Islam and Capitalism

Capitalism did not originate in the Islamic world as it came into being only after the invention of the machine in Europe. 

Capitalism was imported into the Islamic world at a time when it was under European domination. Together with the wave of development, it spread into the Islamic world when it was suffering from poverty, ignorance, illness and backwardness. This made some people think that Islam approves of capitalism, with both its evils and merits. They also claim that there are no provisions in the Islamic law or regulations such as might be in conflict with capitalism. They argue that since Islam permitted individual ownership, it must likewise permit capitalism. 

In answer to this accusation it might suffice to point out that capitalism cannot prosper or grow without usury and monopoly both of which were prohibited by Islam about one thousand years before the existence of capitalism. 

But let us tackle the question at some greater length. If the invention of the machine had taken place in the Islamic world, how would Islam have faced the economic development resulting from such invention? How would Islamic legislations and laws have organized work and production? 

There is consensus of opinion among economists-including those who are opposed to capitalism e.g. Karl Marx-that capitalism at the start brought about great progress and rendered considerable services to humanity. Production was increased, means of communications were improved and national resources were exploited on a larger scale. The standard of living among the working classes became higher than when they were mostly or completely dependent on agriculture. 

The Failures of Capitalist Development

But such a glorious picture did not last long because the natural development of capitalism, as they say, led to the amassing of wealth in the hands of capitalist owners and to a relative diminution of the properties owned by the working classes. This enabled the capitalist owners to use workmen-the real producers in communist eyes-in considerably stepping up the production of various commodities but the wages paid to workmen were too low to ensure decent life because the employers took all the profits and spent them leading a life of luxury and corruption. 

Besides this the scanty wages paid to workmen did not enable them to consume all the production of capitalist countries. This led to the accumulation of surplus production. As a result of this the capitalist countries began to look for new markets for their surplus production, which in turn gave rise to colonialism with all its incessant conflicts among different nations over markets and raw material resources. Destructive wars were the inevitable outcome of all this. 

Moreover, the capitalist system is always exposed to periodic crises resulting from depression caused by low wages and the scantiness of world consumption in relation to increasing production. 

Some propagandists of materialism refer all the problems of the capitalist system to the nature of capital itself rather than to any ill-will or desire for exploitation on the part of the capitalists. Such naïve and strange reasoning means that man with all his emotions and thoughts is but a helpless creature in the face of the power of economy. 

Islam's Alternative Economic Vision

There is no doubt that Islam would have encouraged the good and progressive achievement that were brought about by capitalism without legislation to organize it and to preclude any exploitation which might result from ill-will on the part of the employers or from the very nature of capital. The Islamic principle which was laid in this respect entitles the workmen to share the profit with their employers. Some Maaliki jurisprudents went so far as to give to the employee an equal share in the profit. The employer provides all capital and the workman does the work; the two efforts are equal and accordingly they are entitled to an equal share in the profit. 

The above-mentioned principle illustrates Islam's great concern with the establishment of justice. Such concern for the establishment of justice was voluntarily introduced by Islam. It was not forced thereon by any economic exigency nor was it the result of the struggle among classes which is regarded by the propagandists of certain economic doctrines as the sole effective factor in the development of economic relations. 

In the beginning, industry consisted of simple manual work involving a small number of workmen who worked in simple workshops. The above-mentioned principle would have organized the relation between work and capital on an equitable basis such as Europe had never had. 

The Prohibition of Usury and Monopoly

Economists say that the development of capitalism from its early benevolent phase to its present morbidly evil phase was accompanied by its increasing dependence on national loan. This led to the creation of banks which carried on financial operations, and advanced loans in return for some interest. Such loans as well as the majority of banking operations are based on usury which is expressly prohibited by Islam. 

On the other hand, tough competition, which is another feature of capitalism, leads to the destruction of minor companies or to their merger into major ones. This encourages monopoly which is also prohibited by Islam, as is borne out by some sayings of the Prophet (peace be upon him). He said: "He that monopolizes is a wrongdoer." Because Islam prohibited usury and monopoly it would have been impossible for capitalism to develop under Islam into its present evil stage which involves exploitation, colonialism and war. 

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Source: Book “ISLAM THE MISUNDERSTOOD RELIGION” By Muhammad Qutb