Capitalismis an economic system where resources — whether monetary or otherwise — are privately owned, whereas socialism is a system where goods are owned by the state or the public. Capitalism is founded on the belief that competition brings out the best in people. Socialism, on the other hand, believes that cooperation is the best way for people to coexist. The main difference between these two economic systems is the distribution and earning of wealth. In capitalism, everyone works for his own wealth, while in socialism everyone works for wealth which is distributed equally to everyone.
The main thrust of capitalism is that resources are owned by an individual or a group of individuals. For instance, a company can be run by one person or a group of people. The resources of the individual is used and traded solely by his decision. It is the government’s job to ensure that each individual has a level playing field by introducing laws. The government is not allowed to interfere with the individual’s dealings, except to ensure that laws are being followed.
In a capitalist society, each person owns their own labor. This labor can be sold to employers for a fee. In other words, everyone can get a job and can decide how much their labor is worth in wages. If the employer feels that the worker’s wage is too high for the amount of qualifications the worker has, the employer will not hire them and move on to someone else. Therefore, in a capitalistic society even work is a form of supply and demand.
Under socialism, all resources are owned by all the people. This means that everyone has a say in how the resources are used. In socialism, everyone works for the good of everyone else, and there is no market. That is to say that everyone can get what they need when they need it, and there is no reason for them to pay for it. The government, in the form of a few elected officials, decides how the wealth is to be distributed to everyone.
Those who believe in socialism believe that capitalism unfairly favors the rich. They believe that in capitalism, the power and riches are concentrated to a few who lord it over the rest of society. Socialism was born out of the desire to make things more equal. During the industrial revolution, the working class wanted to share the wealth factory owners were enjoying. Instead of a few people having most of the power, socialism endeavors to make everyone equal.
Proponents of socialism believe that a socialistic society is the best way to care for everyone. They claim that if people worked for everyone else and received everything they needed, then their work ethic would increase. Proponents of capitalism believe that using people’s innate sense of competition is the best way to get the best product. They believe that if individuals are vying for a person’s dollar, they will produce the best possible product so that the person will choose theirs. Capitalists also tend to believe that if people will get the same products and care as everyone else regardless of how hard they work, then people will lose their desire to work.
ISLAMIC ECONOMIC SYSTEM:
Islam is an entire way of life, and Allah’s Guidance extends into all areas of our lives. Islam has given detailed regulations for our economic life, which is balanced and fair. Muslims are to recognize that wealth, earnings, and material goods are the property of God, and that we are merely His trustees. The principles of Islam aim at establishing a just society wherein everyone will behave responsibly and honestly. The fundamental principles of the Islamic economic system are as follows:
Muslims are not to deal in interest.“Those who devour usury will not stand….Allah has permitted trade and forbidden usury…. Allah will deprive usury of all blessing, but will give increase for deeds of charity…” (Qur’an 2:275-6). “O you who believe! Devour not usury, doubled and multiplied. But fear Allah, that you may really prosper” (Qur’an 3:130) This prohibition is for all interest-based transactions, whether giving or receiving, whether dealing with Muslims or non-Muslims. It is reported that the Prophet Muhammad (peace be upon him) cursed those who pay interest, those who receive it, those who write a contract based on it, and those who witness such a contract.
It is forbidden to gain property or wealth by fraud, deceit, theft, or other falsehoods.“…Give just measure and weight, and do not withhold from people the things that are their due. And do not do mischief on the earth after it has been set in order. That will be best for you, if you have faith” (Qur’an 7:85).
It is particularly hateful for a guardian to take from an orphan’s property.“To orphans restore their property (when they reach their age). Do not substitute your worthless things for their good ones, and do not devour their property by mixing it up with your own. For this is indeed a great sin” (Qur’an 4:2).
Forbidden are earnings from gambling, lotteries, and the production, sale, and distribution of alcohol.“O you who believe! Intoxicants and gambling, sacrificing to stones, and divination by arrows are an abomination of Satan’s handiwork. Eschew such abomination, that you may prosper” (Qur’an 5:90).
It is unlawful to hoard food and other basic necessities.Everyone should take what they need and no more. “And let those who covetously withhold of the gifts which Allah has given them of His Grace, think that it is good for them. No, it will be the worse for them. Soon it will tied to their necks like a twisted collar, on the Day of Judgment. To Allah belongs the heritage of the heavens and the earth, and Allah is well-acquainted with all that you do” (Qur’an 3:180).
A Muslim should be responsible in spending money.Extravagance and waste are strongly discouraged. “[The Servants of Allah are] Those who, when they spend, are not extravagant and not stingy, but hold a just balance between those extremes” (Qur’an 25:67). “O Children of Adam! Wear your beautiful apparel at every time and place of prayer. Eat and drink, but waste not by excess, for Allah loves not the wasters” (Qur’an 7:31).
Muslims must pay Zakat (alms).“And they have been commanded no more than this: to worship Allah, offering Him sincere devotion, being true in faith. To establish regular prayer, and to give zakat. And that is the religion right and straight” (Qur’an 98:5). Every Muslim who owns wealth, more than a certain amount to meet his or her needs, must pay a fixed rate of Zakat to those in need. Zakat is a means of narrowing the gap between the rich and the poor, and to make sure that everyone’s needs are met.
Muslims are encouraged to give constantly in charity.“Your riches and your children may be but a trial. Whereas Allah, with Him is the highest reward. So fear Allah as much as you can, listen and obey, and spend in charity for the benefit of your own souls. And those saved from the selfishness of their own souls, they are the ones that achieve prosperity” (Qur’an 64:15-16). The Prophet Muhammad once said that “nobody’s assets are reduced by charity.”