Economics is the efficient utilization of available resources to satisfy maximum needs and wants. Generally, the arrangement, management and distribution of available resources, such as, services and goods either across geographic region or within country by any government or society are called Economic System. There are two most basic Economic Systems exist in this world, which are:
- Conventional Economic System
- Islamic Economic System
There are other economic systems also exist and adopted by many economies, for example, traditional economic system, command economy system, mixed and market economy system, etc. but here only the comparison between Conventional Economic System and Islamic Economic System will be discussed.
Conventional Economic System
This is the economic system where everyone has complete freedom to perform any kind of economic activity.
Objectives of the Economics
There are four essential objectives of any economy.
- Determination of Priorities
- What to produce?
- Various Policies
- Micro and Macroeconomics
- Allocation of Resources
- Where and How to allocate?
- What are the resources to generate wealth?
- Distribution of Income
- The way to distribute income among members of society.
- Levels of wealth, Primary, Secondary.
- Future planning to create wealth
Conventional Economic System can be further divided into two categories:
- Capitalism Economic System
- Socialism Economic System
Capitalism Economic System
In Capitalism Economic System (CES), every individual has all rights to take part in any business to maximize profit. This concept is basically stands on selfishness. Priorities depend upon demand and supply position in the economy. Individual follows market forces where and how much to invest and in which area to make development. Income is distributed in all four factors for example, rent for land, wages for labor, and interest payments for invested capital and profit for owners. All right to wealth is with the all four factors of production.
Capitalism Economic System (CES) blindly follows market forces which creates exploitation of others and only focus on maximization of profit. It creates monopoly and does not care about moral values. It results concentration of wealth because income distribution in the society is imbalanced.
Socialism Economic System
On the other hand in Socialism Economic System (SES), all rights reserves by government. No individual has solely right to participate in any kind of business, planning or interest. All resources allocation or any development, rent, everything will be decided by government including distribution of income between factors of production.
No one has any freedom or natural even. Everything own by state, government is supposed to be “Cure of all illness”. Government is assumed to not commit any mistake ever like angels. However, state use dictatorship way to make everyone works as per government’s planning by will or forcefully. Finally, the consequences are overall inefficiency in the society. Profit is major motivation so if there is no motive, there is no incentive to work efficiently.
Islamic Economic System
Islamic Economic System (IES) is the economic system which recognizes the market forces of supply and demand with the acceptance of private property ownership and right to maximize profitability. However, nothing comes without some conditions in Islam because Islam doesn’t allow anyone to exploit other’s rights.
According to Islam, ownership belongs to Almighty Allah and without his will; no factor of production can produce anything. Islam considers the high morality and prohibited some economic activities which shall harm society in any way such as interest, gambling, speculations, alcohol, etc. Islam also allows government to intervene where it feels appropriate as per need.
IES recognizes three factors of production which are Land, Labor, and Entrepreneur (capital and entrepreneur are considered single unit). IES provides the foundation to develop a socio-economic development in the best interest of all man-kind.