Islamic Economic

Islamic economics refers to the economic system that conforms to Islamic scripture and traditions". The central features of an Islamic economy are summarized as the following: "behavioral norms and moral foundations" derived from the Quran and Sunna, zakat tax as the basis of Islamic fiscal policy, and prohibition of interest.

Islamic movements and authors generally describe an Islamic economic system as neither socialist nor capitalist, but as a "third way", an ideal mean with none of the drawbacks of the other two systems.

To reduce the gap between the rich and the poor, Islam encourages trade, discourages the hoarding of wealth and out laws Usury  (the term is riba inArabic). Therefore wealth is taxed through Zakat, but trade is not taxed. Usury allows the rich to get richer without sharing in the risk. Profit sharing and Venture Capital where the lender is also exposed to risk is acceptable. Hoarding of food for speculation is also discouraged  Grabbing other peoples land is also prohibited.

History

Main article: Islamic economics in the world

Traditional Islamic concepts having to do with economics included:

• zakat—the "taxing of certain goods, such as harvest, with an eye to allocating these taxes to expenditures that are also explicitly defined, such as aid to the needy."
• gharar—"the interdiction of chance (prohibition of gambling)... that is, of the presence of any element of uncertainty, in a contract (which excludes not only insurance but also the lending of money without participation in the risks)."
• riba—"referred to as usury (modern Islamic economists reached consensus that Riba is any kind of interest, rather than usury)"

These concepts, like others in Islamic law, came from the "prescriptions, anecdotes, examples, and words of Muhammad, gathered and systematized by commentators according to an inductive, casuistic method." Sometimes other sources such as al-urf (custom), al-aql (reason), or al-ijma (consensus of the jurists) were employed.

In addition, Islamic law has developed areas of law that correspond to secular laws of contracts and torts.

Early reforms under Islam

Main article: Early reforms under Islam

Some argued that early Islamic theory and practice formed a "coherent" economic system with "a blueprint for a new order in society, in which all participants would be treated more fairly" Under this system God's guidance made sure the flow of money and goods was "purified" by being channeled from those who had much of it to those who had little by encouraging zakat and discouraging riba (usury/interest) on loans. Bonner maintained that Muhammad helped poor traders by allowing only tents (not permanent buildings) in the market of Medina, and by not charging fees and rents there.

Interest

The Quran (3: 130) clearly condemns riba usually translated as "interest": "O, you who believe! Devour not riba, doubled and redoubled, and be careful of Allah; but fear Allah that you may be successful."