CAPITAL

CAPITAL

Capital is that wealth which assists in the production of further wealth. It includes all those things, which instead of giving personal satisfaction, assist in the production of more wealth. According to Professor Thomas, wealth of individuals and nations, other than land, which is used in the production of further wealth, is called capital. It is the wealth which man acquires by his own labor and then uses it for producing more wealth.

Capital is the third factor of production which assists man in the production of wealth. Without the assistance of capital, large scale production in the modern industrial world becomes impossible because fruit of human labor alone is very meager. And we would not be wrong in saying that large-scale production and industrial progress that we have achieved in our age is all due to the use of capital. In fact capital is like blood in human body which runs into the veins of industry and keeps it going.

In view of the great importance of capital in human life, the Holy Quran refers to it as "mataa'ul haya addunnya" in Sura Al-'Imran:

"Fair-seeming to men is made the love of desires, of women and sons and hoarded treasures of gold and silver and well bred horses, cattle and tithe. This is the provision of the life of this world". (III: 14)

The Holy Quran calls wealth and capital as "provision for the use of man in this world" so that he may be able to produce more and more wealth for the gratification of his wants. The word "mataa'" refers to means of sustenance (i.e., production) but may here be taken for capital for it is mentioned after treasures of gold and silver and well-bred horses and cattle which are all different forms of capital. The use of the word "zuyyina" an indication of the great importance of capital in human life. A man with foresight and vision could easily see through these words of the Holy Quran the multifarious uses of capital in future.

The Holy Prophet emphasized the importance of capital in these words: "There shall be no envy but in two cases: The person whom God has given wealth (or capital) and power to spend It in the service of truth (for his own benefit and the benefit of people): and the person whom God has granted knowledge off things and he judges by it, and teaches-(to others)". The desire to have knowledge is here made akin-to the desire: to possess wealth which .is a natural desire in every human heart, and thus it is made clear that acquisition of knowledge is as important as that of wealth. The Holy Prophet being fully aware of the importance of wealth (capital) advised his companions to compete with one another in acquiring both knowledge and wealth.

Umar, the second, Caliph, persistently stressed upon the Muslims to acquire more and more wealth (capital). Mohammad .bin Said states' that there was not a single Muslim who fought in the battle of Qadsia, and received less than fifteen hundred to two thousand dirhams. And there was not a single child who was not receiving one hundred dirhams per month. Umar said, "I know that the allowance is more than their needs. It would be much better if -they buy a goat with the allowance and then buy one or two "ra'Is" (capital) when they receive second allowance. This would increase their capital and after them, their children would have something left and would not be empty handed (poor)".

Accumulation of Capital

Capital is the result of: saving which is possible only if income is greater than expenditure or; expenditure is less than income. Some people have -so much income -that even after meeting all their expenses, they are able to save but most of -the people have less income and more expenditure and are, therefore, unable to -save-under ordinary circumstances. The people can only save if they are encouraged either to increase their incomes by more productive use of their capital or to decrease their expenditure by cutting unnecessary expenses.

The amount of capital which can be used for production of further wealth depends entirely on the amount of saving. Therefore to increase the amount of capital in any country, it is absolutely necessary that, firstly the people should constantly endeavor to increase their income, secondly they should spend their income very carefully and cautiously and should abstain from extravagance and wasteful expenditure, and thirdly there should be prefect peace and security in the country to enable people to earn wealth freely and easily. Islam has recommended all the possible methods to increase the amount of saving in the community.

1.

Growth of Income: The first important factor liable to assist in the accumulation of capital is a rise in income. If income rises, there is a possibility of saving and hence of capital. Islam has suggested many useful methods to increase the growth of incomes in the community. They fall under two main headings:
1. Compulsory Measures and

2. Optional Measures.


1. Compulsory Measures

(i) Payment of Zakat: It comes under compulsory measures. Zakat or poor rate is a compulsory levy on cattle, crops, merchandise and gold, silver, or cash. It is a levy not on income but on total wealth which has been in the possession of the owner for full year, whether the owner has utilized his wealth in production or not, he is liable to pay Zakat every year. It is, therefore, a very effective weapon to force the capitals to invest their wealth in the production of more wealth or otherwise the capital would all be exhausted (finished) after some time by regular payment of Zakat every year. With every increase in investment, profits and incomes are likely to rise.

(ii) Prohibition of Interest: Interest is totally forbidden in a Muslim state and people are not allowed to make money by lending their capital on interest.. It is therefore most probable that people would invest their capital in productive channels, and thereby increase their profits and incomes (for details see chapter on Interest and Zakat in the 2nd volume).

2. Optional Measures

Besides Zakat there is some other morally binding, but very useful and effective, measures which assist in raising the incomes of people in an Islamic State.

(i) Utilization of Orphans' Wealth: To encourage growth of capital in the community, the guardians of orphans are asked to invest orphans' capital in trade and other profitable enterprises and not to keep it hoarded or idle. They are also asked not to waste their property but utilize it in a proper way for their benefit. This is mentioned in the Holy Quran in these words "And make not over your property, which God has made a (means of) support for you, to the weak of understanding then if you find in them maturity of intellect, make over to them their property". (IV : 5-6)

The Holy Quran is here emphasizing the fact that wealth (of the orphans) is not a thing to be despised or wasted for it is a means of support for them. It is your duty to utilize their capital in profitable enterprises so as to defray their expenses from the profits and not from the capital and thus make it a suitable means of sustenance for them.

The Holy Prophet in very strong words told the guardians to utilize orphans' wealth in production and not to leave it idle:

"Beware! Whosoever among you is the guardian of an orphan, who has wealth, should trade with it (i.e., invest it in profit able business) and should not leave it (hoarded), so that (the regular annual levy of) Zakat should consume it".

According to Imam Malik, Aishah, wife of the Holy Prophet, used to give the orphans' wealth to the traders in order that they might trade with it and make profit for the orphans. Similarly Umar, Othman and Ali, during their respective periods of Caliphate, invested orphans' wealth in trade (and other business). And Umar used to say: "trade with orphans' wealth lest it be exhausted by (regular payment of) Zakat".

(ii) Re-Investment of Cash: Growth of capital is regarded 'very important and every Muslim is expected to re-invest his cash in business. In this connection, the following Hadith is very significant "God may not bless the price of that land and that hose which is not again re-invested in land or a house".

Another Hadith emphasizes the importance of capital in these words "Whosoever sells a house or land yielding revenue, and then not re-Invest the price on a thing akin to it, he is not likely to be blessed therein (and his wealth is not likely to grow)".

This shows very clearly that the Holy Prophet was very keen on maintaining the rate of growth of capital in the community. He insisted upon Muslims to preserve their capital and not to sell it for it could be utilized in producing more wealth. If anyone was forced by circumstances to sell any of these things, he was persuaded to buy similar (productive) property with that money.

(iii) Leaving Successors Wealthy: To further help the growth of capital in the community, Islam has encouraged people to leave -their heirs rich and prosperous and not to give away all their .wealth in charity. The Holy Prophet emphasised this in these words "It is better to leave heirs rich than to leave them poor in order that they be begging at other people's doors".

Said Ibn Waqas is reported to have said that: "the Holy Prophet used to visit him at Mecca, in the year of his farewell Pilgrimage, on account of (his) illness which had become very acute. So he said (to the Prophet); it; shall -he then bequeath two-thirds of his property in charity ? He said, no. He asked -him ` for half. He again said, no. Then he asked (him) to bequeath one-third and (said even) one-third is too much, for if he- leaves his heirs free from want, it' is better than that he leaves them in poverty, begging of (other) people".

These sayings of the Holy Prophet clearly show that excessive charity, that renders one's successors poorer, is not an act of piety or virtue. It is better that one should leave more wealth to one's successors so that they could live a better and prosperous life. This attitude towards life and property helps in the growth of capital in the community in general.
2.

Avoidance of Extravagance: Even if income grows; there cannot be sufficient saving if expenditure of the people grows faster. Therefore it is necessary to curtail unnecessary and superfluous expenses and check the growth of extravagance in the community. In order to achieve this objective, the Holy Quran has in very strong words condemned and prohibited extravagance and prodigality in a Muslim community. In Sura Al-`Araf, it is stated

"Eat and drink, but waste not by excess, for God loveth not the prodigals". (VII : 31) .

In Sura Bani-Isra'il: "Squander not wastefully, surely the squanderers are the devil's brethren. And the devil is ever ungrateful to his Lord;" (XVII:26-27)

Thus the Holy Quran, while enjoining charity, draws attention to economy and thereby to the Golden Mean between the two extremes of extravagance and miserliness. Those who waste wealth are called the devil's brethren because they are ungrateful to God for wasting away what He has given them out of His Grace for their maintenance and-support in this world.

In order to discourage extravagance, the Holy Quran has even prohibited such things which encourage or spread habit of extravagance among the people. This' is stated in these words:

"0 ye who believe 1 intoxicants and gambling' and idols and (dividing by) arrows, are an abomination,-of Satan's handiwork; leave it aside in order that ye may, prosper". (V : 93)

The Holy Quran, by calling upon all Muslims to leave such things which lead extravagance, if they want to prosper, has indicated a negative relationship between extravagance and prosperity. It is undoubtedly true that nations who indulge in extravagance and prodigality soon exhaust their savings which adversely affect their investment and production and thereby turn their prosperity into poverty and hunger.
3.

Hoarding: Another factor which checks the growth of capital is hoarding. If wealth, instead of being used for the production of more wealth, is left idle or buried under the ground, as is the habit in most Asian, African and South American countries, it is bound to reduce the amount of working capital available for investment in trade, agriculture and industry. This is likely to slow down the rate of economic development and gradually impoverish the country.

Islam condemns this habit of hoarding like that of miserliness and describes it as one of the qualities of the sinners in these words "And hoards then withholds". (LXX: 18)

These words describe the state of mind of those people who go on hoarding all the time and are never satisfied. They bury their treasures and seal them so that they are never spent. In Sura Al-Tauba a warning is given to those who hoard their wealth and spend it not "And those who hoard up gold and silver and spend it not in God's way-announce to them a painful chastisement". (IX: 34)

Acquisition of wealth is permissible but hoarding of it in such quantities, as is harmful to the community, is strictly prohibited. If every one starts hoarding up his wealth, then the whole working capital of the community will be locked up and nothing (or very little) will be left for maintaining the channels of trade and industry in working order for the benefit of all. In other words, welfare of the community as well as of the individual, demands that capital should be constantly available in sufficient quantities to maintain and develop commercial and industrial resources of the country. Any diminution in the essential supplies of capital through hoarding or otherwise, is likely to damage the economic growth of thee country and, consequently, the general and individual welfare of the people.

Again in Sura Al-Humazah hoarding is described as a quality of the people who are condemned to the fire of Hell in the following words "Woe to every slanderer defamer! Who amasses wealth and counts it-. He thinks that his wealth will make him abide". (CIV: 1-3)

Just as goodness and patience are combined in the previous Sura Al-Asr as the two qualities which are the foundations on which human character should be built and which lead to success in this life and the Hereafter ; "the amassing of wealth and defaming are combined here as the two evils which suck the blood of social (and economic) progress and lead ultimately to poverty and disaster".

In view of the harmful effects of hoarding, as described in the Holy Quran, the companions of the Holy Prophet condemned this habit as unproductive and wasteful. According to Kais Ibn Ali Asim, "we went to Khabbab while he was erecting wait. He said, a Muslim gets a reward for spending his wealth on everything except for burying it in the ground (i.e., hoarding)".
4.

Peace and Security: For accumulation of capital, it is necessary that there should be peace and order in the country. In fact, production and, in particular, accumulation of capital is very, much dependant on peace and security. If there is peace and security in the country, people are likely to work harder and save more than if there-is disorder and insecurity of life and poverty when they are likely to get less opportunities for working and saving.

The Holy Quran enjoins the Muslims to maintain peace and stability in the country so that people may prosper and live a happier life. If there is any evil element in society which is likely to grow and disturb the' peace and tranquility of the system. The Holy Quran commands Muslims to check growth in these words:

"And fight them until there is no more tumult or oppression, and the economic and social-life of the people become subject to the principle of justice and equity in the name of God". (II: 193)

Muslims are here asked to fight for peace and justice for every one in the country. But "when persecution ceases, and men are not forced to accept or renounce creed, being at liberty to profess any belief of the truth- of which they are convinced, then there should be no fighting. The-words that follow make the sense quite clear. If they desist from persecution, the Muslims are at once to stop fighting against them, and hostilities are not to be continued against any except the aggressors".

A comparison with verse 40 of Sura Al-Hajj will show that this is the correct explanation. There the object of the Muslim fights is plainly set forth in the following words (XXII: 40): "And if God did not repel. some people by others, cloisters and churches and synagogues and mosques- in which God's` name is' much remembered would have been pulled down". This shows clearly that the Muslims fought not only in defense of mosques and of their own social and economic system; but also in that of churches, of synagogues, and of the economic and social, system they represented. The same object is stated here in the above verse that there is no persecution on the score of belief, and every one is at liberty to hold any belief which he likes: The verse, in fact, lays down the- broad' principles of religious, social and economic freedom. The words "except against the, oppressors" signify that hostilities can only be carried on against the oppressors, so that when they desist from oppressing, hostilities against them must be stopped".

The same principle was stated by the Holy Prophet at the time of his last Pilgrimage in these Words:

The same principle was stated by the Holy Prophet at the time of his last Pilgrimage in these Words:

"Surely God' has' made sacred' to- you (prohibited you from unlawfully acquiring) your Blood' and your property and your honor as this day of yours (day of Pilgrimage) is sacred in this month of yours in this (Holy) city of yours".

In these words the Holy Prophet clearly made it a- duty of every Muslim, individually as well as collectively, to maintain peace and security in the country so that no one could- violate individual rights and usurp other` people's property or endanger their life or harm their honor (II:188, IV:5, V:32, VI:152, XXV:68).