Islam is not a religion that demands that its followers live in austerity with promises of better things in the afterlife. The concept of acquiring goods through hard work is a basic part of Islam and the Qur’an directs Muslims to take advantage of all the great things that God has placed on Earth for humanity. The concept of private property is well established in the Qur’an, although it is still governed by considerations that are specific to Islam and Muslims.

The first thing Muslims must recognize is that God has created the Universe and everything in it to benefit humanity. That everything that is essential for life, such as water and food, is abundant in quantities sufficient for every human being and that all Muslims must do everything in their power to make sure that no one is left without the means to live in dignity. The Qur’an is also quite clear in the fact that the only valid means to achieving ownership is by hard work and labor. All men are equal under God and there can be no discrimination due to the place of one’s birth, ethnicity, race, or social standing. Each man is judged worthy or unworthy according to his deeds and labor.

The Qur’an is also quite clear in the fact that acquiring and hoarding material things is not the aim of ownership and work. The money and the products should not be the goal in themselves, they should be a path to achieving stability, prosperity, and benefits for oneself and for one’s community. It is important to remember that violent acts should not be a way to achieving ownership and that man is free to own anything that is permitted under Islamic law, that is that is not considered Haram.

It is important to note that there are certain considerations that must be taken into account regarding ownership of a specific good or property. The Qur’an clearly prohibits the hoarding of goods and the monopoly of certain products, especially when this directly or indirectly harms other human beings or the community in general. It is also important to note that ultimately, everything belongs to God and that men are in a sense stewards on Earth. The first consideration of any Muslim is to make sure that people in need have what they need to live in dignity, before the amassing of wealth or owning large amounts of property. This is achieved through various taxes that must be payed on the property one owns, either to the government in an Islamic country or directly to those in need. The principles of justice (specifically that of Ihsan) clearly state that those at a disadvantage (like the poor, the orphans, those that live on the edges of society, the elderly, the crippled, etc.) must be given more in comparison to others that may be relatively better off.

Riba (interest or usury) is fundamentally prohibited both by the Qur’an and the Sunnah. On the concept of interest, there is no doubt or dispute among Muslims that it is absolutely prohibited. In a modern economy in which interest is a fundamental part, this can lead to a necessary change of objectives and perspectives when working within the framework of Islamic economics.

One of the main issues of prohibiting interest is that interest rates are used to regulate demand in modern finance. A particular interest rate is equivalent to a price for a particular investment. With no interest, credit becomes impossible to handle under traditional capitalist models. Islamic economists propose replacing interest rates with profit sharing, selling goods for their cost, or even leasing. All of these alternatives would necessarily make certain speculative practices and artificial interest rate manipulation practices obsolete. However, Islamic economists agree that this would actually be a good thing. One possible alternative consists in the creditor acting as a partner in a contract between an investor and an entrepreneur. Basically, in Islamic economics banks must be able to generate returns through investments in productive projects rather than relying solely on interest rates.

International economics also rely heavily on interest rates. One of the main problems that plague economies, especially those of third-world countries, is the presence of a crippling foreign debt. Corrupt leaders, or incompetent managers can often borrow money without restrictions, and international financial institutions lend it without reservations because interest guarantees a return on capital. In these cases, Muslims find it objectionable that the lenders take absolutely no responsibility in making sure that the projects in which the money will be used are viable and competently managed. This results in a debt that is exploitative and oppressive, and the does not benefit society in any tangible way. It also results in a stunted growth and development due to having to service the crippling debt incurred. Interest-free debt could be easily managed among countries using international financial institutions like the International Monetary Fund.

Islamic economists have argued for the adoption of a profit rate, rather than an interest rate. This can be used to evaluate the quality and return of specific investments and entrepreneurial activities. This concept also lends itself to interacting with countries that do not use an interest-free system. While many economists will argue that a bank interest rate is necessary for currency and monetary policies, Islamic economists have proposed other rates that can be used instead of interest. Countries like Pakistan or Sudan have adopted alternative rates for setting monetary policy, usually set by the government in a way that will benefit the public.

Some people wonder as to why the religion Islam has its own economic system. What the uninitiated do not realize is that Islam is not like many other religions limited only to focusing on the aspects of Man’s relationship with God, rather Islam is a complete system of life – guiding mankind in every sphere of life.

Islamic economics is a much read and much researched topic these days. As the conventional banking is at loggerheads with Islamic values, scholars try to lay the foundation of such banking that will work on the principle of Shariah.

Islamic economics has a firm foundation in the Holy Quran and the Sunnah of the Prophet. Unlike various other economy models, Islamic economics is not existent only in theory; in fact the Prophet himself established it in the Medina. So, in Islam there is theory of the Quran and the practical demonstration of the Prophet to establish a just economic system.

The corner stone of Islamic economics is a system of usury free business interactions. To deal with usury (or commercial interest) is a mighty sin in Islam. Allah says:

“O you who believe! Fear Allah, and give up what remains of your demand for usury, if you are indeed believers. If you do it not, Take notice of war from Allah and His Messenger: But if you turn back, ye shall have your capital sums: Deal not unjustly, and ye shall not be dealt with unjustly.” [Sura Baqara 2:278, 279]

Those unaware often question the concept of no usury in Islamic economic dealings. The explanation is such: Usury or Riba mars the very purpose of Islamic economics. Islamic economics aim for moral development, promoting unity, social justice, fair and equitable distribution, circulation of wealth and providing basic human needs. In an interest based economy, there is no share kept aside for the poor. The rich amass all the wealth while the poor are left with nothing. Since the aim of Islamic economics is to promote economic prosperity for one and all, there can be no system of charging interest. For the Muslims who ignore this code and continue to deal in interest-based economics, there exists a Hadith to shake their very soul of and intimate them to their grave fallacy:

“Riba is of seventy different kinds, the least grave being equivalent to a man marrying (i.e. having sexual intercourse with) his own mother.” (Ibn Majah, Baihaqi).

What is pivotal to Islamic economics is the economic justice – to beidge the gap between different economic classes of a society – and to lay a foundation of a better world. To ensure the same, Islam has made it obligatory upon every Muslim (whose annual income is more than the amount of 85 grams of gold) to give 2.5% of his or her wealth in charity. This is called Zakat in Islam. The Zakat system is the best option not only for the Muslims, in fact for the whole humanity to solve the problem of economic imbalance. What many people don’t realize is that they can easily do away with 2.5% of their earnings and probably will not notice it as such, but it could mean all the difference between life and death to a poorer man. It is heart-warming to note that even in a “cold business matter” such as economics, the religion’s primary aim is to make life better for its people.

Coming to the technical part of Islamic economics, there are different types of financial dealings in Islamic economics. The only difference between these enterprises and conventional ones is that Islam never recognizes any business if it involves interest at any point of dealing.

Here is a list of different financial dealings in Islam:

1) Bai Salam
2) Bai Muajjal
3) Bai Murabaha
4) Sharakat (Partnership)
5) Modarbah
6) Ijara

Let us understand what these terms mean.

1) Bai Salam: Bai in Arabic means business. Bai salam is a spot payment of the price before the goods are delivered. In simple terms, here the buyer pays the price of the goods before goods are handed over to him. However, the quality of the product is to be fully specified before the payment. Also, the payment in this dealing has to be in toto.

2) Bai Muajjal: In Bai Muajjal dealing, the price of an item is payable on a deferred basis either in lump sum or in instalments. It is necessary, however, in this dealing that the price and date of payment must be fixed.

3) Bai Murabaha: This is a financial dealing in which a person purchases a commodity at a certain price, adds to it a sum with determined rate and then sells it to another person. The critical difference between this dealing and riba is that the product must not be currency.

4) Sharakat (Partnership): Here, a fixed amount of capital is set between two or more persons, sharing equally both the loss and profit in the business according to a fixed ratio. The critical point in this type of dealing is that the business must be lawful. However, there are also other conditions like: partners must be sound and mature, mutual agreement between the partners and the rate of profit and loss has to be predetermined.

5) Modarabah: In this type of dealing, one person provides money or capital (known as rabb ul maal) to another person as an investment in a commercial project. The condition in this type of financial dealing is that the rate of profit sharing has to be set beforehand.

6) Ijara: Ijara is an Arabic word which means “wages”. It is to gain profits from a thing. This is the very purpose of Ijara. The thing, in this regard, may be a physical commodity or the service of an individual.

Principle to Practice
Islamic Economics, By Mohammed Ashraf, FCCA [email protected]

Many people always try to fit in the Islamic Economic Principles into the modern economic terminologies instead of adopting a vice versa approach. Without even realizing the fact that these modern terminologies were either originated from the Greeks or research of Muslim economists. In order to remove this misconception, this article is an endeavor to highlight the origin of modern economic concepts and key aspects of Islamic Economics including monetary and fiscal policy from principles to practice.

Basics of Monetary Policy

Conventional monetary policy can be traced back to late 19th century when it is used to maintain gold standard and it’s most modern form is known as gold bullion standard [GBS]. GBS is a system in which gold coins do not circulate, but in which the authorities have agreed to sell gold bullion on demand at a fixed price in exchange for circulating money. Until 1971 most monies of the world were backed by gold. Surprisingly, the current value of paper or electronic money are not backed by gold but can be adjusted by the creators of money.

Monetary policy attempts to stabilize the economy by controlling the interest rates and spending by restricting the governmental borrowings. The monetary policy is a big impediment to free market economy because government controls the economy through monetary policy which is not possible in a gold environment. This is exactly what happened in so called free market capitalist economy in 1931 when gold replacement of currencies were stopped by banks.

With the passage of time, just to control the so called free economy through monetary policy, a layer upon layer over currencies were introduced, that is, initially currency was introduced then undermining currency positions were covered up through book adjustments and now through the concept of plastic money.

Monetary Policy in Islam

The prime concept of free economy is already present in Islamic Economic Principles [IEP]. IEP are strictly against the concentration of wealth and prohibits through the one and only evil – The Riba [Interest].

In contrast to conventional monetary policy, IEP does not suffer from the evils of interest rates, Seignorage (the benefit from printing money) and borrowing money from the population through bills etc. As the concept of interest is absent in IEP, hence, the concept of monetary policy in IEP is restricted to maintaining gold standard, that is, for what it was initially developed.

Gold Standard is based on Islamic principles. Islam considers commodities with intrinsic value as currency. Following are some examples of commodities used as currency: Gold, Silver, Rice, Dates, Wheat, Barley and Salt. Price of a commodity is set by the market itself without any government intervention.

The concept of money was prevalent even prior to Last Prophet PBUH, whereby 1 Dinar [Gold] is equal to 10 Dirhams [Silver]. Even today, silver has a defined parity with gold. The Goldsmith used to put there stamps on Dinar and Dirham to prove there authenticity.

In most of the historical accounts, it states that among the Rashideen caliphs, Syeddana Uthman ibn Affan RA was first to struck the coins, some accounts however states that Syeddana Umar RA was first to do so. When Persia was conquered three types of coins were current in the conquered territories, namely Baghli of 8 dang; Tabari of 4 dang; and Maghribi of 3 dang. Umar (according to some accounts Uthman ) made an innovation and struck an Islamic dirham of 6 dang.

Under IEP, the role of central banks under Islamic Economic Principles would be of International Trade Accounting of a country, review the Shariah Compliant Financial Products and regulate the financial institutions. Consequently, the concept of banking under IEP would be offer Shariah Compliant Financial Products as intermediary, gold vaults for customer and converting currency into gold on account holders’ demand apart from currency handling in transitory phase.

Basics of Fiscal Policy

Fiscal policy is contrasted with monetary policy which attempts to stabilize the economy by controlling interest rates, exchange rates and the supply of money. It uses two main instruments – government spending and taxation. Changes in the level and composition of taxation and government spending can impact on the following variables in the economy:
• Aggregate demand and the level of economic activity;
• The pattern of resource allocation;
• The distribution of income.

Basics of Keynesian Economics

Keynesian economics, called Keynesianism and Keynesian theory, is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.

Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936. The interpretations of Keynes are contentious and several schools of thought claim his legacy.

Keynesian economics advocates a mixed economy — predominantly private sector, but with a significant role of government and public sector — and served as the economic model during the later part of the Great Depression, World War II, and the postwar economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s. The advent of the global financial crisis in 2008 has caused resurgence in Keynesian thought

Fiscal Policy in Islam

During the period of Islamic Governance in Madina, a social transformation took place as a result of changing land ownership giving individuals of any gender, ethnic or religious background the right to buy, sell, mortgage and inherit land. Based on the Quran, signatures were required on contracts for major financial transactions concerning agriculture, industry, commerce and employment. Copies of the contract were usually kept by both parties involved, hence, all we are practicing now is not an alien to Islamic Economic Principles [IEP].

As we all know that IEP is deduced from Quran and Sunnah. Early Islamic Economic Thinkers have developed various economic models that forms the concrete basis of modern economic principles.

Early Islamic Economic Thinkers

Among the earliest Muslim economic thinkers was Abu Yousuf (731-798), a student of Imam Abu Hanifah. Abu Yusuf was chief jurist for Abbasi Caliph Haroon Ar Rasheed, for whom he wrote the Book of Taxation (Kitab al-Kharaj). This book outlined Abu Yusuf’s ideas on taxation, public finance, and agricultural production. He discussed proportional tax on produce instead of fixed taxes on property as being superior as an incentive to bring more land into cultivation. He also advocated forgiving tax policies which favor the producer and a centralized tax administration to reduce corruption. Abu Yusuf favored the use of tax revenues for socioeconomic infrastructure, and included discussion of various types of taxes, including sales tax, death taxes, and import tariffs.

Early discussion of the benefits of division of labor are included in the writings of Qabus, Ghazali, Farabi (873–950), Ibn e Sina (Avicenna) (980–1037), Ibn Miskawayh, Nasir uddin Tusi (1201–74), Ibn e Khaldun (1332–1406), and Asaad Davani (b. 1444). Among them, the discussions included division of labor within households, societies, factories, and among nations.

Many scholars trace the history of economic thought through the Muslim world, which was in a golden age from the 8th to 13th century. A common theme among these scholars was the praise of economic activity and even self-interested accumulation of wealth. Persian philosopher Ibn Miskawayh (b. 1030) notes – “The creditor desires the well-being of the debtor in order to get his money back rather than because of his love for him. The debtor, on the other hand, does not take great interest in the creditor.”

Ibn Taymiyyah

The power of supply and demand was understood to some extent by Ibn Taymiyyah and he illustrates:

“If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down.”

Ibn Taymiyyah also elaborated a circumstantial analysis of the market mechanism, with a theoretical insight unusual in his time. His discourses on the welfare advantages and disadvantages of market regulation and deregulation have an almost contemporary ring to them.

Ghazali

Ghazali (1058–1111) classified economics as one of the sciences connected with religion, along with metaphysics, ethics, and psychology. Authors have noted, however, that this connection has not caused early Muslim economic thought to remain static. Ghazali suggests an early version of price inelasticity of demand for certain goods, and he also discuss equilibrium price.

Ghazali was also noted for his subtle understanding of monetary theory and formulation of another version of Gresham’s law.

Nasir ud din al Tusi

Persian philosopher Nasir ud din al Tusi (1201–1274) presents an early definition of economics (what he calls hekmat-e-madani, the science of city life) in discourse three of his Ethics: – “the study of universal laws governing the public interest (welfare) in so far as they are directed, through cooperation, toward the optimal (perfection).”

Farabi

Farabi notes that each society lacks at least some necessary resources, and thus an optimal society can only be achieved where domestic, regional, and international trade occur, and that such trade can be beneficial to all parties involved.

Ibn Khaldun

In 1964, Joseph Spengler’s “Economic Thought of Islam: Ibn Khaldun” appeared in the journal Comparative Studies in Society and History and took a large step in bringing early Muslim scholars to the attention of the contemporary West. Ibn Khaldūn or Ibn Khaldoun (March 19, 1406 AD/808 AH) was an Arab Tunisian historiographer and historian who is often viewed as one of the forerunners of modern historiography, sociology and economics.

Perhaps the most well–known Islamic scholar who wrote about economics was Ibn Khaldun, who is considered a father of modern economics. Ibn Khaldun wrote on economic and political theory in the introduction, or Muqaddimah (Prolegomena), of his History of the World (Kitab al-Ibar). He discussed what he called asabiyya (social cohesion), which he cited as the cause of some civilizations becoming great and others not. Ibn Khaldun felt that many social forces are cyclic, although there could be sudden sharp turns that break the pattern.

He is best known for his Muqaddimah (known as Prolegomenon in English), which was discovered, evaluated and fully appreciated first by 19th century European scholarship, although it has also had considerable influence on 17th-century Ottoman historians like Hajji Khalifa and Mustafa Naima who relied on his theories to analyze the growth and decline of the Ottoman empire. Later in the 19th century, Western scholars recognized him as one of the greatest philosophers to come out of the Muslim world. The key concepts of Ibn e Khaldun are briefly discussed below:

Asabiyya – Social Cohesion

Ibn Khaldun wrote on economic and political theory in the Muqaddimah, relating his thoughts on asabiyya to the division of labor: the greater the social cohesion, the more complex the division may be, the greater the economic growth.

His theory of asabiyyah has often been compared to modern Keynesian economics, with Ibn Khaldun’s theory clearly containing the concept of the multiplier. A crucial difference, however, is that whereas for John Maynard Keynes it is the middle class’s greater propensity to save that is to blame for economic depression, for Ibn Khaldun it is the governmental propensity to save at times when investment opportunities do not take up the slack which leads to aggregate demand.

Labor Theory of Value

Ibn Khaldun also introduced the labor theory of value. He described labor as the source of value, necessary for all earnings and capital accumulation, obvious in the case of craft. He argued that even if earning “results from something other than a craft, the value of the resulting profit and acquired (capital) must (also) include the value of the labor by which it was obtained. Without labor, it would not have been acquired.”

Population and Economic Growth

Ibn Khaldun noted that growth and development positively stimulate both supply and demand, and that the forces of supply and demand are what determine the prices of goods. He also noted macroeconomic forces of population growth, human capital development, and technological developments effects on development. Ibn Khaldun held that population growth was a function of wealth. He illustrates as follows:

When civilization [population] increases, the available labor again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before. And so it goes with the second and third increase. All the additional labor serves luxury and wealth, in contrast to the original labor that served the necessity of life

Concept of Supply Side Economics

Another modern economic theory anticipated by Ibn Khaldun is supply-side economics. He “argued that high taxes were often a factor in causing empires to collapse, with the result that lower revenue was collected from high rates.” He wrote.

Ibn Khaldun introduced the concept now popularly known as the Laffer Curve, that increases in tax rates initially increase tax revenues, but eventually the increases in tax rates cause a decrease in tax revenues. This occurs as too high a tax rate discourages producers in the economy.

Ibn Khaldun used a dialectic approach to describe the sociological implications of tax choice (which now forms a part of economics theory):

“It should be known that at the beginning of the dynasty, taxation yields large revenue from small assessments. At the end of the dynasty, taxation yields small revenue from large assessments.”

He said that in the early stages of the state, taxes are light in their incidence, but fetch in large revenue…As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow…owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects…and sharply raise the rate of old taxes to increase their yield…But the effects on business of this rise in taxation make themselves felt. For business men are soon discouraged by the comparison of their profits with the burden of their taxes…Consequently production falls off, and with it the yield of taxation.

Concept of Money

Ibn Khaldun understood that money served as a standard of value, a medium of exchange, and a preserver of value.

Concept of Giant Corporate and Multinationals

He mentioned that Businesses owned by responsible and organized merchants shall eventually surpass those owned by wealthy rulers.

Conclusion

It is evident from the above that the majority of modern economic terminologies are deduced from the principles enunciated in Quran and Ahadees. Further, the foundation of modern economics is based on the work of Imam Abu Yousuf, Ibn e Taymiyyah, Ghazali, Farabi etc.

The core difference lies in the concept of interest which is not only absent in Islamic Economic Principles but is absent. The second article of the series will be on Islamic Economic Governance.

There is nothing wrong with commodity murabaha transactions from a sharia perspective. The products are typically used as a pure commodities trading facilitation, as a tool for deposit taking and in some part of the world, particularly the Gulf Cooperation Council (GCC) countries as a financing product.

As a product it is 100 percent sharia compliant under the concept of Tawarruq Bi-ghairi Munazzam and is unanimously accepted by all sharia school of laws. Even the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) says commodity murabaha is not invalid. Whether it is ideal or not is irrelevant as it is sharia compliant. Close resemblance to conventional instruments is also irrelevant.

The issue is not how this product is structured. The real issue arises when commodity murabaha is undertaken by a conventional financial institution that is not governed by any laws that require a 100 percent sharia compliant business operation as it may result with the product being abused.

The abusers normally defend themselves simply by saying the commodity murabaha as a sharia compliant product does not require them to identify how the proceeds from the product are used. They even say the sharia makes it unlawful for identification of proceeds utilisation under a sale of goods as the seller cannot dictate to the buyer how they must use the proceeds. This argument is valid for a straightforward commodities trading activity. However, it cannot hold water when it comes to financing or deposit-taking activities.

The abuse for financing is very limited as it is very difficult to defend financing of a company for non-halal business purposes like the financing of an Indian conventional bank in the Gulf of Cooperation Council (GCC) countries. The deposit taking business is where the product is unfortunately most abused. The leakage into the conventional market has caused the Islamic financial market to suffer.

An example is the lack of liquidity in the primary and secondary sukuk market. The above leakage in the global/GCC market reduces the amount of Islamic funds chasing after sukuk instruments. It also forces Sukuk issuers to rely solely on conventional riba investors (who control the majority of Islamic funds due to commodity murabaha) to buy their sukuk. This resulted in a premium pricing of about 20 basis points over conventional bonds in the global bond market.

In contrast, Malaysia’s sukuk pricing is between 3 to 20 basis points cheaper than conventional bonds. The reason for this is because Islamic funds in Malaysia which cannot leak into the conventional market are forced to chase after Islamic assets thus boosting the demand for sukuk.

With conventional funds also chasing after sukuk the demand for sukuk becomes bigger allowing for greater price tension, thus better pricing. All in all, commodity murabaha as a product is fine under shariah, its abuse is not. It must be regulated by all regulatory bodies that are serious in developing a robust Islamic financial market.

The unique thing about Islamic economics is that the main problem it considers is distribution. Islam makes a difference between luxury items and needs and there is a lesser lack of necessary assets in Islamic economics. Islamic economics believes that the resources that are available in the world are more than enough to meet the basic needs of every human being on the planet.

Not understanding this hides the fact that the real problems faced by millions, like starvation and poverty, are not the result of true scarcity of resources but of faulty man-made systems powered by greed. In fact, they will claim that the resources of the country of Nigeria alone are enough to relieve the needs of every person in the whole continent of Africa, which would happen if they were managed through a system that is not morally or ethically corrupt.

Resources are abundant and ironically are concentrated not in first world countries, but in those of the third world. Islamic economics claims that traditional capitalism is really a predatory system that seeks to deprive the most needy of the existing resources for the personal gain of a few. It does this with the help and support of many institutions that supposedly are there to help the needy.

Defenders of Islamic economics claim that putting into place the rules of Islam in the financial system would stop these problems once and for all. Islam does not limit the individual wealth of each individual, like socialism, so there is always the promise of reward for those willing to work. Islam looks to prevent putting a stop on the production of goods. It seeks to generate abundance by eliminating any systems that prevent products from being produced. Islamic ethics serve the role of preventing abuse and exploitation and, while not limiting the individual wealth of each individual, does limit the ways in that each person can make his money. Islamic economics are against the concept of a free market. Such a lack of restrictions has led to a system in which the largest companies exploit the rest of the world. Under Islamic law resources that are necessary for life and dignity are public property and a personal right of everyone regardless of religion. The Prophet Muhammad stated that every human being has the right to water, green pastures and the fuel to make fire.

Under Islamic law the revenue from natural resources, particularly oil, would not end up in casinos and luxury items but in public projects. The government would use this money derived from public resources to provide for the needs of each person of the public, which would greatly reduce – in fact, make virtually non-existent – the monopoly of multinational corporations.

Islam also has rules that prevent monopolies and the abuse that has been lived recently by the largest companies. It prevents the hoarding of wealth, which must be used, and also eliminates patents and copyrights to prevent monopolies from developing. It also limits the ownership of a business to those that contribute capital or work to that particular business, preventing modern financial takeovers and shady dealings between parent companies and companies designed to fail or go bankrupt; unlike capitalism which allows through the stock market for any person to buy a part of any business without putting work into it. Practices like food dumping by manufacturers to create scarcity and drive up prices would be completely non-existent under Islamic law.

Islam also puts limits on the means that each person can follow to become wealthy. Islam protects individuals and society by not equating the different ways in which a person can earn his money. Islam states that natural resources belong to the public and and prohibits certain goods. For example, under Islam pornography and prostitution are disallowed. Gambling and drinking, and all business that derive from handling these kinds of products that are related to sex or alcohol would also be prohibited.

Under Islamic law currency would be under the gold standard, or it would be linked to a precious resource of some sort. Islamic economics look to back currency with value that is real rather than made up. This eliminates many forms of currency manipulation that have thrived to the detriment of some sectors of society.

The defenders of Islamic economics have said that this system is one of the things that the leaders of the current economies, mainly the United States and China, fear the most. It takes away many of the things that have helped secure their place as first world nations. It nationalizes natural resources, eliminates currency linking and would make the value of the American dollar plummet and breaks up monopolies and the hoarding of wealth. It would also be very unwelcome by the current corrupt leaders of many Arab nations and tribes. They claim that many of the recent attacks on Islam are really based on a fear of Islamic economic principles taking hold around the world.