There have been growing debates about the dynamics of the economic system embraced by the western world. Capitalism and its effects have raised concerns in many people across the world, and this has led to the growing anti-capitalist movement (Reisman, 1998). Capitalism is an economic system where corporate or private entities own capital goods. The Islamic economic system is governed by the ideologies of religion, where the markets are open and competitive. The government manages public property and provides a means for individuals to satisfy their needs by using income from other sources and creating a healthy business environment. A capitalist economic system oppresses the poor because the rich hold the power of decision making, but the Islamic economic system gives the government the duty to feed, clothe and shelter its citizens.
There are a number of negative aspects of the capitalist economic system such as monopoly, inequality, corruption, individualism, hyper-competitiveness, and consumerism among others (Schumpeter, 2013). In this economic system, investments are governed by private decisions while production, prices and distribution of goods are determined by a free market competition. This system lacks government intervention such as price control and is only responsible for protecting the rights of individuals.
Capitalism constricts people to certain social classes and environments. This approach puts people into either rich or poor class. As a result, the poor seldom fail to meet their basic needs or manage to enter a higher economic and social stratum. However, capitalists argue that poor individuals are in disadvantaged position and are not able to obtain wealth because they are not opportunistic and lack motivation (Omar & Mehboob, 2013). This economic system supports the existence of the poor and tries to justify that only the hard working people should always get wealthy. In the capitalistic system, the economic growth and money circulation are regulated by using the interest rates.
On the other hand, Islamic economic system perceives wealth from a different perspective. First, the system is classified to allow everyone to meet the basic needs. Secondly, all residents of an Islamic nation have a means of satisfying their secondary needs (Volker, 2010). These two basic principles are achieved through the system that provides incentives for an unbiased distribution. The Islamic economic system acknowledges that all wealth is owned by the Creator, and human beings are just its guardians. This system prohibits the use of the interest rates, and people who have capital can only invest in a partnership or private businesses. In partnerships, profits and losses are shared according to earlier agreed criteria irrespective of contributed capital or labor (Rauf, 2010). This criterion of sharing proceeds has helped the system to improve employment rate and eradicate the existence of the poor and the rich by ensuring that everyone gets income.
The capitalist economic system has a free competitive market where the price of goods is determined by supply and demand. Private entities, however, play a major role in investment activities. Capitalism depresses local production and boosts the unfettered growth of big companies that use their market power to exploit readily available labor to gain profits (Omar & Mehboob, 2013). The individualistic characteristic of a capitalistic market allows certain individuals to prove themselves innocent of an act of inequality towards market players. On the contrary, Islamic system has a fixed economic policy that is derived from the laws stipulated in the holy books. This approach deals with the individual basic needs by providing people with means to improve their lifestyles and gain personal prosperity. The policy ensures that the distribution of resources is done in a correct manner and that all the citizens get both basic and secondary needs fully satisfied. To achieve the right distribution of wealth, the Islamic economic system ensures that the means used to generate it is improved with intent to increase output (El-Sheikh, 2011).
Moreover, capitalists promote the “trickle-down economics,” where tax cuts and other benefits given to businesses eventually benefit the rest of the citizens by providing an increase in market investments. Nevertheless, this will only apply to capital gains, income tax, and corporate income (ITS, n.d.). It shows that tax cuts will only benefit the rich people, and the poor will suffer because the tax cuts are too insignificant. At the same time, the Islamic economic system follows a well-laid down strategy for taxation (ITS, n.d.). First, it only taxes specific goods and those people who have more than a certain threshold of wealth. Thus, people can only be taxed if they can afford it, and the poor ones are not taxed.
The capitalistic economic system is characterized by speculation and deceitful representation. These are evidenced by government’s actions of artificially making money. Creating excess paper money that cannot denote its real worth is the main cause of inflation in many nations of the world (Marangos, 2013). It is usually done to increase the supply of money in the market with the hope of keeping economic growth, hence creating a false representation that leads to the excess of the artificial money. This situation causes instances of good and bad businesses that have been experienced on many occasions in the past. The governments always take advantage of such instances to increase tax levied on individual businesses or income. The Islamic economic system does not allow altering of money supply in the market because the money supply is based on silver and gold, which are physical assets (Gregory & Stuart, 2013). As a result, the Islamic economy does not experience inflation because it is difficult to create money beyond the actual value of wealth.
Capitalism is seen to be the major cause of economic problems that the world is encountering today. Corrupt leaders have forcibly used this economic system to amass wealth for themselves and the rich, whose number is increasing every day while the gap between the rich and the poor gets wider.