Friday, 16 December 2011

Economic System: Capitalism Economy System, socialism Economy System, mixed Economy System, Islamic Economy System.

Economic System: Capitalism Economy System, socialism Economy System, mixed Economy System, Islamic Economy System.


Economics is a social science and it is important in our social life political life, economic life and daily life. Economics provides us with the knowledge and insight necessary to understand the impact of developments in business, society and the world economy. It enables us to understand the decisions of households, firms and governments based on human behaviors, beliefs, structure, constraints and need.
A social science dealing with interrelationships and predictions (estimates) of production, distribution of good and services, economics helps us with our daily routines (Micro-economics) or our planning for the entire economy (Macro-economics) economics is important because it approximates and predicts economic behavior, be it individual or national or international .Because it shows the world how the country has been improving in its assets.

Economic system is the combination of the various agencies, entities (or even sectors as described by some authors) that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. An economic system is composed of people, institutions, rules, and relationships. For Example, The convention of property, the institution of government, or the employee-employer relationship, Examples of contemporary economic systems include capitalist systems, socialist systems, and mixed economies. Today the world largely operates under a global economic system based on the capitalist mode of production.

Capitalism Economy System:

An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market. For Example:

Capitalism is at once far too rational, trusting in nothing that it cannot weigh and measure, and far too little as well, accumulating wealth as an end in itself.

Features of capitalism Economy System:

(a) There is a market where there are goods/services produced for exchange.
(b) Productive wealth is held mainly in private hands .

(c) Economic life is organized according to market principles of demand and supply.

(d) Material self-interest and profit maximization provide the motivation for hard work.
Socialism Economy System:

Economic system in which the means of production are commonly owned and controlled cooperatively; or a political philosophy advocating such a system, As a form of social organization, socialism is based on co-operative social relations and self-management; relatively equal power-relations and the reduction or elimination of hierarchy in the management of economic and political affairs. As an economic-system, socialism is structured upon production for use – the direct allocation of resources toward useful production. In some cases, financial calculation is replaced with calculation-in-nature – such as energy accounting or physical quantities. The output generated – goods and services for consumption – is distributed through markets.
Features of socialism Economy System :
(a) Command Economy:

Central Planning and strict Bureaucracy is the main feature of Socialistic Economy. It directs all Political and Social Activities.

(b) Limited Role of Market:

Generally the Market is determined by Demand and Supply and here as the Government decides the production allocation of resources it is having minimum role to play.

No private ownership of property or factors of production. The government is the owner of all properties. Only a little Private property is allowed and no property rights, hereditary rights.
(c) Central Planning:

The main feature of Socialism is central planning which decides the basic problems like 1) what to produce? 2) How to produce? 3) For whom to produce? The Central
Planning committee sets the goals for the economy and also he time frame within
these goals are to be realized.

(d) Social Security and welfare:

In a Socialistic Economy the government decides all economic decisions and sets the goal of the economic welfare and security of weaker sections of society and aged people.

Mixed Economy system:

Economy in which both market forces and government intervention and direction are used to determine resource allocation and prices and Mixed economy is a system where the government has some control over the production of goods and services in the economy. An economic system is that includes a mixture of capitalism and socialism. This type of economic system includes a combination of private economic freedom and centralized economic planning and government regulation. An example of a mixed economy country is Canada. In Canada the government places a priority on all parts of economy, such as Growth, Efficiency, Security, Stability, Equality, and Freedom.

Features of Mixed Economy System:

(a)The private sector controls some part of natural resources and the government controls the other.

(b)The government plays an important role in resolving economic problems faced by society.

(c)Private ownerships and governments cooperate to produce goods and resolve together fundamental economic problems.

(d) The government also provides services such as education, health, military defense, legal and infrastructure to society.

(e) The government influence in determining the goods to be produced.

Islamic Economy system:

Islam views life as a compact whole and does not divide it into many separate and conflicting parts. The economic aspect is one of the most important parts of our life, while not being the whole of it. The Islamic system is balanced and places everything in its right place. Islam has given detailed regulations for the conduct of our economic life which concerns mainly the earning and use of wealth.

Man needs bread to live but he does not live for bread alone. This means that earning and spending money is essential for our living, but we do not live only for this. We have a greater purpose in life.

Everything in Islam is for the benefit and welfare of mankind. The economic principle of Islam aim at establishing a just society wherein everyone will behave responsibly and honestly and not as ‘cunning foxes’ fighting for as big a share of something as possible without regard for honesty, truth, decency, trust and responsibility.

Features of Islamic Economy System:

a) The Concept of Private Property:

Basic Principles in Islam for Consumption or Investment of private property are

* Concept of "HALAL" and "HARAM" for earning or in production and consumption of wealth.
* A property cannot be used against public interest.
* Show much as you have something.
* Real/money Capital cannot be used for gain.
* Payment of Zakat is compulsory.

b) Consumption of Wealth:
In Islamic System uses of luxuries are not allowed because it against the concept of "TAQWA" should have distinguished between "HALAL" and "HARAM"."BUKHAL" and "ISRAF" are to be avoided.
c) Production of Wealth:

Price mechanism plays a key role in carrying out the production process in an Islamic Society. As Price system results in the expectations of workers and consumers the Govt. Interferences with the price mechanism to over come the problem. These things are not allowed in Islamic System.

* Production of drugs, gambling, lotery, music, dance etc.

* Lending and borrowing on interest

* Black marketing, Smuggling etc.

d) Distribution of Wealth:

Islamic Economics System favour fair (not equal) distribution of wealth in the sence that it should not be confined to any particular section of the society. For fair distribution of wealth Islam gives following steps

* "BUKHAL" and "ISRAF" are to be avoided.

* Payment of Zakat.

* Interest not allowed

* Monopoly of Private firm not allowed

* Earning from Black Market.

e) The Concept of Zakat:

Zakat is a major source of revenue the government in an Islamic state. It levy on all goods and money or on wealth if have to pay yearly on the month of RAJAB or RAMADAN.

f) Interest free Economy:

The whole financial system the bank structure in particular is run on the basis "SHARAKAT" and "MUZARABAT" in Islamic state. Therefore, Islamic economics is an interest free economy.

g). Responsibility of the Government :

Responsibility of the Islamic Government are

i. Should Check un Islamic activity like gambling, smuggling, black marketing etc.

ii. Should secure poor people by giving them necessity of life i.e. food, clothing, health etc.

iii. Should provide equal employment opportunity.

iv. Social and Economic Security is required to guarantee by the Govt.

There are some comparisons are shown insert a table below:







This system is based on private or corporate owner ship of capital goods.

This system is based on co- operative relations and self management.

This system is the mixture of capitalism and socialism.

This system is mainly based on earning and use of health.


All investments are depends on private decision.

All investments are depends on government decision.

All investments are depends on both government and on private sector.

All types of investing decision depend on a private company.


Product price and distribution can be motivated according to the market demand.

The market is determinate by demand and supply.

Private sector and government sector together produce and distribute product.

Its mainly work for distribute wealth.

Developing sector

Self interest materials and profit maximize the motivation of hard work.

Financial calculation and energy can develop the production.

The government influences to develop the production.

A very important thing is that it’s a interest free economy so this economy has made an different place.

Service provide

It services to provide wealth for more production.

It sets the whole planning of economic growth.

It provides services education health military legal and infrastructure to society.

Interest free economy and the concept of zakat is the most important part.


A private company can take all decision.

Only government can take all decision.

Both the private and government sector takes decision.

Any Islamic private sector can takes decision


It works with the competition of free market

It it does not work with the free market

Its work with the market demand

Its work for donate money from zakat concept.


Its not interest free economy system.

Its not interest free.

Its not interest free.

It’s a interest free economy system.


Good and capital is the main source.

Co operative relation is main source.

Capital and co operative relation both is main.

Islamic concept zakat is the main source.


The royalty of legal works is not conforming.

Conformed legal works.

Mixture result.

Always legal work.



Not enough.




Economic work as a monitor of a countries financial condition. it plays a very perfect play to make a success of any country. The economic systems are the element of economic task circle. Capitalism is a major element with a heavy man power and capital goods. Socialism, mixed, and Islamic economic system are also working together to develop the production of goods and distribution of goods as market demand. But today the world largely operates under a global economic system based on the capitalist system on mode production.

Economic system is the perfect system to improve a countries financial condition. Capitalism is the good one which is followed by most developing countries. But I like most the mixed economic system. And why i like this system? in my thinking private sector is more faster then government sector and facilities are available in private sector. Government always had done the legal task so this economic system is based on both sectors. So I like it.

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