Since I started my internship, even months prior, I have been back and forth on the matter of capitalism versus socialism, especially when having discussions with my husband. For years, I believed not in the superiority of a welfare state, but in its importance to nurture a healthy society. I remember being stupefied three years ago when a classmate in the States declared his detestation over high taxation; my understanding about taxation back then is limited to its similarity to the concept of zakat—to help. So how can high taxation possibly be bad?
But after doing my own research, through reading and understanding, I am proud to call myself a capitalist today. I now support a liberal market economy not because I support the accumulation of wealth primarily through capital, but through labor, which should be at the heart of a strong economy, and not welfare.
A hadith of the Prophet of God reads, “Nine-tenths of all rizq is derived from commerce.” And I believe most Muslims know of the story of how the Prophet instructed a beggar to sell his only belonging in order to use the capital gained for trade. Plus, have we forgotten that the Prophet himself was a trader and that Mecca was the center of caravan trade? Free trade is encouraged back in the day! In fact, during the early days of Islam, the government’s role was limited to combating fraud in business and to uphold justice, which is something every Muslim could agree is the cornerstone of our faith.
“And in no wise covet those things in which God hath bestowed his gifts more freely on some of you than on others: to men is allotted what they earn and to women what they earn: but ask God of His bounty: for God hath full knowledge of all things” (4:32).
The difference between capitalism in Islam and western capitalism is the importance of a safety net to protect those who are less well-off through zakat. Unlike taxation, zakat is a voluntary act of charity. It is not in the interest of the government to coerce citizens to part with their earnings so that wealth is spread equally. Instead, zakat acts as a trampoline only to launch a person into the right direction.
The practice of zakat is no different to what Germany practices. Germany, being the strongest economy in Europe, has a social market economy. A social market economy is also called a Christian democracy, because it seeks to apply Christian values of justice and fairness in economy—isn’t this similar to what Islam calls for? In Germany, free market is practiced throughout, but the government intervenes in such matter as pension, healthcare, and unemployment insurance, to name a few, through a combination of contributions and subsidies. In Islam, another word for that contribution is zakat.
I am not, however, promoting absolute capitalism as that found in the United States (before President Obama, that is). Absolute capitalism is about caring for oneself, and none other, which goes against the teachings of Islam. But to quote the Quran’s warning on riba as a testament to Islam’s support for socialism is also erroneous. Islam does not allow monopoly, but that is as far as it goes regarding government intervention. To ask for the government to go beyond by demanding a total welfare state is not only economically suicidal, but also un-Islamic.