The Economic System of Islam


By: Hazrat Mirza Bashiruddin Mahmud Ahmadra

Publishers: Islam International Publications Ltd.

This book is a print version of a lecture delivered by Hazrat Mirza Bashiruddin Mahmud Ahmadra, second successor of the Promised Messiahas, titled Islam ka Iqtisadi Nizam

The lecture was delivered in Lahore, at the Ahmadiyya Hostel, on 26 February 1945. The main purpose of the lecture was to show that it is only through the teachings of Islam that a truly just system of governance and economics can be established. The lecture, in light of the Holy Quran and the practice of the Holy Prophetsa, elaborates the responsibilities of both the rulers and the ruled, and leaves no doubt that the Islamic system of governance is fundamentally democratic, based on free and fair elections in the best sense of the word. It also ensures that justice will prevail, incentives for achieving excellence would be provided, and the basic needs of all will be satisfied. However, a proper governance structure is a pre-requisite for the establishment of the Islamic economic system – it would be impossible to have an Islamic economic system in an otherwise corrupt political and social environment. 

After giving an in-depth description of the main elements of the Islamic system of economics, the second half of the lecture is devoted to a critical evaluation of communism. It is demonstrated that the communist system is really not what it claims to be, and it has inherent contradiction which will cause its downfall. This is followed by a presentation of three prophecies about the decline of the Communist system in Russia – a prophecy of Prophet Hizqilas [Ezekiel], a prophecy of the Promised Messiahas, and a dream of Hazrat Khalifatul Masih IIra (the speaker) himself. What unfolded in the years and decades after this lecture was delivered are enough to prove the fulfilment of these prophetic words and visions.

We present below some excerpts from the lecture as no better words than those of the great orator himself can justify the topic.

Describing the nature of economic systems of the world, Hazrat Khalifatul Masih IIra states:

“The economic systems prevalent in the world can be classified into three types. There is one type of economic system that is not governed by any specified rules and regulations, and can be called a ‘system’ only for the sake of convenience. Some nations and countries never spelled out how their economic system would be run and had no specific plan or policy towards that end. Such societies do not distinguish between individual and national goals, and in the absence of a set policy, adopt any idea that appears convenient or practical. The second system is nationalistic in its approach, that is, one where nations seek only to maximise their collective national interests. The third system is individualistic, i.e., it gives individuals an opportunity to work on their own for the betterment and progress of their country. Workers as well as owners of capital are permitted to struggle for their rights and pursue their self-interest. Employees have the right to negotiate their wages and benefits with the management, which in turn is expected to institute clear rules and regulations governing workers. Thus the emphasis in this system is on the individual. These are the three basic economic systems that exist in the world today. The first system is not bound by any definite laws or rules; the second system is nationalistic in its approach, while the third is driven by individualism. Islam does not accept the first system at all, for the Islamic system is based on prescribed principles and laws, which people are enjoined to follow. Islam relies on purpose and wisdom, and does not approve of indiscriminate adoption of economic policies. A system without well-designed laws is akin to feeding off of wild vegetation that grows on its own. Islamic system, on the other hand, can be compared to a farmer who follows a set routine for sowing seeds, irrigation, and nurturing plants. He knows what to keep in his orchard and what to throw out.”

In this variety of systems, Hazrat Mirza Bashiruddin Mahmud Ahmad, Khalifatul Masih IIra goes on to explain the very nature of the Islamic economic system:

“The essence of the economic system of Islam lies in an appropriate combination of individual freedom with state intervention. It allows state intervention to a certain extent, but it also provides for individual freedom. A proper balance between these two defines the Islamic economic system. Individual freedom is granted to enable persons to build up assets and spend them voluntarily in order to gain the spiritual benefits in the life to come. State intervention, on the other hand, is provided in order to protect the poor from economic exploitation by the wealthy. The state intervention is deemed essential for putting in place certain safeguards against harming the weaker sections of society, while individual freedom is deemed essential for a healthy competition among individuals and for enabling them to make provisions for the life hereafter. Individuals are given full opportunity to voluntarily serve humanity and earn merit in the life hereafter. Individual freedom thus opens up endless possibilities of progress through the force of healthy competition. At the same time, judicious state intervention is provided so that the economic system is not based on brutality and injustice and hindrances to economic progress of any section of society are avoided. It should now be easier to understand that religions that believe in the hereafter in general, and Islam in particular, do not view the issue in simple economic terms, but from a religious, moral and economic perspective. Religion does not seek a purely economic solution because such a solution might interfere with the moral and religious aspects of life, which would be unacceptable. A non-believer is of course free to view economic problems in isolation. But a religious person would not judge an economic system from purely an economic perspective. He would demand an economic system that also respects his moral and religious requirements.”

After a thorough examination of capitalism and communism, Hazrat Khalifatul Masih IIra identifies where problems with both the systems lie and how the only possible way forward happens to be the Islamic way:

“After reflecting over these important matters, a reasonable person would conclude that a practical economic system must leave room for religion. Short term economic considerations must not permit that the longer term consequence of an economic system be ignored. Only that economic system would be beneficial to humanity which fulfils everyone’s basic needs, but also promotes healthy competition among individuals while curbing unhealthy rivalry. The fact is that communism was a reaction to past tyranny. That explains why this philosophy spread to areas where people were oppressed, but it did not take root in such countries as Great Britain and the United States. Similarly, it has not been successful in countries where nationalist or socialist governments were in power. Some time ago an American newspaper posed an interesting question to the working classes: Do you consider yourself to belong to the capitalist class, the middle class or the poor class? The majority of the respondents said that they considered themselves to be in the middle class. This suggests that it does not occur to an American worker that he is poor. This is the reason why communism was an even bigger failure in the United States than in Great Britain. On account of the abundance of wealth in America the labouring class does not feel that they are impoverished and are in need of a system that redresses their complaints and meets their basic needs. Thus, the real solution to the problem is that: 

1. In accordance with the Islamic teaching, the rights of the poor should be safeguarded; and 

2. The hopes and aspirations of people should be fostered.”


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