An ecosystem of (i) economic sciences*, (ii)

natural sciences, (iii) social sciences and (iv)

spiritual sciences for advancement of justice
and human welfare
Founded on principles not interests
Mohammad Naeem Khan, FCA
Petroleum Economist
Eni Pakistan Ltd
*Science refers to irreversible laws
1
Principles
of Islamic
economic
system
Devine Economic Plan
Malik 2

And Allah has made you successors in the land and raised some of you above
others in different levels, to test you for what is given to you. (Araf 165)

When a man gets in trouble he cries for help of Allah, and when he is
granted favors, he says I have got it due to my knowledge. In fact
wealth is a trial but most of people do not know. (Zumr 49)
Not related to efforts
Zumr 49
Wealth is a test
Anam 165/Nahal 71

And Allah has made some of you excel others in wealth. (Nahal 71)
Output/Resource ()
Outcome ()
Work ()
Mission of Islam ( )
Human Welfare

Spiritual Power

Economic Power

Piety

Unity

Prayer

Charity

Fasting

Hajj

Social System

Economic System

Political System

Spiritual System

Target of Islam ( )
Good deeds

Belief

(Baqra 277)

(Noor 55)
Those who, if We give them power in the land, establish regular prayer
and give regular charity, enjoin the right and forbid wrong: with Allah
rests the end (and decision) of (all) affairs. (Hajj 41)

Economic System
()
Morality System
()


Accumulation of Wealth
() X
Distribution of wealth
()

The focus of Islamic economic system is to stop the lust of
possession and the lust of pleasure twin plagues
responsible for killing the humanity
Economic Principles of Islam
Earning Side

State ()
Distribution

Individual ()
Frugality & Sharing

Usage Side

(Tauba 34-35)

( 34 )

But if you do not stop taking usury, then be ready for war
with Allah and His Messenger
(Baqra 279)

Allah has allowed business and forbidden usury
(Baqra 275)
They ask you how much they should spend; Say: "What is
beyond your needs." Thus Allah makes clear to you His
revelations: In order that you may ponder. (Baqra 219)

(Baqra 219)

in order that wealth may not become confined to the
rich amongst you.
(Hashar 7)
Business

Usury

Falahi Nizam
Istasali nizam
Biological communities are highly efficient in energy capture and recycling, living
exemplars of the motto, "Waste not, want not." Energy and materials are continuously
recycled for use and reuse within and between cells, organisms, and species with a
minimum of loss, as the wastes of one become the resources of another. Frugality and
sharing are the secret of life's rich abundance, a product of its ability to capture, use,
store, and share available material and energy with extraordinary efficiency
As suggested by Michael Albert in Participatory Economics there are the 4 Maxims of
wealth distribution in a just and equitable system.

1. DISTRIBUTIVE MAXIM 1. Payment according to personal contribution and the
contribution of property owned.
2. DISTRIBUTIVE MAXIM 2. Payment according to personal contribution.
3. DISTRIBUTIVE MAXIM 3. Payment according to effort.
4. DISTRIBUTIVE MAXIM 4. Payment according to need.

Islam abhors DEBT and strongly discourages it
1. Prophet (PBUH) said: "Whoever asks for money while he has what
suffices him has asked for a lot of Hellfire's embers." People asked
him, "What is the sufficient amount of money above which one should
not ask?" He said, "The amount he needs for his lunch and dinner."
(Abu Dawud)

2. He also said: "Whoever asks people for their money to increase his
wealth, has asked for embers, so let him ask a little or a lot.

3. A man came to the Prophet (PBUH) and said, "O Messenger of Allah! If
I was killed in Allah's cause, observing patience, awaiting Allah's
reward, attacking, not retreating, would Allah forgive my sins?" The
Prophet (PBUH) said, "Yes, except for the debt." The Prophet (PBUH)
said, "A believer's soul is attached to his debt till it is paid.

4. A dead person was brought to the Prophet so that he might lead the
funeral prayer for him. He (PBUH) asked, "Is he in debt?" When the
people replied in the negative, he led the funeral prayer. Another dead
person was brought and he asked, "Is he in debt?" They said, "Yes."
He (refused to lead the prayer and) said, "Lead the prayer of your
friend." Abu Qatada said, "O Allah's Apostle! I undertake to pay his
debt." Allah's Apostle then led his funeral prayer. No. 2154 (Sahih
Bokhari)
Islam prohibits and strongly CONDEMNS
usury or RIBA.
1. Allah will deprive usury of all blessing, but will increase
benefits of charity" (Baqra 276);

2. If you do not stop taking usury, then be ready for a war with
Allh and His Messenger (Baqra 279)

3. Abdullah ibn Hanjalah related that the Prophet said: A dirham
of Riba (interest) knowingly taken by a man is a sin worse
than committing Zina (fornication) 36 times (Ahmad,
Daraqutni).

4. Narrated Jabir ibn Abdullah: Allah's Messenger cursed the
accepter of interest and its payer, and one who records it, and
the two witnesses; and he said: They are all equal (Muslim).

5. Hazrat Abu Hurairah r.a. reported that the Prophet said : A
time will certainly come when none will remain who will not
devour usury. If he does not devour it, its vapors will fall on
him [Ahmed,Abu Dawood,Nisai,Ibn Majah]
Primary focus of Islam is on the spiritual System (test of Taqwa/free will)
Legal system provides only safety valve for safeguarding basic human rights
Keeping excess wealth and generating income from it is allowed legally but
spiritually is it detested.
Dimensions of
Islamic Economic System
Legal System
Limited Capitalism
(surplus wealth for personal use)
Spiritual System
Spiritual Socialism
(human rights on surplus wealth)
Treatment system
(Repair/Maintenance)
Restricts luxury &
wealth accumulation
Immune System
(Regulatory)
Channels excess
wealth to needy
Inter-dependent &
Inter-connected (Synthesis)
R
e
s
t
r
i
c
t
i
n
g


e
v
i
l
s
/
c
r
i
m
e
s


E
l
e
v
a
t
i
n
g

e
t
h
i
c
a
l
/

s
p
i
r
i
t
u
a
l

v
a
l
u
e
s

Individual
Distribution
(Arteries)
State
Collection &
Re-distribution
(Veins)
Economics: A life blood system of Society
Labor
+
Capital
(Entrepreneurship)
Land
Partnership
(Labor + Capital)
Status of Sources of Income
Ideal
Permitted
Restricted
Prohibited

Voluntary Charity ()
Entire wealth in access of basic needs

Inheritance ()
Strictly in accordance with injunction of Quran

Zakat ()
Payable on wealth of individual

Taxes ()
Taxes imposed by state to
provide basic needs of its citizens
Compulsory

Marriage payment and
penalties on certain faults
%

o
f

c
o
n
t
r
i
b
u
t
i
o
n

Distribution Channels ()
Stock Exchange Transactions
Trade*
Risk capital investment at
profit/loss + Work + Public
benefit
*Limited liability is an exclusion
Public Benefits
Does the activity lead to
employment/resource
generation or brings harm to
the public interest
Interest based
Load taken/given at interest
with security against fully
insured property (margin
financing)
Gambling
Profit/loss without efforts at the
expense of someone else
1. Limited liability concept in anti-Islam
2. Primary purpose of the transaction is to make quick money rather than long term
investment
3. Mostly investment is made from loan taken from banks or brokers
4. It is a gambling business (gain at the loss of someone else
5. Short term focus leads to extreme damage of public interest.
Property business (Plots)
Trade*
Risk capital investment at
profit/loss + Work + Public
benefit
*Limited liability is an exclusion
Public Benefits
Does the activity lead to
employment/resource
generation or brings harm to
the public interest
Interest based
Loan taken/given at interest
with security against fully
insured property (margin
financing)
Gambling
Profit/loss without efforts at the
expense of someone else
As per Islamic law house is right of every Muslim. Anyone trying to grab the property for
the purpose of trade/profit making is haram because it is a gamble (profit/loss at the
expense of others) and it is also not a business/trade as it does not lead to any fruitful
business activity which entails hardwork. As a consequence of profit making price of the
property rise and takes it out of the reach of legitimate buyer for building his house
State Financial Crime: Inflation
100
147
216
317
466
685
1,006
1,479
2,172
3,192
4,690
0
1,000
2,000
3,000
4,000
5,000
0 5 10 15 20 25 30 35 40 45 50
An item costing Rs
100 now costs Rs
4,690 in year 50
@8% inflation rate
Year
V
a
l
u
e

R
s

Faceless dragon eating humanity
Corporation: An ingenious device for obtaining individual profit
without individual responsibility.

Moto: Profit, growth & Competition and amorality,
dehumanization, opposition to nature.

Allah does not impose upon anyone a duty but to the
extent of his ability; He gets reward for every good deed,
and suffers for every ill that he earns. (Barea 286)

Nor can a bearer of burdens bear another's burdens if one heavily laden should
call another to (bear) his load. Not the least portion of it can be carried (by the
other). Even though he be nearly related.
(Fatir 18)
Resources

Credit

Judges

Law

Politicians

Jobs

Media

Trade

Commerce

Production

Corporate
Capitalist Citizen
(limited liability)
(1886)
Islam does not
permit
limitation
of liability. Every
individual is fully
responsible for
his deeds
1. Banks were created for taking public deposit and
lending at interest and investment in treasury
bonds, derivatives, securities etc.
2. Interest is against natural laws. Proper functioning
of natural laws and economy implies a zero rate of
interest
3. Islam detests borrowing even at zero interest rate.
4. Banking was conceived in iniquity (against natural
law) and was born in sin (for the benefit of rich).
5. An interest rate of zero means the end of the
money & banking system.
Does Islam allow any Banking System?
1. (http://www.biblebelievers.org.au/usury.htm)
And I sincerely believe with you, that banking establishments are more dangerous than
standing armies; and that the principle of spending money to be paid by posterity, under
the name of funding, is but swindling futurity on a large scale
Thomas Jefferson in a letter to John Taylor 28 May 1816, Writings (1984) New York:
Literary Classics of the United State
Hallal means of living
Distribution of entire excess wealth
Hardy any situation of Zakat
Simple lifestyle
Moral
(Height of
spiritual
living)
Hallal means of living
Pays Zakat and other compulsory dues
Charity (infaq) up to the level of Taqwa
Modest lifestyle
Legal
(Minimum
threshold
of living)

No distinction of hallal/harram
Does not care to pays Zakat/other dues
Charity for image building
Extravagant and luxurious lifestyle
Stinginess/wealth piling up
Illegal
(State of
practical
kufr)
Three economic modes of Muslims
Cowardice
Ignorance
Tensions
Fear
Hunger
Servitude
Debt
Threats
Tyranny
Savagery
Cut-throat competition
Self-centeredness
Criminality
Robbery
Theft
Racism
Before (Savage Society)
E
x
p
l
o
i
t
a
t
i
o
n

D
e
p
r
i
v
a
t
i
o
n

Intellect
Compassion
Care of kin
Affection
Sincerity
Freedom
Fortitude
Munificence
Zeal & Endeavor
Piety
Courage
Happiness
Justice
Content
Satisfaction
Chastity
Humility
After (Natural Society)
H
a
r
m
o
n
y

Non-contributory
/Contributory
Social Security
Plan
(Surplus Pool)
Mirror view before/After Implementation
Summary of natural economic System of Islam
1. Islamic view is that real economy controls, and the money is only a
supportive function. Protects labour/work.
2. Stop earning money through money and compels people to work and invest
money in business ventures
3. Eliminates sources of unearned income (interest/speculation)
4. No protection to capital and uses wealth in real economic activities integrated
with physical laws of nature.
5. Collect zakat (wealth tax) no tax on income or consumption.
6. It is responsibility of individuals for meeting needs of poor and social welfare
of society
7. State is responsible for meeting basic needs of citizens and taking
administration/legal measure for checking concentration of wealth in few
hands.
8. Business in Islam is not an grabbing the opportunity but a Ibadah covered
under the ethos of Islamic principles of life.
2
Principles
of current
economic
system
1. GDP growth
2. Free market
3. Credit
4. Tax on income/
Consumption
5. Deficit financing
Modern Economic Drivers
Government Companies Individuals
1. Economics is a Science of wealth (to teach selfishness). K.K Dewett
2. Economic is made to study wealth rather than welfare.
3. Whatever the economics is concerned with it is not concerned with:
Study of relation of real goods (physical science) and wealth (monetary
science)
Study of relation of material welfare (of individual) and general welfare (of
humanity).
Study of relation of short term needs: and long-term needs
1. Wealth Tax ()
2. Guarantee basic
human needs
3. Restricting wealth
accumulation
1. Earned income ()
2. Restricts
consumption ()
3. Distribute surplus
wealth ()
Islamic Economic Drivers
1. Sales growth
2. Money
3. Credit
4. Consumerism
5. Profit
maximization
1. Income growth
2. Money
3. Credit
4. Consumption
5. Wealth
maximization
Ownership/Competition
Short-term approach
Trusteeship/Cooperation
Long-term approach
BERNARD : Money is like an iron ring we've put through our noses. We've forgotten that we designed it, and it's
now leading us around. I think it's time to figure out where we want to go - in my opinion toward sustainability and
community - and then design a money system that gets us there.
Profound change in the underlying dynamics:
Money and credit rather than goods/services had become the real economy
Energy and automation has become real contributor rather than manpower and animals
Organic Resources

(Manpower, animals, plants)
Inorganic Resources

(Natural Resources)
Taxes ()
Money ()
Credit ()
Gov. Deficit ( )
Operates under
physical/biological constraints
Operates under unconstrained
compound interest rate growth
Matter ()
Natural (Real) Economy
Money ()
Financial (Shadow) Economy
Major problem of Humanity:
Operating under incompatible Systems
Founding father of discounting Paul Samuelson in 1937
Framework of integrated human ecosystem
Social
Process

Demography
Technology
Economy
Institutions
Culture
Information
Ecological
Process

Primary
production
Populations
Organic matter
Nutrients
Disturbances


Biggest tragedy of our time is that modern priests (economists) do
not know that something must be physically possible before it can be
economically possible.
External Biological, Geological
& Physical Conditions
External Political &
Economic Conditions
Interactions
Land use
Land cover
Production
Consumption
Disposal
Human
Systems

Natural
Systems

natural curve
(natural resources)
linear curve
(machines)
exponential curve
(money)
Time
Growth
Basic types of growth patterns
a
c
b
Curve a in figure represents an idealized form of the normal physical growth pattern
in nature, which our bodies as well as those of plants and animals follow. We grow fairly quickly during the early stages of our
lives, then begin to slow down in our teens, and usually stop growing physically when we are about twenty-one.
Curve b represents a mechanical or linear growth pattern, e.g. more machines produce more goods, more coal produces more
energy, etc. It is not so important for our analysis. It should be clear, however, that in a finite universe even this growth pattern will
eventually create problems.
Curve c represents exponential growth the most important and generally least understood growth pattern which may be
described as the exact opposite to curve a in that it grows very slowly in the beginning, then accelerates continually faster and
finally grows in an almost vertical fashion and gradual starts declining and eventually come to end. In the physical realm, this
growth pattern usually occurs where things are out of order, where there is sickness, often leading to death. Cancer, for instance,
follows an exponential growth pattern, and, using this analogy, interest may be seen as the cancer on our social and economic
system.
Since through our bodies we have only experienced the physical growth pattern of nature, which stops at an optimal size (curve
a), it is difficult for human beings to understand the full impact of the exponential growth pattern in the material realm.
298,342,731
10.0%
Year Outstanding US Debt Debt/Citizen
1 8,199,252,799,551 27,483
25 88,836,493,038,639 297,767
50 962,517,279,115,525 3,226,213
75 10,428,591,684,647,000 34,955,072
100 112,990,724,306,816,000 378,727,928
125 1,224,221,272,194,810,000 4,103,405,731
150 13,264,077,493,871,600,000 44,459,194,462
175 143,712,379,256,415,000,000 481,702,298,476
200 1,557,081,369,667,970,000,000 5,219,102,756,246
225 16,870,518,770,280,900,000,000 56,547,443,652,250
250 182,787,109,988,408,000,000,000 612,674,923,822,453
U.S. National Debt Clock
US Population
Current Interest Rate
http://www.brillig.com/debt_clock/
77 times
of national
total now
As of 25
th
January 2006
Wayne A.M. Visser and Alastair McIntosh
http://www.che.ac.uk/publications/usury.htm
Organisations in the West with money to invest, especially those which like to
consider themselves as being ethical, might have rather more to learn from Islam
than is generally acknowledged. By applying the Islamic approach, a lot of human
misery could have been avoided.
8%
Year Kg (Gold, Sliver or any other commodity)
0 1
200 4,838,950
400 23,415,433,085,206
600 113,306,100,207,918,000,000
800 548,282,506,567,769,000,000,000,000
1000 2,653,111,407,564,170,000,000,000,000,000,000
1200 12,838,272,344,326,700,000,000,000,000,000,000,000,000
1400 62,123,752,631,416,000,000,000,000,000,000,000,000,000,000,000
1600 300,613,707,008,236,000,000,000,000,000,000,000,000,000,000,000,000,000
1800 1,454,654,572,742,820,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000
2000 7,039,000,140,947,130,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000
5,972,000,000,000,000,000,000,000
1,178,667,136,796,240,000,000,000,000,000,000,000,000,000
1 Kg
in year 1
Weight
of Earth
No of
earths
Kgs in
year 2000
Interest
Rate (8%)
The economist sees economic activity as a function of infinite "money creation",
rather than a function of finite natural resources".
1
Impracticable (Financing Decisions)
cc
Un-natural (Investing Decisions)
1. Under discounting system, we need less and less quantities in
future to survive.
2. Under natural system, we need a constant quantity of food to
meet our biological needs
3. Hence, discounting concept is in conflict with nature
100
62
39
24
15
9
6
4
2
1
0
100 100 100 100 100 100 100 100 100 100 100
0
20
40
60
80
100
120
1 5 10 15 20 25 30 35 40 45 50
Year
Q
u
a
n
t
i
t
i
e
s

@
1
0
%

Capitalist Way Islamic Way
Year 50
Quantities
Year 1
Quantities
3
Outcome of
current
economic
practices

)26(

*****
And give to the relatives due and to the
needy and the wayfarer, and do not squander
wastefully. Surely the squanderers are the
fellows of the devils and the satan is ever
ungrateful to his Lord.
(Isra 26-27)
Outcome of modern economic system
Explosion of
Over-utilization

Explosion of
Over-production

Explosion of
Over-wastage

Explosion of
Over-supply

Explosion of
Debt


Explosion of
Competition

World Economy at Crossroad
Industrial
Economy
Products
economy
Employment
Industrial
Economy
Paper
Economy
Real
Economy
Social
Principles
Economic
Principles
1. Primary products economy uncoupled from Industrial Economy
2. Industrial Economy uncoupled from Employment
3. Symbol economy disconnected from real economy
4. Economic principles (self-interest/short term focus) disconnection
from social principles
Modern tragedy of Contradictory Laws
Integral
System
E
c
o
n
o
m
i
c

L
a
w
s

"It is well that the people of the nation do not
understand our banking and monetary
system, for if they did, I believe there would
be a revolution before tomorrow morning."
Henry Ford
The Earth can no longer support the lifestyle of the cool hunting American-style
consumer. We have sought, bought, spewed and devoured too much, too fast, too
brazenly, and now we're about to pay. Economic "progress" is killing the planet.
(Kellay Lason)
1. Sixty percent of the
families in America can
maintain their standards
of living for only one
month
2. The next 20% can
maintain it for only three
months.
3. That means that 80% of
the population is living at
an incredibly high level of
economic insecurity
Consumption & Waste Culture

w
o
r
k
-
a
n
d
-
s
p
e
n
d

l
i
f
e
s
t
y
l
e
.

March towards Destruction?
Each U.S citizen
requires energy
of 300 persons
working round the
clock
Wood
Labor
Domesticated
Animals
Lifecycle is no more sustainable
0%
20%
40%
60%
80%
100%
1850 1870 1890 1910 1930 1950 1970
p.79 BEYOND OIL. J. Gever et al. 1991
Fuel
Domesticated
Animals
Energy is
now
life blood of
economy
6000 products
(Fertilizers &
pesticides!!!!)
Oil is capitalism's crack cocaine
Stacked presentation of work done over time in
United States by labor, Domesticated animals, Fuels
as a percentage of Total Horsepower in the Economy
http://lifeaftertheoilcrash.net/Research.html
Importance of Energy
How Much Human Energy Is Contained in One
Barrel of Oil?
***
1 Barrel of Oil = 5,800,000 BTUs
**
1 Barrel of Oil = 23,200 Hours of Human Work Output
Human work cost of 1 barrel of oil
Rate per hour= US$ 8/hour
Total cost= $185,600 per barrel equivalent human
work
Switchover is possible only when the oil cost
increases $185,600/barrel
Or Rupees 70,000/Litre
Greatest Threat to Life: Food Scarcity
from planting, irrigation, feeding and harvesting,
through to processing, distribution and packaging.
In addition, fossil fuels are essential in the
construction and the repair of equipment and
infrastructure needed to facilitate this industry,
including farm machinery, processing facilities,
storage, ships, trucks and roads
Pesticides (Gas)
FROM THE CAVES, TO THE MOON, TO THE CAVES
Richard C. Duncan, Ph.D. Institute on Energy
and Man, June 27, 1996
Even if the entire mass of the earth were petroleum, it would be exhausted
in 500 years at 5% increase in rate of consumption. For addition 100 year
157 earths would be required (current production is 10 Trillion Ton/year)

X
How many populations have We destroyed, which were given to wrong-
doing? They tumbled down on their roofs. And how many wells are lying
idle and neglected, and castles lofty and well-built? (Hajj 45)
X

Story of Past Rebels
Tower of Babel
Period of Namrood (let us revolt) 2500 BC
4
What
should we
do?
War with
Allah & Rasul
Interest Economic
Revenge (Qasas)
Killing Political
100 Lashes
Sex Social
Disliking/Curse of
Allah
various Moral
Action Crime Level




Penalties on various crimes
1. Limit growth and focus on wellbeing
2. Limit Debt & encourage entrepreneurs
3. Introduce zero rated debts
4. Impose Charge on money holding
5. Make speculation a criminal offence
6. Incentivise productive work and investment;
7. Tax Unearned Gains
8. Replace labor for energy use
9. Strengthen the social fabric of family and
community
10. Lease land for living/business purposes
Steps for healing the money system
The money
system is like a
cancer that
consumes its
host and
ultimately
destroys itself
Healing the Money System David C. Korten: http://www.converge.org.nz/pirm/money.htm
Action at personal level
1. Adopt simple lifestyle (Resource conservation &
sharing)
2. Get out of interest/speculation based investments
3. Fully utilize goods before replacement
4. Eliminate morbid craving for extravagant gadgetry
5. Get rid of fashion (a bio-economic disease of the
human mind )
6. Demand durable goods to be made still more
durable by being designed so as to be repairable.
7. Get closer to the nature as possible
8. Join hands to fight for reform at state level
Final outcome
It was thus becoming apparent that nature must, in the not far distant future,
institute bankruptcy proceedings against industrial civilization, and perhaps
against the standing crop of human flesh, just as nature had done many times to
other detritus- consuming species following their exuberant expansion in
response to the savings deposits their ecosystems had accumulated before they
got the opportunity to begin the drawdown...[Overshoot ISBN 0-252-00988-6 ]

"Drawdown" is the process by which we are using up the surrounding resources
faster than they can be replaced. Transgressing the carrying capacity for one
period lowers the carrying capacity thereafter, perhaps starting a downward spiral
toward zero

( 7 )

)8(

)9(

*****
Let the man of means spend according to his means: and the man whose
resources are restricted, let him spend according to what Allah has given
him. Allah puts no burden on any person beyond what He has given him.
After a difficulty, Allah will soon grant relief. And how many a community
revolted against the ordinance of its Lord and His messengers and We took
detailed accountability of their deeds and punished them severely. Then did
they taste the evil result of their conduct, and the End of their conduct was
great loss.
(Talaq 7-10)
Globalization
Deregulation
Concentration

MARKET
ECONOMY
Small & Local
CAPITALIST
ECONOMY
Large & Global
Global Financial System
Global Corporation
Culture &
Choice
Rules
People
Ownership
POWER SHIFT:
PEOPLE
GLOBAL FINANCE
Culture &
Choice
Rules
Local
Enterprises
People
Ownership
Source: Life after the Dominance of Capital, by David C. Korten
http://www.bke.hu/~kg_korny/altern/korten/kortpres.html
Most frequent
question is: Where
is modern Islamic
Economic System?
Surprisingly, the Quran troughs the question back to
us?

Create it based on the guiding principles keeping in
view needs and deeds of the society. Then keep on
modifying it based on the emerging needs of the
Humanity