberalism is also called individualism because it believes that humanity can rise materially and spiritually through the effort of the individual. (İbrahim Fadıl, İktisat, p. 45) In fact, modern economy came into being as a community economy or in other words as a state economy. When feudalities started to collapse gradually after the 15th century and bigger central states started to be founded, economy started to establish connections with politics and the state. As a matter of fact, a French economist called Antoine de Monchretien combined the words politics and economy for the first time and published a book called“Economie Politique” in 1615 (Feridun Ergin, İktisat, p. 1; Ak İktisat Ans. p. 685; İbrahim Fadıl, İktisat, p. 40) The west was so socialist and statist at first that Adam Smith, who is regarded to have founded individualism and liberalism, named his famous book “The Wealth of Nations”. (See Adam Smith, Milletlerin Zenginliği, trans: Haldun Derin, Milli Eğitim Basımevi, İst. 1948
After giving information about the school of Physiocracy, we mentioned the conditions and ideas that prepared and evaluated it in terms of Islamic law in our book called “İslam Hukuku Açısından Serbest Piyasa Ekonomisi (Free Market Economy from the Viewpoint of Islamic Law)”. Physiocrats are the first economists who stated that there was a natural-divine order in the universe and that economy functioned based on the laws of this natural order.Therefore, it is possible to say that Physiocrats have thoughts that are in compliance with Islam "because Islam is a religion that is inherent in man and that has combined the laws of nature. Nature is the law of creation of Allah and Islam is His executive law. Therefore, there is no decree that is contrary to reason and nature in Islam.” (Ahmet Hamdi Akseki, İslam p. LXX (70))
Elmalılı states the following regarding the issue: Indeed, since Allah is the Lord of the realms, His laws are current in the whole universe. Laws are sometimes named after the being that imposes them and sometimes after the topics that they are related to. For instance, Solon laws are named after the person who imposed them; real estate law is named after the topic. Nature is under the decree of the laws imposed by Allah; therefore, these laws are named "Laws of Nature". However, it is more appropriate to call them laws of Allah and divine system since Allah has imposed all of them… Therefore, what man needs to do is not to impose laws in science and religion but to search and find the laws of Allah and to reveal them. It is not right to say Archimedes imposed the law of hydrostatics, Newton imposed the law of gravity and Aristotle imposed the law of non-contradiction; it is not right to say Abu Hanifa imposed the laws of comparison and fiqh, either. If those laws had been imposed by them, they would have been wrong. They are right because they are the laws of Allah that were discovered. Therefore, scientists and scholars are not those who invent but discover and reveal. (Elmalılı, Hak Dini, I, 126)
In the Islamic economy there is no contradiction among the principles of production, consumption, exchange, circulation and tax; there is no disharmony between economy and religion and between ethics and law, either. On the other hand, there is no contradiction or disharmony but harmony between the lifestyle Islam advises to man and the community, and the globe and the universe. However, the words and terms of other systems cannot express Islamic understanding. For instance, when the sentence "there is free market economy in Islam" is uttered, it does not mean the free market economy of liberalists and the Western understanding. We regard the understanding of liberalism by the West as exceptional. It is seen clearly especially in their art, poetry and literature. However, there is no exceptionality in Islam and the economic life suggested by it because the following is stated in a verse: “Does Man think that he will be left uncontrolled, (without purpose)?” (al-Qiyama 75/ 36) Normal life and healthy environment function based on laws and rules; similarly, even abnormal life and ill community function based on laws and rules. That is, there is no irregularity in the realm of beings; even ill people and ill communities function based on rules. It is Allah who imposed these laws and rules on nature, and social and economic life. And we apply these laws and rules imposed by Allah through religion and science on economic events, that is, through the method that Allah wants. Therefore, Islam does not regard only declaration of intent sufficient in economic events like in social events; in addition, it lays it as a condition for the parties to show consent. We call doctor-patient, teacher-student, state-citizen and husband-wife relationships social events. We regard declaration of intent sufficient to use those rights. Ibn Abidin states the following regarding the issue: "the contract of marriage, divorce and freeing a slave are valid with force and without the necessity of consent. If a man divorces his wife jokingly, his wife is regarded to have been divorced legally but not religiously.” (Ibn Abidin, II, 421; cf: Kasani, V, 176). The transactions of people that are based on goods, effort and money are called economic events; after declaration of intent, that is, offer and acceptance, consent is also necessary. Therefore, it is necessary for a person to show consent to all kinds of economic transactions that he produces through his effort, buys and sells. Can it be said that workers show consent to the collective agreements signed by trade union leaders on behalf of them (!) today?
The following principles are necessary for the free market to form spontaneously in the Islamic economy:
1- It is necessary not to devour wealth of men unjustly and not to buy and sell things through an exchange contract and trade agreement based on mutual consent. We explained the verse regarding the issue above.
2- The prohibition of interest and profiteering is one of the principles imposed by Islam. As Islamic jurists put it, interest is something extra that has no equivalent. The goods and money in economy are like the blood in the human body; so, it is necessary for them to circulate continuously. Therefore, the accretion or build-up taking place somewhere as extra will swell like cancer in the body and cause illnesses and crises. We wrote the verse regarding the issue above.
Profiteering means to stock goods that people need with the expectation of a rise in their prices. (Kamil Miras, Tajrid, VI, 448). There are some hadiths regarding the issue. For instance, Muadh b. Jabal says: I asked the Messenger of Allah about what profiteering included. He said, “A person rejoices when he hears that prices are low and becomes sorry when prices rise. As for the profiteer, he is an evil man; he becomes sorry if Allah decreases prices and rejoices when He increases prices. (Haythami, Majmau’z Zawaid, IV, 101; Mansur Ali Nasif, at-Taj, Buyu, 2) It is reported from Mamar and Abu Hurayra that the Prophet (pbuh) said: “A person who stocks goods expecting that prices will increase in an Islamic land commits a mistake.” (Haythami, ibid IV, 101 and at-Taj, Buyu, 2). There are also hadiths that Allah will throw profiteers into Hell. (see Haythami, ibid IV, 101)
3- The prohibition of setting an official, fixed price: In Islamic economy, fixed prices, ceiling prices and base prices cannot be set. It is haram to set fixed prices according to the view of the majority of the scholars. However, Imam Malik says it is permissible. Nevertheless, the purpose of setting a fixed price is to prevent the sovereignty of a profiteer who increases prices in the market by determining a reasonable price. (Mansur Ali Nasif, Taj, II, 204, footnote: 4)
Hz. Prophet (pbuh) did not regard setting fixed prices by the state as a measure of preventing inflation. (see Fazlurrahman, İslamiyet ve İktiadi Adalet meselesi, (trans: Yusuf Ziya Kavakçı) s. 42). Ömer Nusuhi Bilmen says the state should not set fixed prices and determine the amounts and prices of goods. There is some wisdom behind every act of Allah. If prices sometimes fall and sometimes rise naturally, it should be regarded as normal. (Ö.N.Bilmen, Istılahat-ı Fıkhiyye, VI, 125) On the other hand, setting fixed prices can make people hide their goods in commercial life. Concealing goods cause prices to increase. Increase in prices will harm the poor. (Sayyid Sabiq, Fiqhu’s Sunnah, III, 105)
It is reported from Anas and Muhammad b. Abdurrahman that once prices increased during the time of the Messenger of Allah (pbuh). People went to the Prophet and asked him to set the prices. Thereupon, the Messenger of Allah said:
“It is Allah who determines prices, causes abundance or scarcity and gives sustenance. I swear by Allah that I can neither give you anything nor prohibit you from anything of my own accord. I am only a treasurer; I do what I am commanded to do; it is Allah who gives. I want to attain Allah without violating the rights of anybody relating to their property, lives and blood.” (Abu Yusuf, Kitab-ul Kharaj, p. 91; Abu Dawud, III, 272; Tirmidhi, III, 605; Ibn Majah, II, 741)
4- One of the acts prohibited in the Islamic economy is bidding up the price in order to deceive buyers. It causes inflation, bringing up a situation in favor of the seller and against the buyer. Hz. Prophet (pbuh) prohibited people from najash. (Bukhari, III, 91; Ibn Majah, II, 733; Tajrid, VI, 457). Najash means to pretend to be a buyer and bid up the price of something though he does not want to buy it in order to encourage others to buy it and to increase its price. (Marghinani, al-Hidaya, III, 40; Kasani, V, 233; Ibn Qudama, al-Mughni, IV, 160; Molla Khusraw, Durar, II, 177) Some scholars regarded najash, which brings about unlawful profits, strictly abominable (makruh tahrimi) (Muhammad b. Abdurrahman ad-Dimashqi, Rahmat-ul Ummah, II, 2); others state that it is not halal (permissible). (See Ibn-ul Humam, Fath-ul Qadir, V, 240)
5- There is no evidence in the Quran and Sunnah determining the rate of profit. In fact, the rate of profit is situated in the price that forms at the point where supply and demand meet. It is not appropriate for a system that adopts free market to set prices and to determine a rate of profit. Therefore, there is no figure regarding profit in verses and hadiths. It is natural for the prices to increase as demand increases but it should not be thought that exorbitant rates of profits are legitimate in Islam. The ethical level of the society, supply demand equilibrium, difference of place and time and many other factors affect the rate of profit. Some scholars say the profit is at the rate of half of the price (Ö.N.Bilmen, Hukuku İslamiyye, VI, 120); some scholars cite the rate of 1/ 2 and 1/3 for setting prices. (see Celal, Yeniçeri, Yıllık, p. 212) When the profit in murabaha transaction is as much as the capital, Abu Hanifa does not regard it permissible to obtain profit again when selling it.
There is no determination of the rate of profit in hadiths but there are some examples that give us some ideas about the issue. For instance, Hz. Prophet (pbuh) gave Hakim b. Hizam 1 dinar to buy him an animal to be sacrificed. Hakim bought a sheep for 1 dinar and then sold it for 2 dinars. Then, he bought another sheep for 1 dinar gave the sheep to the Prophet together with the other 1 dinar. Hz. Prophet gave the 1 dinar to the poor as sadaqa and prayed for Hakim to have good business. (Abu Dawud, III, 256; No: 3386) The same incident took place between Hz. Prophet and Urwa al-Bariqi. (see Abu Dawud, III, 256; No: 3384) In both hadiths, we see that something that cost 1 dinar was sold for 2 dinars with a profit of one hundred percent, that is, with a profit as much as the capital.
There is another hadith regarding the relationship between the capital and the rate of profit. Hz. Prophet (pbuh) said, "The profit of goods that are not compensated and undertaken is not halal. (Abu Dawud, III, 283, No: 3503; Ibn Majah, II, 737, No: 2187; Imam Shafii, al-Umm, III, 70; Sarakhsi, Mabsut, XIV, 36). What is meant by the profit that is not compensated and undertaken is probably the profit that has no profit-loss balance, that is, that has no risk. Sarakhsi (Sarakhsi, XV, 130–131; cf. Kasani, Badayi, IV, 206; Ibn-ul Humam, Fath-ul Qadir, V, 215, 265) explains it through the following example: A person hires something for 100 lira and then he rents it to a friend or another person without making any expenses or additions for 120 lira; this 20 lira is profit that is not compensated and undertaken; that is, it involves no risk. (see Kasani, IV, 206; Shawkani, Nayl-ul Awtar, V, 203 ff)
Since the capital bears the risk and if we take the balance of capital and risk into consideration, we can say under the light of the hadiths above and the ijtihad of Abu Hanifa that the rate of profit up to the amount of the capital is permissible in the Islamic economy. However, we do not mean that there is a rate and limit of profit in the Islamic economy.
As we have pointed out above, profit is something with variable functions. It can be low or high depending upon time, place and conditions. However, in our opinion, if the profit obtained from something under normal conditions is more than the capital of that thing, the extra amount, that is the part of the profit over one hundred percent is not legitimate.
6- A lot of importance is given to market in the Islamic economy. Hz. Prophet (pbuh) stated the following about not selling goods on the way before arriving at the market: “Do not interrupt the commercial goods on the way to the market…” Islamic scholars looked for the reasons why Hz. Prophet prohibited interrupting commercial goods on the way and made explanations regarding the owner of the goods, the sellers at the market and the people of the region.
The owner of the goods might sell his goods cheaply before he arrives at the market since he does not know about the prices and he might suffer a loss. Therefore, if he comes to the marketplace later, sees that the prices are high and understands that he has been deceived, he can demand his goods back and annul the transaction. The sellers at the market who cannot go out of the city to buy the goods before they arrive at the market will have to buy those goods from those who interrupt; thus, they will buy them at a higher price and they will suffer a loss. Those who interrupt before the goods arrive at the market will sell them at higher prices and they will make the people of the region suffer a loss. For, if the producers had brought the goods to the market, they would have sold the goods themselves directly without middlemen and the prices would not have been so high. (Imam Malik, Muwatta, IV, 307; Shafii, al-Umm, III, 93; Kasani, V, 232; Marghinani, IIı, 40; Ibn Taymiya, al-Hisba, p. 11; Ibn Qayyim al-Jawziyya, at-Turuq-ul Hikamiyya, p. 283; Ibn Humam, V, 239; M. Khusraw, II, 177; Ibn Nujaym, VI, 108; Shah Waliyyullah, Hujjatullah, II, 110; Sayyid Sabiq, Fiqh-us Sunnah, III, 11)
7- There is another hadith that helps free market. Hz. Prophet said, “No city dweller should sell the goods of a villager on behalf of him.” (Bukhari, III, 94; Muslim, V, 17; Abu Dawud, III, 269) Then, city dwellers should not sell the goods of villagers and strangers on behalf of them. When Ibn Abbas was asked about the meaning of this hadith, he explained it as follows: “Do not act as middlemen for them.”
We want to make the following explanation based on Shafii: Strangers bring their goods to the market without knowing about the market. The people living in that region need the goods. However, the owners of the goods have some difficulty in finding places, carrying their goods, etc. People want to buy them because they need them. Therefore, the owners want to sell them immediately. Thus, the goods are sold after the market prices are found out, with an appropriate price and profit based on the equilibrium of supply and demand. Therefore, both the seller and the buyer will be pleased.
If we suppose that the city dwellers sell those goods, the middlemen will buy them at a low price and then wait for the market prices to rise and to sell them with higher profits. Thus, they will harm both the owners of the goods by preventing them from selling their goods at a reasonable price and the people of the region by stocking the goods and then selling them at higher prices. In that case, both parties will be harmed; therefore, the Prophet prohibited such a transaction. (Shafii, al-Umm, III, 92; Ibn Qudama, IV, 162; Ibn Qayyim, p. 308)
8- One of the kinds of dealing that the Prophet (pbuh) prohibited is to offer to pay a higher price to goods that two parties have agreed to buy and sell. The Messenger of Allah said, “Do not try to buy something that two parties have agreed on. When your brother is about to buy something, do not try to buy it by offering a higher price.” (Bukhari, III, 90; Muslim, V, 12; Abu Dawud, III, 269)
According to this hadith, it is haram to intervene in a deal that parties have agreed on and to annul it. It is haram to offer a seller a higher price for something that he has agreed to sell to someone else and to ask him to give up the deal. (Marghinani, III, 90; Molla Khusraw, II, 177; Ibn Qudama, IV, 161; al-Ayni, Umdat-ul Qari, XI, 257; Ibn Humam, V, 239; Ibn Nujaym; al-Bahr, VI, 107; ash-Shawkani, V, 189)
9- It is forbidden to sell goods before one receives them because it will cause another price apart from the market price. Hz. Prophet (pbuh) stated the following regarding the issue: “When you buy food, do not sell it before you receive it.” (Ibn Majah, II, 749; No: 2226) There are also explanations reported from Ibn Umar. During the time of the Prophet, people used to buy grains from the merchants who owned caravans before receiving them. Then, the Messenger of Allah sent an official to those merchants. He prohibited them from selling the grains before they brought to the market. Ibn Umar also said that the Prophet prohibited selling the grains that were bought until they were weighed and received. (Bukhari, III, 89; Muslim, V, 23; No: 38; Nasai, VII, 287; Tajrid, VI, 437, No: 986) Ibn Umar added:
“I saw some profiteers and hoarders during the time of the Prophet. They bought food without weighing and receiving them and wanted to sell them to others; they were beaten before they transported these goods and were prohibited from selling the goods before they received them.” (Tajrid, VI, 446, No: 991) These hadiths were explained as follows: If a merchant who sells grains sells them before he arrives at the market, he will cause the prices to rise and hence harm people; therefore, it is prohibited. (see Tajrid, VI, 437, No: 986)
Mujazafa, that is, selling things without weighing and measuring, in other words, to buy things in bulk by bargaining, is regarded as legitimate and halal. However, it is forbidden to sell goods that were bought like that before receiving and transporting them because it is a kind of deal that causes profiteering. If goods that are bought but that are not received are allowed to be sold again, some goods that are stocked in a barn will rise in price without moving and unnecessarily by being sold again and again. It is pointed out by Ibn Umar that it is stated in the hadith that it is necessary to receive the grains before selling them again in order to prevent the rise in prices: The owners of the goods that practice mujazafa are beaten until they load the grains on animals and take them to the market; it is stated that transporting the goods from the place where they are stocked means receiving and delivering them, which is demanded by the Shari'ah in order to prevent prices from rising. This is the only purpose demanded by the hadith. (Tajrid, VI, 447, 448)
10- A helpless person is prohibited from buying and selling because the price will not be in compliance with the free market and it will be a deal made because of an obligation. It is stated in the resources that this kind of buying and selling, which is called bay' al-muztar (sale or purchase that is forced) is haram. It is stated in a hadith reported by Hz. Ali that Hz. Prophet prohibited a helpless person from buying and selling. (Abu Dawud, Sharh Khattabi, III, 676)
When a seller sells his goods to a hopeless person, he needs to sell it at the usual price without increasing; otherwise, this purchase will be invalid. (Ibn Abidin, IV, 110) A person who finds something that he needs only in one place, he needs to buy it at the usual price. The seller has to sell it at the usual price especially if it is food or clothes that one has to buy. It is a religious duty for him to sell it like that. (Ibn Taymiya, Fatawa, XXIX, 361)
Now, I want to quote some principles from my book, which was prepared as my doctoral thesis, called “Kur'an-ı Kerim'e Göre İslam Ekonomisinin Esasları (the Principles of Islamic Economy According to the Quran)”. The numbers of the chapters and verses are given in parentheses. It is necessary to refer to the part called Evidence and Explanations of the resource for the interpretation of the verses.
People are created and educated by one single Lord. (2/139) People cannot establish a system on their own. They are to search, learn and apply the natural system. (1/7) Man is an organ of the state; on the other hand, he is an independent being that maintains his own personality. (2/ 30) Nobody can be deprived of personality. (2/ 30) Individuals face the state directly without using any intermediaries. (1/ 5)
Economic life is a natural life. Artificial interventions to economic life will harm it. (28/ 78) The purpose of all economic activities is to increase the population and the goods. (2/ 155) Economic development is measured by the amount of the goods and population. (9/ 69) Economic behavior forms in a system as a result of it. Good behavior is not enough; a good system is necessary. (2/188) Human mind can find a system that will discriminate between the good and the bad, and the ruined goods and sound goods. (5/100) It is the duty of the state to establish the system. (1/1)
Islam has an economic system. (2/ 1–5). Free enterprise and free trade are essential in the Islamic economic system. (2/ 286) Free enterprise and free competition systems are a natural result of economic evolution and selection. (3/ 140) In the Islamic economy, the world and the hereafter, matter and spirituality are given the same importance. One of them cannot be sacrificed for the other. (24/ 37) No decree is missing in the Quran. (6/ 38) Many events are narrated through analogy in the Quran. An issue is narrated directly or through a similar issue. (6/ 38) Islamic system does not comply with interest. (2/ 278) Zakah (alms)-tax is the opposite of interest. (2/ 280) Interest system and interest free zakah system are two systems that are opposite of each other. (30/ 39) Some parts of a system and order cannot be used separately and the other parts are not left out; they are considered as a whole. (2/ 208)
The basic production is the green plants that store solar energy. (6/ 99) The basic production is soil products. (6/ 99) The production system is based on the circulation of the waters that fall down onto the earth from the sky. (14/ 32) Rivers play a role in production. (14/ 32) The earth and the sky, the air and the sun, the soil and the water take part in production together. (14/ 32) The sun, the moon, days and nights are factors of production; and they produce freely for people in nature. (14/ 33) Production and hence consumption are social (collective). Everybody should act accordingly. (1/5) Production, consumption and exchange acts are social events. (2/ 274)
The Islamic state does not differentiate between Muslim and non-Muslim citizens regarding worldly affairs. (3/110) Property belongs to Allah; individuals have the right and authority to use property on behalf of Allah. (2/ 180) The state is not a society or commercial firm established by the rich only; so, the poor also benefit from the state revenues. (59/ 7) Illegitimate gains, concealed goods and haram goods are not under the guarantee of the state. (2/ 270) Transgression into personal property means transgression into state property. The state is in charge of protecting all property.(3/ 26) The president represents the state. (4/ 59) The duty of the individuals is to establish the government by paying allegiance to it. It is not possible to govern without a government. (3/ 104) Governments apply the decrees that are decided by consensus. (4/ 59) Governments are authorized to and have to enjoin and apply what is good. Governments cannot set prices. However, they can call to prices that form freely. (3/ 104)
Governments have no right and authority to collect extra taxes (2/ 272) to increase tax rates (3/ 161) and to impose new taxes. (3/ 161) One should not envy those who have property and who hold the power. (4/ 53) The property and the government are delivered to the ones who deserve them more. (4/ 58)
Inheritance is a legitimate right in the Islamic economy. (4/7) The system of inheritance established by men is different from the system that Allah orders. The inheritance system of Islam is more beneficial in terms of economy. (4/ 11) The reasons for inheritance are relation, marriage and guardianship. (4/ 8) Adopting a child and being and inheritor through adoption is not possible. An individual cannot be appointed as an inheritor. (4/ 33) The property of a person who has no inheritors is delivered to the treasure. (4/ 8)
Labor means to work for a purpose and to spend energy. (2/ 204) Labor is the power and energy that make man run, work and move. Labor is benefit and it belongs to its doer. The source of property is labor. (53/ 39) Labor is not property; therefore, supply and demand fluctuations are not applied in labor in order to maintain the balance of wages as it is the case regarding property. (2/ 148) The labors of people are different from one another. (92/ 4) The difference of strength and ability among people enables the exchange of labor (employment) to be realized. (43/ 32) When labors are different, it is certain that there will be division of labor in business life. (92/ 4) The degrees of the qualified and unqualified labor are different from each other. (6/ 132)
The first fund in trade, loan and other issues is called capital. (2/ 279) In Islamic economy, capital is subject to different laws; therefore, it is possible to divide capital into two as fixed capital and circulating capital. (2/267) It is wrong to demand equality for people regarding property and capital, to claim that people are equal and to regard a slave and his master equal. (30/ 28) Zakah tax limits maximum capitals; thus, excessive accumulation of capital is prevented and capital owners are forced to invest. (2/ 276) There is no equal distribution and limitation of the wealth in the community. (3/ 35) When credit is given to the one who works, there will be no abuse of capital. (2/ 245) In the partnership of mudaraba, the capital owner suffers the loss. (2/ 267)
Goods are a means that Allah created for men to meet their need in the world. (2/ 155) Goods enable man to satisfy their needs, to maintain their lives, to survive and to be sovereign in the world. Goods are things that man's nature want and that can be stored for future needs. In other words, goods are things that can be bought and sold, that have value and that need to be compensated by the one who destroys them. Accordingly, things like sunlight, solar heat and air are very useful but they are not regarded as goods because they cannot be stored. However, gases compressed in tubes are regarded as goods because they are stored somewhere. (4/5) What man earns by working, what he obtains and uses are called goods. Tax is levied on things like that (for instance, asphalt, petroleum, stones, melting and non-melting metals, etc) (2/ 272) Goods are international and they circulate among nations. It is necessary to ensure the circulation of goods and money among all classes. Goods are more useful for those who need them most. It is harmful when goods and money accumulate in the hands of the rich only. (59/ 7)
Right of property for an individual means to have the right and authority to own goods and things regarded as goods and to use them independently for his own interest. (3/ 26) Property is a necessity and quality of being a human. (9/ 34) Everything is for man; there is no other being that deserves to own property. (2/ 29) System of property is a system of the state and it is mercy for people. (4/ 29) System of property is obligatory for individuals and communities. An individual has to obey the system of property as long as he lives in the community. (2/ 180) Right of property is completely subject to the legal system. Intervention in property is never permissible. Setting fixed prices, allocation of foreign exchange and special loans are never in question. Governments cannot intervene in economy except taxes allocated to them. (3/ 26) Individuals have limited right of property. (3/ 26) There is no absolute property but conditional property in the Islamic economy. (24/ 33) Equality in property and consumption is not in question. (16/ 71) It is wrong to demand equality for people regarding property and capital. (30/ 28)
In the Islamic economy system, free enterprise and free trade are essential. (2/ 286) Everybody can choose his own job and knows what and how to produce. (2/ 148) Works are carried out based on private property and free enterprise, jointly and in a chain. (2/ 110) In working life, division of labor is essential. (17/ 84)
The wage is the return for the labor that is used. Rent is the return for the thing or service used. (28/ 27) It is legitimate to hire a laborer for a certain wage. (43/ 32) The balance between profit and loss, wage and labor, rent and place are stable. They form a balance between them and among others. (2/ 275) Wage is paid to the laborer not to make him survive but it is paid to make him have some capital and for his work. (1/ 5) Wages are arranged based on professional ability, time, knowledge, experience, ability and industriousness. (2/ 282) Wage is paid only if what is done is useful. (65/ 6) A person who has not worked due to any reason does not deserve the wage. (6/ 158) Contract does not ensure wages; wages become payable after the work is done. (65/ 6) The applications of brazen law of wages, natural wages and fund of wages are not fair. (28/ 27).
Profit compensates loss; it is the rise in the value of goods; it is price difference. (2/ 275) The profits gained without any risks are regarded as interest. (2/ 275)
Rent means to sell some benefits in return for a certain amount of money. It is permissible to rent property and goods that do not run out as they are used for a certain amount of money. The laborer is regarded to rent himself by selling his labor. Goods that run out as they are used cannot be rented; for instance, water cannot be rented, a cow cannot be rented for its milk and a tree for its fruit. They are real goods; therefore, they can only be sold. (28/ 27)
Interest means to gain something in return for lending. (2/ 282) Interest is something extra that has no equivalent. Interest increases in time and doubles, triples, etc; interest is divided into two as fadl (interest in excess) and nasia (interest on credit transactions). Interest is haram for all Muslims. (3/ 130) Interest decreases production, prevents factories from operating and makes it stop at a certain point, causing crises. (30/ 39) Interest slows down exchange, restrains circulation and decreases national income. (2/ 276) Those who do not accept the prohibition of interest are regarded to have rebelled against the Islamic state. (2/ 279)
Interest system gnaws and eats into national income. (2/ 275) In fact, when national income increases, the revenues of the state increase, too. (23/ 72) To earn money through illegitimate means and to spend it will decrease national income. (5/ 42) In the interest system, national income will decrease; and in zakah system, national income will increase. (30/ 39)
In the Islamic economy system, the owner of a place receives rent, the owner of circulatory capital receives profit and the laborer receives wages. (2/ 267) The distribution of income is arranged justly in the community. (2/ 134) Added values obtained as a result of production are divided into tax, rent, profit and wages based on the shari'ah (contracts). (3/ 73) The countries that cannot arrange the distribution of income justly cannot develop; they are bound to decline and collapse soon. (2/ 134)
The countries that establish their natural system will be in abundance and welfare. (7/ 58) Worries and troubles are eliminated in the economic system of a community where tax system is arranged properly; welfare economy replaces troubles and worries. (2/ 274) Goodness and welfare are certain; they are eternal peace away from temporary pleasures. (3/ 92) Wealth and welfare, poverty and misery are social. The community advances or progresses as a whole. (2/ 155) Welfare takes place as a result of normal economic acts. (5/ 66) Welfare is an outcome of a historical process. (1/ 7) After the community improves, abundance and welfare will increase. (7/ 95) Individual efforts are not sufficient for salvation, welfare and happiness; social movements and acts are necessary. (3/ 186) Migration brings about abundance and wealth. (4/ 100) Marriage brings about abundance and wealth, too. (24/ 32) The countries that cannot establish the natural system or that spoil it suffer famine and misery. (7/ 95) It is necessary to discriminate between the good and the bad, spoilt and sound goods, and legitimate and illegitimate goods in order to ensure welfare. (5/ 100) When dirty acts like alcoholic drinks, gambling, idols and lotteries are eliminated from the economic system, welfare economy will arise. (5/ 90) Communities that take social security measures and give the rights of social security classes attain welfare. (30/ 38) It is not possible to ensure welfare and peace in a society if the poor are not given proper goods, food and clothes. (3/ 92) If the free trade system without interest introduced by Islam is applied fully, the world will be a place of abundance like Paradise. To abandon the free trade system without interest will bring about misery. (5/ 66) Communities that free what is prohibited and that prohibit what is free cannot attain welfare and happiness. (16/ 116) It is not possible for a community where neighbors do not help one another at all to attain welfare and happiness. (107/ 1–7)
Expenditure for pleasure is called luxury. It is permissible to use luxurious goods (goods that are used for pleasure not because they are necessary) under certain conditions. Luxury should not prevent a person from charity and helping others, should not push that person to do illegitimate things regarding acquisition, use and exchange, should not lead him to belieflessness and insecurity and should not prevent him from belief and doing good deeds. (5/ 93)
Extravagance means to transgress limits and do extreme things regarding an issue. (25/ 67) In its general sense, extravagance means totransgress limits and to go beyond moderation. Extravagance can be in two ways: doing something too much (ifrat) and doing something too little (tafrit). That is, doing something too little is also extravagance. (4/6) Luxury and the demands for show off consumption are not regarded as needs. The state does not pay for these expenses. (2/ 215) The community has the authority to check whether the goods are spent in a balanced way and whether they are wasted or not. (6/ 141) Spending money on adornment and beauty products is permissible as long as one does not waste. (7/ 32) In consumption, to show off, luxury and wasteful spendings are haram and sinful but they are not forbidden. (2/ 215) Believers avoid extravagance and show off in consumption. They compete to do charity not to waste and show off. (3/ 14)
Useful things that are appropriate for the body have been rendered halal and permissible; inappropriate and harmful things for the body have been rendered haram and forbidden. (2/ 175) Food that is useful for the body and can be digested is halal and food that is harmful for the body and cannot be digested is not halal. (5/ 88) Only Allah has the right to render something halal and haram. Nobody can decide on his own that something is halal or haram. (2/ 275) It is wrong to regard something that is legitimate as illegitimate. It is regarded as oppression and cruelty to prohibit something that is legitimate. (5/ 87) What is haram is not to use goods and labor where necessary. (10/ 59)
The transactions that increase the marginal utility and potential of the values like goods, labor, money and credit in the community are legitimate; and those which decrease them are illegitimate. Illegitimate ways of obtaining money like bribery, telling lies, interest, gambling, theft, abuse, deceiving, misleading, eye wash, profiteering and influence peddling part goods from their owners like the bark is parted from the trunk and decrease marginal utility. (5/ 42)
In the Islamic economy, the insurance system of today is replaced by the institution of infaq (charity). In the Islamic economy, the life of everybody is insured. Besides, there is no institution that insures in return for premiums. The Islamic system itself is insurance. There is no need for a simple insurance company at all. In the Islamic economy, the collection and distribution of taxes, that is, the budget itself insures the lives of all citizens. Thanks to the property understanding, provincial organization and administration of Islam, the lives of all animals and plants are insured. The reason for infaq is marriage, relatives and property. Nafaqa means to meet the needs for food, drink, clothes and residence. (2/ 215) The state has to ensure the basic needs for everybody. (6/ 164) The insurance for illnesses and disabilities is replaced by the institution of relatives in the Islamic system. (2/ 83) Nafaqa is not some help given by relatives but the use of the share of the state in the profit by the individual. (6/ 164) A child is born, lives and dies in the family and community. (4/1) When the child is born, the duty to take care of him belongs to the father in terms of nafaqa (sustenance). (65/ 6) The relatives that are not allowed to marry one another or the relatives that can be inheritors for one another have to look after one another. (17/ 26)
Social politics or social security, public education, the system of working and living are all arranged in the system of the state. (2/ 83) Financial help for a person is collected in the family first, and then in the street he lives, district, city, region and then in the state and in the world. (4/ 36) It is necessary to give away the best possessions in order to be a really good person and attain goodness. (3/ 92) The goods and sacrificed animals allocated to the community ensure social security. (5/ 97) The state helps the families with little children, the child and the mother. (6/ 151) The state helps those who are in financial trouble and pays their debt. (2/ 280) Everybody has to help the needy bodily and give away some of his property. (2/ 270) Apart from the obligatory taxes to be given to the state, it is necessary to establish charity organizations for voluntary helps. Economic charity organizations are established along with social charity organizations. (2/ 177)
The financial aid to the old people, ill people, children and the poor are gratuitous. (2/ 83) Nobody can rub it in after helping somebody or doing him a favor. The reasons for the obligation to help other individuals are being a relative, living nearby, working in the same place, neighborhood and visiting. (4/ 36) Parents, relatives, orphans, poor people and travelers are the basic institutions of social balance. (2/ 215) The rights of the poor are given to them from the Treasury. (17/ 26) The countries that take social security measures attain welfare. (30/ 38)
Sadaqa (tax) is the tax that taxpayers pay from their property for the sake of Allah to the state to be given to the needy. Sadaqa is the right of the poor and the needy; it is not a present, charity or donation given to them. Sadaqa given to the poor and the needy are like the salary and wages paid to officials and laborers. A poor person is the one whose annual income is less than his annual expenditure. A needy is a person who has no capital and who has the right to receive help for his capital. (9/ 60) A poor person is the one that cannot work and a needy person is the one that has no money. The poor are given money from the Treasury to maintain their living and the needy are given money as capital. (2/ 83) Relatives (dhul-qurba) are the people who undertake to look after their weak relatives in their homes. Those who look after the ill and the old people are regarded in this group. (8/ 41) The relatives, the needy, the travelers etc are given their rights directly by the Treasury. (17/ 26)
Begging is regarded as something bad. However, it is permissible for helpless people who cannot find any other things to do to survive. It is a duty close to fard to help a beggar who is needy and helpless. The beggar should not be hurt or offended; even if he is not given anything, he should not be chased away or rebuked. If he insists on begging though he is not needy, he can be rebuked. (93/ 9-10)
Questions on Islam
- What should economic systems, principles and basic rules be like according to Islam?
- Is share market permissible in Islam?
- There are so many banks that claim to be "Islamic", that is "Interest Free" banking. Could you explain please which banks are preferable?
- What is Interest and why is it Forbidden?
- Why is Interest Forbidden?
- Future and Options Trading
- What is Islam's view of Business Life and Economic development?
- Is network marketing religiously permissible? Is the bonus that is gained through the web of sale religiously permissible?
- Is it permissible to increase the prices because of the enflation?
- Is share market business and life insurance allowed in Islam?