1. ISLAMIC ECONOMIC SYSTEM 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

2. 1 Principles of Islamic economic system

3. Devine Economic Plan Malik 2 وَهُوَ الَّذِي جَعَلَكُمْ خَلاَئِفَ الأَرْضِ وَرَفَعَ بَعْضَكُمْ فَوْقَ بَعْضٍ دَرَجَاتٍ لِّيَبْلُوَكُمْ فِي مَا آتَاكُمْ 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) فَإِذَا مَسَّ الْإِنسَانَ ضُرٌّ دَعَانَا ثُمَّ إِذَا خَوَّلْنَاهُ نِعْمَةً مِّنَّا قَالَ إِنَّمَا أُوتِيتُهُ عَلَى عِلْمٍ بَلْ هِيَ فِتْنَةٌ وَلَكِنَّ أَكْثَرَهُمْ لَا يَعْلَمُونَ 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 وَاللّهُ فَضَّلَ بَعْضَكُمْ عَلَى بَعْضٍ فِي الْرِّزْقِ And Allah has made some of you excel others in wealth. (Nahal 71)

4. Output/Resource ( قوت ) Outcome ( مقصد ) Work ( كام ) Mission of Islam ( اسلام كا نصب العين ) Human Welfare انسانيت كى فلاح Spiritual Power جانى جهاد Economic Power ما لى جهاد Piety نفس كا جهاد Unity اجتمائى جهاد Prayer صلاة Charity زكاة و انفاق Fasting روزه Hajj حج Social System معاشرتى نظام Economic System معاشى نظام Political System سياسى نظام Spiritual System روحانى نظام

5. Target of Islam ( اسلام كا نصب العين ) Good deeds عمل صالح Belief مقصد حيات إِنَّ الَّذِينَ آمَنُواْ وَعَمِلُواْ الصَّالِحَاتِ وَأَقَامُواْ الصَّلاَةَ وَآتَوُاْ الزَّكَاةَ لَهُمْ أَجْرُهُمْ عِندَ رَبِّهِمْ وَلاَ خَوْفٌ عَلَيْهِمْ وَلاَ هُمْ يَحْزَنُونَ (Baqra 277) وَعَدَ اللَّهُ الَّذِينَ آمَنُوا مِنكُمْ وَعَمِلُوا الصَّالِحَاتِ لَيَسْتَخْلِفَنَّهُم فِي الْأَرْضِ كَمَا اسْتَخْلَفَ الَّذِينَ مِن قَبْلِهِمْ وَلَيُمَكِّنَنَّ لَهُمْ دِينَهُمُ الَّذِي ارْتَضَى لَهُمْ وَلَيُبَدِّلَنَّهُم مِّن بَعْدِ خَوْفِهِمْ أَمْنًا (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) الَّذِينَ إِن مَّكَّنَّاهُمْ فِي الْأَرْضِ أَقَامُوا الصَّلَاةَ وَآتَوُا الزَّكَاةَ وَأَمَرُوا بِالْمَعْرُوفِ وَنَهَوْا عَنِ الْمُنكَرِ وَلِلَّهِ عَاقِبَةُ الْأُمُورِ Economic System ( رزق ) اقامت زكاة Morality System ( شريعة ) اقامت صلاة روح كى غزا جسم كى غزا Accumulation of Wealth ( منكر ) دولت كا ارتكاز X Distribution of wealth ( معروف ) دولت كى تقسيم  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

6. Economic Principles of Islam Earning Side آمدنى Usage Side مصارف َأَحَلَّ اللّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا Allah has allowed business and forbidden usury (Baqra 275) 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. State ( حكومت ) Distribution سدباب تكاثر Individual ( فرد ) Frugality & Sharing عفو (Tauba 34-35) وَالَّذِينَ يَكْنِزُونَ الذَّهَبَ وَالْفِضَّةَ وَلاَ يُنفِقُونَهَا فِي سَبِيلِ اللّهِ فَبَشِّرْهُم بِعَذَابٍ أَلِيمٍ (34) يَوْمَ يُحْمَى عَلَيْهَا فِي نَارِ جَهَنَّمَ فَتُكْوَى بِهَا جِبَاهُهُمْ وَجُنوبُهُمْ وَظُهُورُهُمْ هَذَا مَا كَنَزْتُمْ لأَنفُسِكُمْ فَذُوقُواْ مَا كُنتُمْ تَكْنِزُونَ But if you do not stop taking usury, then be ready for war with Allah and His Messenger (Baqra 279) فَإِن لَّمْ تَفْعَلُواْ فَأْذَنُواْ بِحَرْبٍ مِّنَ اللّهِ وَرَسُولِهِ 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) وَيَسْأَلُونَكَ مَاذَا يُنفِقُونَ قُلِ الْعَفْوَ كَذَلِكَ يُبيِّنُ اللّهُ لَكُمُ الآيَاتِ لَعَلَّكُمْ تَتَفَكَّرُونَ (Baqra 219) كَيْ لَا يَكُونَ دُولَةً بَيْنَ الْأَغْنِيَاء مِنكُمْ “… in order that wealth may not become confined to the rich amongst you”. (Hashar 7) Business بيع Usury ربا + -

10. Individual Distribution (Arteries) State Collection & Re-distribution (Veins) Economics: A life blood system of Society

11. Money Labor + Capital (Entrepreneurship) Land Middlemen Machine Partnership (Labor + Capital) Status of Sources of Income Ideal Permitted Restricted Prohibited Medium of Exchange

12. % of contribution Distribution Channels ( عبادت ) Voluntary Charity ( انفاق ) Entire wealth in access of basic needs Inheritance ( وراثت ) Strictly in accordance with injunction of Quran Zakat ( زكاة ) Payable on wealth of individual Taxes ( تيكس ) Taxes imposed by state to provide basic needs of its citizens Compulsory واجبات Marriage payment and penalties on certain faults

14. Property business (Plots) X X 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 ? Y 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

15. 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 Value “Rs”

16. 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. لاَ يُكَلِّفُ اللّهُ نَفْسًا إِلاَّ وُسْعَهَا لَهَا مَا كَسَبَتْ وَعَلَيْهَا مَا اكْتَسَبَتْ 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) Islam does not permit limitation of liability. Every individual is fully responsible for his deeds وَلَا تَزِرُ وَازِرَةٌ وِزْرَ أُخْرَى وَإِن تَدْعُ مُثْقَلَةٌ إِلَى حِمْلِهَا لَا يُحْمَلْ مِنْهُ شَيْءٌ وَلَوْ كَانَ ذَا قُرْبَى 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 زرائ آمدنى Credit قرض Judges جج Law قانون Politicians سياست دان Jobs ملازمت Media ابلاغ Trade كاروبار Commerce تجارت Production بيداوار Corporate Capitalist Citizen (limited liability) (1886)

19. Mirror view before/After Implementation Cowardice Ignorance Tensions Fear Hunger Servitude Debt Threats Tyranny Savagery Cut-throat competition Self-centeredness Criminality Robbery Theft Racism Before (Savage Society) Exploitation Deprivation Intellect Compassion Care of kin Affection Sincerity Freedom Fortitude Munificence Zeal & Endeavor Piety Courage Happiness Justice Content Satisfaction Chastity Humility After (Natural Society) Harmony Non-contributory /Contributory Social Security Plan (Surplus Pool)

21. 2 Principles of current economic system

24. Framework of integrated human ecosystem فطرى اور انسانى قوانين كا ربط 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. X Y X X Social Process Demography Technology Economy Institutions Culture Information Ecological Process Primary production Populations Organic matter Nutrients Disturbances External Biological, Geological & Physical Conditions External Political & Economic Conditions Interactions Land use Land cover Production Consumption Disposal Human Systems انسانى قوانين Natural Systems فطرى قوانين

25. 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.

26. U.S. National Debt Clock US Population Current Interest Rate http://www.brillig.com/debt_clock/ As of 25 th January 2006 DEBT WHIRLEPOOL 77 times of national total now

27. 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. B y applying the Islamic approach, a lot of human misery could have been avoided . 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 1 Kg in year 1 Weight of Earth No of earths Kgs in year 2000

29. 3 Outcome of current economic practices

30. وَآتِ ذَا الْقُرْبَى حَقَّهُ وَالْمِسْكِينَ وَابْنَ السَّبِيلِ وَلاَ تُبَذِّرْ تَبْذِيرًا (26) إِنَّ الْمُبَذِّرِينَ كَانُواْ إِخْوَانَ الشَّيَاطِينِ وَكَانَ الشَّيْطَانُ لِرَبِّهِ كَفُورًا ***** 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 كثرت استمال Explosion of Over-production كثرت بيداوار Explosion of Over-wastage كثرت ضياع Explosion of Over-supply كثرت ترسيل Explosion of Debt سودى كاروبار كا جال Explosion of Competition اندهى مقابله بازى

32. Modern tragedy of Contradictory Laws Integral System X Self-Centered Overnight Profit Quick Usage "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 Moral Laws Physical Laws Economic Laws

34. March towards Destruction? Each U.S citizen requires energy of 300 persons working round the clock

35. 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 Labor 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 Wood Labor Domesticated Animals

36. 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

37. 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)

38. 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)

39. فَكَأَيِّن مِّن قَرْيَةٍ أَهْلَكْنَاهَا وَهِيَ ظَالِمَةٌ فَهِيَ خَاوِيَةٌ عَلَى عُرُوشِهَا وَبِئْرٍ مُّعَطَّلَةٍ وَقَصْرٍ مَّشِيدٍ 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

40. 4 What should we do?

41.     Penalties on various crimes War with Allah & Rasul Interest Economic Revenge (Qasas) Killing Political 100 Lashes Sex Social Disliking/Curse of Allah various Moral Action Crime Level

44. 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 لِيُنفِقْ ذُو سَعَةٍ مِّن سَعَتِهِ وَمَن قُدِرَ عَلَيْهِ رِزْقُهُ فَلْيُنفِقْ مِمَّا آتَاهُ اللَّهُ لَا يُكَلِّفُ اللَّهُ نَفْسًا إِلَّا مَا آتَاهَا سَيَجْعَلُ اللَّهُ بَعْدَ عُسْرٍ يُسْرًا ( 7) وَكَأَيِّن مِّن قَرْيَةٍ عَتَتْ عَنْ أَمْرِ رَبِّهَا وَرُسُلِهِ فَحَاسَبْنَاهَا حِسَابًا شَدِيدًا وَعَذَّبْنَاهَا عَذَابًا نُّكْرًا (8) فَذَاقَتْ وَبَالَ أَمْرِهَا وَكَانَ عَاقِبَةُ أَمْرِهَا خُسْرًا (9) أَعَدَّ اللَّهُ لَهُمْ عَذَابًا شَدِيدًا فَاتَّقُوا اللَّهَ يَا أُوْلِي الْأَلْبَابِ الَّذِينَ آمَنُوا قَدْ أَنزَلَ اللَّهُ إِلَيْكُمْ ذِكْرًا ***** 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)

45. 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 X

46. 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

47. Jazakallah