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Islamic Finance - Essay Example

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Question 1: Modern world is based upon the principles of Capitalism while communism was once considered counterpart to capitalism but sooner it failed to maintain its egalitarianism. Besides capitalism and communism, Nowadays Islamic principles and Islamic economic system has gained popularity among nations…
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Download file to see previous pages In capitalism individuals have more choices where individuals are free to make decisions about their life, family, political involvement and business. In socialism individuals are not in control of their own decisions. In contrast to capitalism and communism; Islamic system also allows free decision making to individual until Islamic teachings and principles are not violated. In Islamic economic system individuals are required to take care of Islamic norms and values that do their actions and decision justify Islamic teachings or not? If individual’s actions are acceptable according to Islamic values only then individuals can decide freely. Information provision in capitalism is not free but has certain cost. In capitalism government does not provide information, it is assumed that information is out there in the market while individuals are required to explore market and extract information. Though information is available in the market but it encourages exploitation of individuals who are not well aware of the prices. In contrast to capitalism; in communism and Islamic system information is freely provided to customers by the government. Under these systems government believes in protection of consumer rights and consider it the responsibility of state to keep people aware of market prices. Since capitalism delegates liberalization hence individuals have every right to own property. Individuals are free to buy and sell property anywhere in the world (LIODAKE?S, 2010). Similarly Islamic teachings preach equality, freedom and liberty by which individuals are free to buy and sell property but beside right to property individuals are bound to pay zakat for their property at the rate of 2.5% annually (AZHAR, 2010). Contrastingly in communism individuals have no right to own any property where as any property within the state is owned by the state. Individuals under communism are allotted piece of land according to their services and responsibilities yet they cannot declare ownership to that piece of land. In today’s modern world, incentives, innovation, goals, targets, profit, entrepreneur, innovation and growth are common to be heard in capitalism which indicate constructive and developmental nature of capitalism. Western life style can be quoted against where innovation, goals and incentives are deep rooted in their daily conscious. Capitalism promotes concepts of open economy (REDWOOD, 1993). No doubt communism brought enormous growth, incentives and progress to Russia but that cannot be announced open because all incentives were available to the ruling elites and to the party members while commoners were only the workers (RESNICK & WOLFF, 2002). Islamic system promotes equality where theoretically layman has the same rights and opportunities as of elites. Under Arabs, Islamic system got much popularity, growth and success but in modern world, Islamic system is hardly in practice to defend its theoretical principles (MIRAKHOR & ZAIDI, 1988). The role of government in the capitalistic economy has no existence but even in United States, this principle has never been truly practical. The idea of free market in reality means government rules and regulations because without regulations, capitalism can never exist (HEILBRONER, 1993). Free market economy is faced with some market imperfections that are needed to be corrected by external authority whereas government is the third party to fix the bugs. Unlikely in modern communism ...Download file to see next pagesRead More
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