chapter 3 islamic economic system and conventional

BPMS1013 Theor & Practice of Islamic Business1

Chapter 3: Islamic Economic Sstem and Conventional

Islamic Business School (IBS), UUM

2013


INTRODUCTION Conventional economy is an economy that already

been adopted and applied in an economic society

So, when it linked with the economy the conventional system can be considered as an economic system that has been widely practiced.

Does not have absolute standard but nature flexible and can change according to a conditions in a society.

Islamic economic system is based on the proceedings of Al-Quran and Al- Sunnah.

The Direction of economic systems is to bring Al-Falah concept of success in this world and hereafter.

Prohibition of usury , gambling and many more.


Definition and Concepts of Economics

Definition of Economics

“Study of how societies use scarce resources to produce valuable commodities and distribute them among different people.“

Concepts of Economics Wants

Scale of preference

Opportunity cost

Choice


Capitalism Economic System An economic system based on a free market, open

competition, profit motive and private ownership of the means of production.

Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies also own the firms and are known as capitalists.

Principle of Capitalism Belief in economic freedom

Private property

Individual decisions

Competition or economic rivalry in the market place


Problems of Capitalism

Irrational behaviour

Inequality

Monopoly behaviour

Immobilities

Equity

Unemployment


The command economic system (Communism & socialism)

Meaning /definition

A command economy is where economic decisions are planned out in detail by a central government authority.

Also known as planned economic.

Example: North Korea, Soviet Union , China ,Cuba

The principle of Communism & socialism

Nationalization of property

Economic equality

Regimentation


Advantages and Disadvantages Communism & Socialism

Advantages

Services and goods provided are for the benefit of community and not to make profit

Profit in not the main objective, instead the government aims to provide goods and services to everybody

Less inequality of wealth

Low level of unemployment

No duplication as the allocation of resources is centrally planned

Disadvantages

Lack of innovation

Limited consumer choice

Lack of efficiency

Overstaffing

Neglect of moral education


The Mixed Economic System (Welfare state)

Meaning /definition

Mixed economic is an economy system that combine or mixture of capitalism and socialism

Industries are privately owned and others are publicly owned or nationalized

Malaysia, England, Germany, Sweden

Objective

Stability prices

Economic growth

Full employment

Efficient use of resources to produce goods and services.


Advantages and Disadvantages Mixed Economic

Advantages

Less income inequality

Helping Producers and Consumers

Protecting the Economy

Free Enterprise

Benefits of taxes for social program

Disadvantages

Harming Competition

Bureaucratic Decisions

Unsuccessful regulations may paralyze features of production

Economic problem


Islamic Economic System Definition and philosophy of Islamic economic

system Social Science that studies human behavior in terms of use and management

of natural resources for the benefit of themselves and the community’s interest to seek the blessing of Allah s.w.t. (Hailani Muji Tahir, 1991)

Philosophy of Islamic Economic System

- Concept of faith - Equality and brotherhood of man

- Concept of authority (Rububiyah) - The Day of Judgement

- Concept of property rights - Human as khalifah

- Concept of moral purification (Tazkiyyah)

Principles of Islamic Economic System1) Individual freedom 2) The right to own property

3) Controlled economic inequality 4) Social justice and equality

5) Social Security 6) Widespread distribution of wealth

7) Wealth accumulation uncertain ban 8) The ban on the anti – social institutions

9) Individual and social welfare


Structure and implementation (Government, Private Sector, NGO) 1) Government

- Implemented by the government directly

2) Private sector- Performed by individuals who seek to use the energy, ability and

property in various fields

3) NGO - Implemented by using private property, public @ baitulmal. Implementation islamic economic system Maqasid syari’ah concepts and goals

Three principles :

1) Tauhid

2) Khalifah

3) Justice


Maqasid Sharia

(Purposes of Sharia)

Maintain and preserve religious

Keep and preserve sanit sense

Care and look after their own safety and lives

Protect and safeguard the security of property

Care and maintaining dignity


Conclusions

Generally both forms of business wants to generates profit but the differ between them is Islamic economy look more on human behaviour in manage natural resources for the benefit of themselves and community.

While a freedom in conventional economy will eventually create a different economic system and policy basis.


Q & A

Thanks…

chapter 3 islamic economic system and conventional

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