Islamic capitalism was active during the

Islamic Golden Age The Islamic Golden Age was a period of scientific, economic, and cultural flourishing in the history of Islam, traditionally dated from the 8th century to the 13th century. This period is traditionally understood to have begun during the reign o ...

and

Arab Agricultural Revolution The Arab Agricultural Revolution was the transformation in agriculture in the Old World during the Islamic Golden Age (8th to 13th centuries). The agronomic literature of the time, with major books by Ibn Bassal and Ibn al-'Awwam, demonstrates t ...

, where an early

market economy A market economy is an economic system in which the decisions regarding investment, production, and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a mark ...

and form of

merchant capitalism Some economic historians use the term merchant capitalism, a term coined by the German sociologist and economist Werner Sombart in his "The Genesis of Modern Capitalism" in 1902, to refer to the earliest phase in the development of capitalism as ...

took root between the 8th–12th centuries. A vigorous

monetary economy Monetary economics is the branch of economics that studies the different theories of money: it provides a framework for analyzing money and considers its functions (as medium of exchange, store of value, and unit of account), and it considers h ...

was based on a widely-circulated

currency A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use within a specific envi ...

(the

dinar The dinar () is the name of the principal currency unit in several countries near the Mediterranean Sea, with a more widespread historical use. The English word "dinar" is the transliteration of the Arabic دينار (''dīnār''), which was bor ...

) and the integration of

monetary Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: med ...

areas that were previously independent. Business techniques and forms of business organisation employed during this time included

contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent to transfer of goods, services, money, or promise to transfer any of thos ...

bills of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...

, long-distance

international trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (See: World economy.) In most countries, such trade represents a significan ...

, forms of

partnership A partnership is an agreement where parties agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations ...

(''mufawadha'') such as

limited partnership A limited partnership (LP) is a type of partnership with general partners, who have a right to manage the business, and limited partners, who have no right to manage the business but have only limited liability for its debts. Limited partnership ...

s (''mudharaba''), and forms of

credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt) ...

debt Debt is an obligation that requires one party, the debtor, to pay money Loan, borrowed or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state or country, local government, company, or an individual. Co ...

profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit (real property), a nonpossessory inter ...

loss Loss may refer to: *Economic loss *Grief, an emotional response to loss **Animal loss, grief over the loss of an animal Mathematics, science, and technology * Angular misalignment loss, power loss caused by the deviation from optimum angular al ...

capital Capital and its variations may refer to: Common uses * Capital city, a municipality of primary status ** Capital region, a metropolitan region containing the capital ** List of national capitals * Capital letter, an upper-case letter Econom ...

(''al-mal''),

capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form ...

(''nama al-mal''),

circulating capital Circulating capital includes intermediate goods and operating expenses, i.e., short-lived items that are used in production and used up in the process of creating other goods or services. Mark Blaug, 2008. "circulating capital," '' The New Palgr ...

capital expenditure Capital expenditure or capital expense (abbreviated capex, CAPEX, or CapEx) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered ...

revenue In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business. Commercial revenue may also be referred to as sales or as turnover. Some compan ...

cheque A cheque (or check in American English) is a document that orders a bank, building society, or credit union, to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing ...

promissory note A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of ...

trusts A trust is a legal relationship in which the owner of property, or any transferable right, gives it to another to manage and use solely for the benefit of a designated person. In the English common law, the party who entrusts the property is k ...

(see ''

Waqf A (; , plural ), also called a (, plural or ), or ''mortmain'' property, is an Alienation (property law), inalienable charitable financial endowment, endowment under Sharia, Islamic law. It typically involves donating a building, plot ...

''),

savings account A savings account is a bank account at a retail banking, retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options and the inability to be overdrawn. Traditi ...

transactional account A transaction account (also called a checking account, cheque account, chequing account, current account, demand deposit account, or share account at credit unions) is a deposit account or bank account held at a bank or other financial instituti ...

pawn Pawn most often refers to: * Pawn (chess), the weakest and most numerous chess piece in the game * Pawnbroker or pawnshop, a business that provides loans by taking personal property as collateral Pawn or The Pawn may also refer to: Places * Pa ...

ing,

loan In finance, a loan is the tender of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money. The document evidencing the deb ...

ing,

exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...

bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

ers,

money changer Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: med ...

ledger A ledger is a book or collection of accounts in which accounting transactions are recorded. Each account has: * an opening or brought-forward balance; *a list of transactions, each recorded as either a debit or credit in separate columns (usu ...

deposits A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below. ...

, assignments, the

double-entry bookkeeping system Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to a ...

, and

lawsuit A lawsuit is a proceeding by one or more parties (the plaintiff or claimant) against one or more parties (the defendant) in a civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today ...

Organization An organization or organisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, -ize (-isation, -ization), see spelling differences) is an legal entity, entity—such as ...

al enterprises independent from the

state State most commonly refers to: * State (polity), a centralized political organization that regulates law and society within a territory **Sovereign state, a sovereign polity in international law, commonly referred to as a country **Nation state, a ...

also existed in the medieval Islamic world, while the

agency Agency may refer to: Organizations * Institution, governmental or others ** Advertising agency or marketing agency, a service business dedicated to creating, planning and handling advertising for its clients ** Employment agency, a business that s ...

institution was also introduced. Many of these early capitalist concepts were adopted and further advanced in

medieval Europe In the history of Europe, the Middle Ages or medieval period lasted approximately from the 5th to the late 15th centuries, similarly to the post-classical period of World history (field), global history. It began with the fall of the West ...

from the 13th century onwards.Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", ''

Historical Materialism Historical materialism is Karl Marx's theory of history. Marx located historical change in the rise of Class society, class societies and the way humans labor together to make their livelihoods. Karl Marx stated that Productive forces, techno ...

'' 15 (1), pp. 47–74,

Brill Publishers Brill Academic Publishers () is a Dutch international academic publisher of books, academic journals, and Bibliographic database, databases founded in 1683, making it one of the oldest publishing houses in the Netherlands. Founded in the South ...

. Some have argued that these economic activities laid the foundations for the development of modern capitalism.

Market economy

was established in the Islamic world on the basis of an economic system resembling

Capital formation Capital formation is a concept used in macroeconomics, national accounts and financial economics. Occasionally it is also used in corporate accounts. It can be defined in three ways: *It is a specific statistical concept, also known as net invest ...

was promoted by labour in medieval Islamic society, and

financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any Economic resources, economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their prod ...

was developed by a considerable number of owners of monetary funds and

precious metal Precious metals are rare, naturally occurring metallic chemical elements of high Value (economics), economic value. Precious metals, particularly the noble metals, are more corrosion resistant and less reactivity (chemistry), chemically reac ...

Riba ''Riba'' (, or , ) is an Arabic word used in Islamic law and roughly translated as " usury": unjust, exploitative gains made in trade or business. ''Riba'' is mentioned and condemned in several different verses in the Qur'an3:130

(

usury Usury () is the practice of making loans that are seen as unfairly enriching the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is charged in e ...

) was prohibited by the

Qur'an The Quran, also romanized Qur'an or Koran, is the central religious text of Islam, believed by Muslims to be a revelation directly from God ('' Allāh''). It is organized in 114 chapters (, ) which consist of individual verses ('). Besides ...

, but this did not hamper the development of capital in any way. The capitalists (''sahib al-mal'') were at the height of their power between the 9th–12th centuries, but their influence declined after the arrival of the ''ikta'' (landowners) and after production was monopolized by the state, both of which hampered the development of

industrial capitalism Capitalism is an economic system based on the private ownership of the means of production. This is generally taken to imply the moral permissibility of profit, free trade, capital accumulation, voluntary exchange, wage labor, etc. Its emergence ...

in the Islamic world. Some

state enterprise A state-owned enterprise (SOE) is a business entity created or owned by a national or local government, either through an executive order or legislation. SOEs aim to generate profit for the government, prevent private sector monopolies, provide goo ...

s still had a capitalist mode of production, such as pearl diving in

Iraq Iraq, officially the Republic of Iraq, is a country in West Asia. It is bordered by Saudi Arabia to Iraq–Saudi Arabia border, the south, Turkey to Iraq–Turkey border, the north, Iran to Iran–Iraq border, the east, the Persian Gulf and ...

and the

textile industry The textile industry is primarily concerned with the design, production and distribution of textiles: yarn, cloth and clothing. Industry process Cotton manufacturing Cotton is the world's most important natural fibre. In the year 2007, th ...

in Egypt. During the 11th–13th centuries, the " Karimis", an early enterprise and business group controlled by entrepreneurs, came to dominate much of the Islamic world's economy. The group was controlled by about fifty Muslim merchants labelled as "Karimis" who were of

Yemen Yemen, officially the Republic of Yemen, is a country in West Asia. Located in South Arabia, southern Arabia, it borders Saudi Arabia to Saudi Arabia–Yemen border, the north, Oman to Oman–Yemen border, the northeast, the south-eastern part ...

i, Egyptian and sometimes Indian origins. Each Karimi merchant had considerable wealth, ranging from at least 100,000

s to as much as 10 million dinars. The group had considerable influence in most important eastern markets and sometimes olitics through its financing activities and through a variety of customers, including Emirs, Sultans, Viziers, foreign merchants, and common consumers. The Karimis dominated many of the trade routes across the Mediterranean Sea, Red Sea, and Indian Ocean, and as far as Francia in the north, China in the east, and

sub-Saharan Africa Sub-Saharan Africa is the area and regions of the continent of Africa that lie south of the Sahara. These include Central Africa, East Africa, Southern Africa, and West Africa. Geopolitically, in addition to the list of sovereign states and ...

in the south, where they obtained gold. Strategies employed by the Karimis include the use of agents, the financing of projects as a method of acquiring capital, and a banking institution for loans and deposits. Another important difference between the Karimis and other entrepreneurs before and during their time was that they were not tax collectors or landlords, but their capitalism was due entirely to trade and financial transactions. Though medieval Islamic economics appears to have somewhat resembled a form of capitalism, some

Orientalists In art history, literature, and cultural studies, Orientalism is the imitation or depiction of aspects of the Eastern world (or "Orient") by writers, designers, and artists from the Western world. Orientalist painting, particularly of the Middle ...

also believe that there exist a number of parallels between Islamic economics and

communism Communism () is a political sociology, sociopolitical, political philosophy, philosophical, and economic ideology, economic ideology within the history of socialism, socialist movement, whose goal is the creation of a communist society, a ...

, including the Islamic ideas of

zakat Zakat (or Zakāh زكاة) is one of the Five Pillars of Islam. Zakat is the Arabic word for "Giving to Charity" or "Giving to the Needy". Zakat is a form of almsgiving, often collected by the Muslim Ummah. It is considered in Islam a relig ...

and

riba ''Riba'' (, or , ) is an Arabic word used in Islamic law and roughly translated as " usury": unjust, exploitative gains made in trade or business. ''Riba'' is mentioned and condemned in several different verses in the Qur'an3:130

. Others see Islamic economics as neither completely capitalistic nor completely

socialistic Socialism is an economic and political philosophy encompassing diverse economic and social systems characterised by social ownership of the means of production, as opposed to private ownership. It describes the economic, political, and social ...

, but rather a balance between the two, emphasizing both "individual economic freedom and the need to serve the common good." (se
online
) Others point out that Islam has an inherently capitalist nature and argue this most through respect for private property as the foundation of capitalism in Islam, as well as the historical fact that the

Muhammad Muhammad (8 June 632 CE) was an Arab religious and political leader and the founder of Islam. Muhammad in Islam, According to Islam, he was a prophet who was divinely inspired to preach and confirm the tawhid, monotheistic teachings of A ...

was an entrepreneur, a merchant.

Market economy

See also

References

Further reading