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An Islamic Economy Example of a traditional economic system Theory of Capitalism Private ownership, hard work, self-interest, and amassing wealth are the principles of the economy. Where does ETHICS come in? Economics in a traditional Arab perspective: No word for economics in classical Arabic. I qtisad: Means moderation and keeping to the golden mean. Islamic Economy is composed of three basic components. Principle of multi-faceted ownership. Economic freedom within a defined limit. The principle of social justice. Ownership in an Islamic Economy No private ownership in Capitalist terms. No socialist ownership in terms that society owns property. “Real ownership belongs to Allah, man holds property in trust, which he is accountable to Him.” – Shari’ah Ownership in an Islamic Economy The acquisition of property as well as its use and disposal are subject to limits set and guided by Allah. The three kind of ownership is determined by principles, needs and circumstances. Economic Freedom in Islam Economic freedom is within the bounds of the spiritual and moral values of Islam. Forbids economic activities that hinder Islam: – – Usury (interest on money) monopolies Self-interest in Islam? Sacred law emphasizes that the success of both the individual and society depends on the balance between spiritual and material needs of man. – “Man may not possess all that he desires or obtain wealth in any way he may choose.” Islamic Principle When the spiritual life is detached from the economic struggle of man, the dominant balance will be upset. Prices are based on tradition – not just supply and demand. Islamic Principles of Self-Interest Hoarding and profiteering is forbidden when there is particular need for particular commodities. It brings the price mechanism into harmony. The state only intervenes if corruption is happening. Islam and Interest on Money Interest is forbidden in Islam. People cannot make money by lending money. BUT investment is encouraged. Invest money in a productive manner, and increase profits. Islam and Social Justice Wealth is to be distributed. Differences in wealth are okay within “reasonable limits.” Zakat: A special tax that is paid as a religious duty and act of worship. Based on values of property. Islam and Social Justice Ijuthad: A court of clerics that using holy texts try to apply the past to today in solving economic problems. Keep man mindful of Allah’s will.