Sample Essay on Comparison between Capitalism, Socialism and Islamic Economics
Capitalism, socialism and Islamic economics are complex concepts that are concerned with government and economics bodies. Although these concepts are not usually mutually exclusive, it is possible to find more than one of them in most modern states. Perhaps, the most challenging aspect of these concepts is their historical definitions. Various states and scholars define them differently. Nevertheless, there are common definitions for these terms. To understand the comparison between capitalism, socialism and Islamic economics, you need to know their definitions.
Capitalism refers to an economic system that has most or all means of production owned and operated privately.
In this economic system, capital investment and production, as well as prices and distribution of commodities, are determined by players in a free market. Unlike in socialism, the state does not have control over the production, distribution, and sale of commodities. This implies that in capitalism, production is aimed at making profit.
On the other hand, socialism refers to an economic system in which common property is owned by the state. The state owns the means of economic production. In a socialism economic system, the state directs employment. This means that a state may provide employment to workers even if there is nothing that is particularly essential for them to do.
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While capitalism is not concerned about economic equity, socialism concerns itself with redistribution of resources from the rich members of the society to the poor. This is aimed at ensuring that every member of the society has equal opportunities and outcomes. Most modern states combine capitalism and socialism in economic systems.
Islamic economics, on the other hand, is an economic system that adheres to Islamic traditions and scripture. The central aspects of Islamic economics are moral foundations and behavioral norms which are derived from Sunnah and Quran. Other aspects include the Zakat tax which forms the basis of the Islamic fiscal policy. Islam economics also prohibit interests. Most scholars in this economic system and Islamic movements describe it as a system that is neither capitalist nor socialist. They consider it as a third-way economics system that does not have drawbacks of socialism and capitalism.
However, Islamic economics encourage trade as a way of reducing the gap between the rich members of the society and the poor. It discourages wealth hoarding while outlawing usury. Zakat tax is used to tax wealth while trade goes untaxed. Venture capital and profit sharing are acceptable in the Islamic economic system.
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