Economic Systems10 min read

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Economic Systems

Economic Systems

 

Among the different economic systems in use in the world at the moment, two systems are the most prominent; one is the capitalist system (Socialism) which is called “Al-Rasmaliyah” in Arabic, and the other is the cooperative system (Capitalism) which is called “‘Al-Shamu’iyah” in Arabic. Is called. “Capitalism” in the world is called “capitalism” and its extreme form of inclusion, whatever is happening or things are being subordinated to the same two systems after the fall of the Soviet Union, if the six ends and with it. The power of this theory has also weakened, but from an economic point of view, it is still very important in the economic theories of the world, so it is also important to understand: Therefore, first of all, the introduction of these two economic systems should be presented. And then, compared to them, the reasons for the differences in Islam will be explained.

 

Capitalism

First of all, let’s go about the capitalist system. What method has this system adopted to solve these four problems, i.e., determining priorities, allocating resources, and distributing income and development? Every man should be left completely free for commercial and industrial activities and be given the liberty to adopt whatever method he thinks fit to earn maximum profit. This will solve the four problems mentioned above of the economy because when everyone is concerned about making maximum profit, everyone will do what society needs in the field of economy. In K, all four problems will automatically settle with a certain balance. Now the question is how to solve all four problems automatically. Will A little detail to answer this question In fact, in this universe, there are many Fatemified –: the following points are worth mentioning for this description: nat: need and demand (Supply) are driven by natural laws that always produce the same results, one of them is the law of supply. Is. Supply refers to the total quantity of any commodity that is brought to the market for sale (Demand), and demand is the desire of buyers to buy this commodity at the market price. Now, the natural law of supply and demand is that the price of an item in the market is greater than the supply, and the price of the item increases when the demand is greater than the supply. For example, in the summer season, when the heat starts to fall, there are more buyers of ice in the market, which means that the demand for ice has increased. If there is a decrease in competition, the price of ice will surely increase. Unless, at that time, the ice production increases as much as the demand increases, then the price will not increase.

On the other hand, during the winter season, the number of buyers of ice decreases, which means that the demand for ice decreases. Now, if the total quantity of ice in the market is more than the demand, then the price of ice will surely decrease. It is called a natural. (Law of Demand & Supply) is the law which the philosophy of the corrupt capitalist system says that this natural law of supply and demand determines for the agricultural professionals that they have their What can be grown in the land? And this law determines for manufacturers and traders what they should bring to the market in what quantity. And in this way, all the above-mentioned problems of the economy get solved automatically.

The law of supply and demand determines the preferences in such a way that when we want each person to earn the maximum benefit. If left free, each person will try to bring into the bar for his own profit the thing that is most in demand so that he can get a high price for it. Agriculturalists will prefer to grow things with a high market demand and will try to produce industrial products with a high market demand because if they bring to the market things that are in low demand, they will help. You will get little profit. The result is that although each person is working for his own profit, the natural forces of supply and demand are forcing him to meet the demand and needs of society. Even when the production of a commodity reaches the market so much that it is equal to its demand, it will not be profitable for the merchant and the manufacturer to produce more of that commodity, so they stop producing it. Will In this way, only those things the society needs will be produced in the society and will be produced in the quantity which is actually required to meet this need, and this is called determination of preferences. It also has to do with setting priorities; When one (Allocation of Resources) allocates the resources, he uses the existing resources in different tasks accordingly, so the laws of supply and demand determine the priorities; in the same way, the allocation of resources is also done simultaneously. As a result, everyone invests their resources, i.e. land, capital and labour, in the same work so that they can bring the same ‘things’ in the market, which is in high demand in the market and get more profit. Therefore, the problem of the allocation of resources is automatically solved by the laws of supply and demand.
A third issue is the distribution of income resulting from certain processes of birth resulting in production or income; It should be distributed in society. On what basis the capitalist system says that whatever income is earned should be distributed among the same factors – those who participated in the birth process? According to capitalist philosophy, these factors are total of four.

  • Earth
  • A regularization of personal preferences
  • capital
  • Employer or organization

An employer or an organization refers to a person who initially intends to undertake an action, brings together the first three factors for this work and assumes the risk of profit or loss. The capitalist system says that whatever income is generated as a result of the process of birth should be distributed in such a way that the land provider should be given rent, the labourer should be given wages, and the capital provider should be given interest. It did not allow, and the employer who was the main driver of this process should be given profit. That is, whatever is left after paying the rent of the land, the wages of labour and the interest on the capital is the profit of the employer. Now the question is how to determine how much rent will be given to the land. How much labour will be paid? And how much interest will be given to the capital? In response to this question, the capitalist philosophy then presents the law of supply and demand; that is, it says that the compensation of these three factors is determined on the basis of their demand and supply. His compensation will be so much more. Suppose Zaid wants to set up a garment factory because he is the catalyst for setting up this industry, and he is the factor taking the risk of profit and loss. Now he (Entrepreneur) is responsible for assembling the production, so in economic terms, he first needs land to set up the employer factory. If he doesn’t have the land, then he has to rent it from somewhere. This rent will be determined on the basis of the supply and demand of the land, i.e. if there are many people who rent the land, i.e. the supply of land is high, and the takers are less than that, i.e. the demand is low, then the rent of the land will be seven. If this happens, the land rent will be expensive. Thus the laws of supply and demand will determine the rent. Then he will need workers to work in the factory, which is defined as labour in economic terms, and he will have to pay wages. This wage will also be determined on the basis of supply and demand. If there are, it means that the supply of labour is more. So his salary was reduced. But if there are few workers available to work in that factory, it means that their supply is less, so they have to pay more wages. In this way, the wage will be determined in mutual negotiation at the point on which both supply and demand agree.

Similarly, a manufacturer will need capital to purchase machinery, raw materials, etc. He will have to pay interest in the capitalist system; the amount of this interest will also be determined on the basis of supply and demand. If there are many lenders, it means that the supply of capital is high so that a low-interest rate will work, but if there are few lenders, the capitalist will have to pay a high-interest rate. In this way, the interest rate will also be determined on the basis of supply and demand and when the rent on the basis of supply and demand; Once the wages and interest are determined, the income that will be generated as a result of the production of the factory and the rest of it will be given to the employer as profit.

Thus you see that the basic problem of income distribution is also governed by the capitalist system’s laws of supply and demand. The fourth economic problem is that of development; that is, every economy needs to develop its production and increase the income and quality of its production. According to the philosophy of the capitalist system, this problem is also solved on the basis that when each person is left free to earn maximum profit, the natural laws of supply and demand will automatically induce him to create new ones—bringing new things and better quality in the market so that the demand for its products is more and it gets more profit.

 

Principles of Capitalism

The basic principles of capitalism are three and two of them are mentioned below:

The first principle is that every human being has the right to do so in this system. That he can keep items on his private property and can also keep production resources. In the cooperative system, although personal consumption goods can be privately owned, the means of production, such as land or factory, are generally not in private ownership, but in the capitalist system, all kinds of things, even if they are related to consumer goods, are included in the production goods. It may come under personal ownership.

The second principle is that the motivation that drives the production process is: Human (Profit Motiv), personal profit motivation, and personal profit motivation (Laisses Fare). Non-interference of the government. Capitalist system. The third principle is that the government should not interfere in the commercial activities of people in business and should not interfere with the way they are doing business, and should not be used to impose more restrictions on them by the government. It is actually a French word meaning “Laisses Fare”. This principle is usually referred to as the ‘non-interference policy of the government’, and it means ‘let it go’, meaning that the government is being asked not to interfere with the way in which people are doing their business. They should be allowed to be free without any hindrance.

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Talha Siddiq

Talha Siddiq

I am an Islamic Scholar. I have expertise in Ahadith, Fiqh, Logics, and the Arabic language. I have a specialty in Islamic finance and Islamic study. To get started with me, Book Now one-to-one Session, or let us know what do you like in the contact form.

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