A directed economy refers to an economic system in which the resources (land, manpower, capital, and all economic activities) are under the government’s management and regulation. Examples include investment, the distribution of important primary material, and the prices of consumer goods. The economic experience of some countries has proved the failure of this form of economy which is known to curb people’s freedom.
Islam respects human will and protects private property meanwhile, Islamic law paves the way for investment and gives investors the freedom and security to engage in various economic activities provided they observe its rulings in their dealings, earnings, and spending.
The economics of a free market
This is also referred to as capitalism. It is the opposite of a directed economy and means the non-interference of the state in economic activities, allowing the market to self-operate. This system has encountered many setbacks and failed to achieve its goals because it is based on Machiavellian materialism and is permeated by monopoly, economic blocs, sham transactions, and tawarruq (buying an item on credit and selling it on the spot to obtain cash); this system does not respect values and ethics. When free from its negative components, capitalism corresponds closely with the Islamic economic system.
The Islamic economic system
It refers to a free market devoid of monopoly, deception, risk, ignorance, fraud, tatfif (giving less value than agreed), gambling, usury, and all forms of unlawful consumption of the property of others. It also refers to the implementation of the concept of the economy of work and actual production.
Nationalization
Nationalization is the transfer of the ownership of property to the government i.e. making it a public sector entity. Nationalized industries usually include airlines, gas and electricity industries, mining, postal services, railway, telephone companies and anything related to industry and means of production. Nationalization is a stage that every independent country usually goes through in the process of converting ownership and establishing its sovereignty. Nationalization is considered one of the most rigid forms of state intervention in economic life. The motivations for nationalization are many and have led to differences between countries as to the extent of which they implement or resort to it, and of the manner of its implementation.
The Islamic perspective of nationalization becomes evident through a number of concepts which are:
Individual ownership of property is inseparable from human existence and is tied to human nature regardless of how many attempts there might be to eliminate it; Islam still acknowledges it.
Private ownership — whatever its size — was allowed in many Muslim and non-Muslim civilizations and countries. However, Islam introduced a set of regulating standards such as the prohibition of usury, monopoly, bribery, gambling, etc…
3- It is not necessary for ownership to be public to support national wealth and increase production as it is likewise not necessary to eliminate private ownership to achieve societal justice.
4- It is necessary to enact rules and laws to protect private ownership from becoming a tool of exploitation, monopoly, injustice and for controlling others.
5- Some properties related to the needs of the public as a whole and which are not the product of human endeavor are not subject to private ownership. Examples include water, pasture, and fire among others.
6- Islam does not seek to achieve financial equality between the people with regard to their income and fortunes. It bases its legislations on the acknowledgment of individual differences in the nature, potential, needs, and the physical and mental abilities of people.
7- There is no harm in nationalization if it means restoring property that must be owned by the nation as a whole. The Prophet (peace and blessings be upon him) restored Ma`rib salt (mountain) which he had given as a fief to Abyad Ibn Hammal. Nationalization is prohibited if it encroaches upon private property without a legitimate justification associated with the public interest in conjunction with just compensation to the original owner.
In brief, Islam does not support a directed economy, a free market economy, the nationalization of institutions or any particular positive economical policy. Islamic law presents a number of values and general principles which rule the market and eliminate injustice and dispute, establish justice and equality, respect both public and private ownership and create harmony between them, and achieve the interests of the people and their legitimate goals in the best manner. These values and principles are not incompatible with the development of economic practices or means or even with benefiting from the experiences of other countries and civilizations.
Islamic legal principles and values
1- The right of a person to own property and the freedom of its disposition in compliance with Islamic law. The Prophet (peace and blessings be upon him) said, “Allow people [to engage in trade]. God will grant them provision through one another” (recorded by Muslim).
2- The non-exploitation of the people’s need for a particular commodity through monopoly until its price is raised. The Prophet (peace and blessings be upon him) prohibited monopoly and said, “Only a sinful person monopolizes [a commodity]” (Muslim) and “He who monopolizes a commodity is cursed” (recorded by Ibn Majah and Al-Darimi).
3- Prevention of usury which is based on exploiting the needs of the people for profit by making a person pay extra without return. It is a form of ill-gotten wealth for God says, “… for taking usury when they had been forbidden to do so; and for wrongfully devouring other people’s property. For those of them that reject the truth We have prepared an agonizing torment” (Quran 4:161).
4- The obligation to develop the economy and land, improve people’s livelihoods, and prevent the hoarding of property and depositing it in storehouses without giving out God’s due. God the Almighty says, “It was He Who brought you into being from the earth and made you inhabit it” (Quran 11:61), “Then when the prayer has ended, disperse in the land and seek out God’s bounty” (Quran 62:10), “[Prophet], tell those who hoard gold and silver instead of giving in God’s cause that they will have a grievous punishment” (Quran 9:34), and “A clear sign has come to you from your Lord. Give full measure and weight and do not undervalue people’s goods; do not cause corruption in the land after it has been set in order: this is better for you, if you are believers” (Quran 7:85).
5- Prevention of waste in resource and energy use and the necessity of practicing moderation in their administration. God the Almighty says about those who spend moderately, “They are those who are neither wasteful nor niggardly when they spend, but keep to a just balance” (Quran 25:67). Wastefulness is deemed objectionable (in Islamic law). God the Almighty says, “Do not squander your wealth wastefully: those who squander are the brothers of Satan, and Satan is most ungrateful to his Lord” (Al-Isra`, 26-7), and “Do not be tight-fisted, nor so open-handed that you end up blamed and overwhelmed with regret. Your Lord gives abundantly to whoever He will, and sparingly to whoever He will: He knows and observes His servants thoroughly” (Quran 17:29-30).
And God the Almighty knows best.