Introduction to Economic System PART 2 ~ Islamic Education

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The country could be rich in natural  resources, as in the case of Iraq and Saudi Arabia, but the basic needs of most of their citizens are not satisfied completely. Therefore, the increase of production by itself, does not solve the basic problem which must be treated first and foremost, which is the complete satisfaction of the basic needs of each and every individual, and following that enabling them to satisfy their luxuries.

Therefore, the poverty and deprivation required to    be treated is the non-satisfaction of the basic needs of man as a human being (i.e. food, shelter and clothing), not the increasing luxuries resulting from urban progress. Hence, the problem to be treated is the poverty and deprivation of every individual in the society, not the poverty and deprivation of the country measured as a whole.
The poverty and deprivation from this perspective (i.e. for every individual) is not treated by increasing national production, rather it is treated by the manner in which the wealth is distributed to the individuals in society enabling complete satisfaction of all their basic needs, and then enabling the individuals to satisfy their luxuries.

Capitalism considers value as being relative and not real, and so it is treated as a subjective measurement. Hence, the value of a yard of cloth is the marginal benefit of it assuming its availability in the market. Its value is also the quantity of commodities and efforts that could be exchanged for it. The value becomes a rice if what is obtained for the yard of cloth is money. These two values, in their view, are separate, and they have two distinct names; benefit and the value of exchange. The meaning of value according to this definition is wrong, because the value of any commodity is the quantity of benefit in it, taking into account the element of scarcity. So the real view towards any commodity is to observe its benefit whilst taking          into account its scarcity, whether it is possessed by man from the start like from hunting, or by exchange like selling; and whether this was related to the person or related to the thing.

Thus, value is a name for a designated thing that has a specific reality, and not a name for a lative thing, which applies to it in one respect and is not applicable in another. So the value is an objective measurement and not a relative thing. Therefore, the view of the economists towards value is wrong from its basis. what is referred to as the marginal utility value is an estimation meant to concentrate production based on the worst-           case scenario of distributing the ommodities. Thus the value of a commodity is estimated based on the lowest limit so that production proceeds on a guaranteed basis.

The marginal utility is not really the value of the commodity, nor even the price of the commodity, because the value of the commodity should be estimated by the amount of benefit in it at the time of estimation, taking into account the element of scarcity at that time. Its value would not drop if its price decreases later on, nor would it rise if its price increases as well, because its value was considered at the time of its evaluation. Therefore, marginal utility theory is a theory for price and not a theory for value, and there is a difference between price and value, even in the view of Capitalist economists. What governs the estimation of price is the abundance of demand together with the shortage of supply or the abundance of supply together with the shortage of demand; these matters are related to the level of production of a commodity, and not related to its distribution. Whereas value is estimated by the quantity of benefit present in the commodity at the time of evaluation, bearing in mind the element of scarcity, without considering it as part of the estimation; so supply and demand do not utterly affect the value.  Therefore, the subject of value is wrong from its basis, and any subject based on it is definitely wrong since the basic concept is false. However, if the value of the commodity were evaluated in terms of its benefit measured by the benefit of a commodity or an effort, then such an evaluation would be correct and would lead to much greater stability over the short term. If the value was estimated by the price, the evaluation would be relative not real, and it comes closer to changing every  time according to the market. In this latter situation, it is false to refer to it as a value, and so the term value would not truly apply to it. It would rather become a means to obtain money according to the market and not according to what it possesses of benefits.            

Capitalists claim that benefits are the result of the efforts which man expends. So, if the reward was not equal to the work then no doubt the level of production declines, and they conclude from this that the ideal method to distribute the wealth among the members of society is that which guarantees to achieve the highest possible level of production. This approach is totally wrong, since in reality the resources, which God has created, are the basis of the benefit in the commodities. And the expenses spent in increasing the benefit of these resources, or initiating a benefit in them together with the work, are that which made them in the form that provides a particular benefit.

So considering the benefit as a result of the efforts only is completely wrong and it neglects the raw material and other expenses. For in some cases, these expenses could be compensation for a raw material, and not for an effort. Thus, the benefit could be a result of man's efforts or could be a result of the existence of the raw material, or could be a result of both of   them, but it is not only as a result of man's efforts. As for the decline in the level of production, it does not result solely from a decrease in the reward for work, since it could also result from the depletion of the wealth of the country, or from war, or for other reasons. As an example, the decline of production in both Britain and France after the Second World War did not result from a reduction in the reward to work; it resulted from the shrinkage in their influence over their rich colonies, and their involvement in the war. The decline in production of the US during the Second World War did not result from a reduction in the reward to work; it resulted from its involvement in the war against Germany.

The decline in the Islamic World today did not result from a reduction in the reward to work; it is as a result of the intellectual decline into which the whole Ummah fell. Therefore, the inadequacy of the reward to work is not the only reason for decline in production, and it is false to assume from this premise that the ideal method of distribution is to secure the raising of the level of production. Arriving at the highest possible level of production has no relationship with the distribution of wealth amongst individuals. The Capitalists say that the price is the incentive for production, because the motive for the person to expend any effort is his reward materially. This view is incorrect and contradicts reality. Man often expends effort in return for a moral reward such as the attainment of a reward from God, or for the sake of achieving ethical merit such as returning a favour. The needs of man can be materialistic such as material profit; they can be spiritual such as sanctification, or moralistic such as praise. So taking into consideration materialistic needs only is incorrect. In fact, a man could expend resources in satisfying a spiritual or a moral need more generously than he spends in satisfying a materialistic one. Therefore, the price is not the only incentive for production. Accordingly a stonemason could designate himself to work for months in cutting stones for building a mosque, a factory may assign its production for some days of the year for distribution to poor people, and a nation could allocate some or focus all of its efforts on preparing to defend its territories. Such production is not motivated by price.

Moreover, the materialistic reward itself is not confined to price, it could come in the form of other commodities or services. Hence, considering the price as the only incentive for production is incorrect. One of the great anomalies of Capitalism is its consideration of price as the only regulator for distributing wealth amongst the members of society. They say that the price is the only constraint that forces the consumer in his possession and consumption to accept a limit comparable to his income, and it is the price that restricts the consumption of every individual in acceptance to what his revenues permit. Accordingly, through the rise in price of some goods and drop in the price of others, and in the availability of money to some people and its non-availability to others, the price regulates the distribution of wealth amongst consumers. Thus, every individual's share of the wealth of a country is not equal to his basic needs, but is equal to the value of the services in which he has contributed in producing commodities and services i.e. equal to what he owns of land or capital, or equal to what he carried out of work, and projects. From this principle, which makes the price the regulator of    distribution, Capitalism has effectively decided that man does not deserve life unless he is capable of contributing to the production of commodities and services.

The person who is incapable of contributing, whether he was born with a physical or mental disability, does not deserve life, and does not deserve to take from the wealth that which satisfies his needs. Also the person who was born strong in body or in mind, and who is more capable of creating and possessing wealth however he wishes, deserves to consume luxuriously and deserves to practice control and mastery over others with his wealth. Also the one whose motivation to seek material gains is stronger will exceed others in possessing wealth whereas, the one whose adherence to spiritual and moral values (which control him during the earning of wealth) is stronger, will have less than others in possessions or wealth. This approach excludes the spiritual and moral elements from life and produces a life built upon a materialistic struggle to gain the means of satisfying materialistic needs. This eventually occurs in all countries that adopt and apply Capitalism.

The domination of Capitalist monopolies has developed in countries adopting Capitalism, with producers exercising control over consumers. A small group of people i.e. the owners of large oil, automotive, and heavy industry corporations, has come to dominate consumers, reigning over them by imposing certain prices for the commodities they produce. This has led to attempts to "patch up" the economic system. They did this by giving the State (government) the right to intervene in fixing the price (price control) in special circumstances to protect the national economy, to protect consumers, and to reduce consumption of some commodities, as well as limiting the authority of monopolies. They also included in the regulation of production certain public projects directed by the government. These measures contradict the basis of their economic system, which is economic freedom, and they are only applied in specific circumstances. Moreover, many Capitalists do not adopt this interventionist approach (Conservatives) and they scorn it, contending that the price mechanism alone is sufficient to achieve harmony between the interest of the producers and the interest of the consumers, without any need for governmental intervention.

These patchwork solutions which are recommended by the supporters of intervention (Liberals), are only applied in certain circumstances and conditions, and even in these circumstances, the distribution of wealth amongst the individuals does not achieve the complete satisfaction of all basic needs for each and every individual. The poor distribution of commodities and services, which resulted from the concept of freedom of ownership and from the concept of making the price the only mechanism for distributing wealth, will continue to dominate every society that applies Capitalism. With regard to American society, many Americans had a sufficient share of the wealth of the country, to satisfy most of their basic needs completely, and to satisfy even some of their luxuries.

This situation occurred due to the immense wealth of that country which had reached a level by which there was an opportunity for every individual to satisfy all of his basic needs and some of his luxuries. However, this was not due to making the share of the individual equal to the value of the services he contributed in production. Furthermore, putting the             price mechanism as the controller of distribution has caused Capitalist monopolies in the West to look abroad to other countries for new markets, from which to gain raw materials and to sell their products. What the world suffers from, in terms of colonisation, regions of influence and economic invasion, is merely a result of these monopolies and making price a tool in the distribution of wealth. Thus, the resources of the world are accumulated on this basis into the hands of Capitalist monopolies. All this is due to the false rules and principles established by Capitalism. As for the Socialist economic system, with Communism being a part of it, it contradicts Capitalism. Though its influence on the international stage was removed with the end of the         Soviet Union which used to adopt it internationally and domestically, studying its ideas while refuting them and clarifying their corruption is an important issue for the one who carries the Islamic Da’wah, since the ideas remain talked about, whether in entirety or partially, even if only within a limited circle.

Most of the Socialist ideas appeared in the Nineteenth century. The Socialists fought fiercely against the opinions of the liberal school of thought i.e. they fought the Capitalist economic system. The powerful emergence of Socialism was due to the iniquity that the society suffered under Capitalism and owing to its many fallacies and inadequacies. By reviewing the Socialist schools of thought, it appears that they agree on three issues, which distinguish them from other economic schools of thought.

            1. Achievement of a type of actual equality.

            2. Abolition of private property either completely or

            partially.

            3. The organisation of production and distribution of the commodities and services by means of all of the people.

 However, despite their agreement over these three issues, they have fundamental differences over many points, the most important of which are:

           

Firstly:

The Socialist schools of thought differ in the form    of the eventual equality they aim to achieve. One group advocates arithmetic equality that means equality in everything of benefit, thus each person is given an identical amount. Another group suggests common equality, which means     observing the ability of everyone when distributing work and looking at the needs of every individual when distributing products. Equality in their view is established when the following principle is applied: "From each according to his   strength i.e. his ability (meaning by this the work which he performs), and to each according to his need (meaning the          distribution of production)." A third group adopts equality in the means of production, since the resources are not sufficient to meet the needs of all individuals, the basis of distribution becomes: "From each according to his strength i.e. his ability, and to each according to his work." So equality is achieved when each person is facilitated of the means of production the same as others.     

Secondly:

The Socialist schools of thought differ in the quantity of private property that is to be abolished. One group adopts the abolition of private property completely, which is Communism. Another suggests the abolition of private property related to the means of production which is called capital i.e. factories, railways, mines and the like. Thus they prohibit the possession of any commodity that is used for production. Hence, one cannot own a house for the purpose of leasing it, nor a factory, nor a piece of land, but they may keep certain types of property for the purpose of consuming them. It is allowed for            them to own everything they consume, so for example they can own a house to live in, and what the land and factories produce but not the land/factory itself. This is called Socialism of Capital. Another group does not advocate the abolition of private property except that which is relevant to agricultural land, these are the Agrarian Socialists (Agrarian Reformers). Yet another group says that every case in which public interest invites the transforming of a private property to public property, has to be studied. They call for restricted ownership of private property in many areas by putting laws for the maximum limit of interest and rent, a minimum limit for wages, and strive to give workers a share in the capital. This is called State Socialism.

Thirdly:

The Socialist schools of thought differ in respect of the means they adopt to implement their objectives. Thus, revolutionary Socialism (Revolutionary Syndicalism) depends upon liberating the labour force by what it calls direct action i.e. the efforts of the labour force themselves, such as disruptive strikes, sabotage of machinery, and propagating the ideas of a General Strike amongst workers. They work to mobilise them around this idea, until the time comes when they are able to implement a General Strike, thus paralysing economic activity, which would eventually result in the demolition of the present economic system.

As for the Marxist Socialists, they believe in the natural law of evolution in society and believe that this alone is sufficient to destroy the current system, which will then be replaced by another system built on Socialism.

As for the advocates of State (Government) Socialism, their means to implement their thoughts is through legislation. So, by issuing canons they warrant the preservation of public interests and improvement in the conditions of the labour force. Additionally, by levying taxes, particularly phased-in taxes on capital and inheritance, they suggest that they will close the gap between private properties.

Fourthly:

The Socialist schools of thought differ with respect to the structure that is needed to administer the projects in the Socialist system. For example the Capital Socialists want to assign the organisation of production and distribution to the government (State), while the Syndicalists want to confer management to organised groups of labour, headed by their chiefs (Guild Socialism). The most famous and influential among Socialist theories are those of the German, Karl Marx. His theories have dominated the Socialist world, and upon them the Communist Party and the Union of Soviet Socialist Republics (USSR) in Russia was established which lasted for about seventy years before it collapsed over two decades ago.        One of the best-known theories of Karl Marx is the theory of value, which he took from the thinkers of Capitalism, andupon which he attacked Capitalism. Adam Smith, who is considered the leader of the Liberal School of Thought in England and is viewed as the person who put the basis of the political economy i.e. the Capitalist economic system, defined value by saying: 'The value of any commodity depends on the magnitude (quantity) of effort spent in its production.' So the value of the commodity whose production needs two hours is worth twice the value of the commodity whose production needs only one hour. Ricardo who came after Adam Smith, explained his theory of work, when he defined value, saying: 'What determines the value of the commodity is not only the quantity of work spent directly in its production, but also the work spent in the past, in producing the tools and machines used in the production process as well.' This means that Ricardo believed that the value of the commodity depends on the expenses incurred during production. He referred these expenses to one element, which is the work.

Origin From : The Economic System of Islam (Taqiyudin An Nabhani)

Post by : Admin Islamic Education Center (YS)

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