Economic Thoughts of Redistribution of Income and Wealth: A Comparative Analysis

By Azizi Che Seman and Nor Aini Ali

Comparison between conventional and Islamic views on redistribution of wealth.

Distribution

Conventional – there are 2 types of people who have a right to acquire wealth and property and to dispose
• Those with primary rights – ie those that participate in the process of production (ie those that have any of the 2 factors of production – labour, land, entrepreneurship or capital)
• Those with secondary rights –

Islam – enjoins upon those in the primary group to share with the secondary group


Redistribution

Redistribution of wealth is important when the market system is imperfect.

Conventional:-

Arguments against redistribution
1. labour and capital are paid in accordance with the value they produce. Land and capital owners receive profit or interest because the land or capital they own is productive
2. freedom of contract
3. taxation and transfer programs interfere with the basic incentives

Arguments for redistribution
1. utlilitarian justice – ie a dollar in the hands of a rich man is worth less to him than a dollar in the hands of a poor man
2. or if someone has more than another, a utility gain will result from transferring income from those with more to those with less – utility function
3. simple fellow feeling
4. social contract theory – Rawlsian justice – inequality would only be tolerated in a society as long as some of the benefits went to those at the bottom
5. Marx – he places all value on labour and none on capital, so that profits are an expropriation by the capitalist of the fruits of labour’s effort
6. Income distribution as a “public goods”

Islamic

1. Redistribution is aimed to maintain justice and equity in society
2. Ibn Taymiyyah – eradication of poverty is an obligation of the state
• It is duty of state to help people better themselves financially
• Redistribution of income is duty of the state
• There are other obligations on Muslims apart from zakah = on the basis of need of the society
• Do this by right taxation, in addition to zakah
• Waqf for the use of the rich is considered invalid because wealth should not circulate among the rich only
3. “Ibn Hazm (994-1064) who says that it is the duty of the rich of every country to support the poor, and that the ruler has a right to force them to do so, if zakah and other public revenue is not sufficient.”
• Basic standard of living is food, shelter, clothes and water
• State must provide for the basics
• But the function of eradicating property is not just left to the state but also to the rich
• Taxes can be imposed if zakah is not sufficient