Perhaps the most outstanding feature of political economies is that which defines property ownership in the society. Private ownership was recognized as the distinctive feature of capitalism. Public ownership of the means of production is the main characteristic of socialism. The Islamic political economy recognizes three forms of ownership, namely, the private ownership, the public ownership, and the state ownership. The scope of each of these forms of ownership is exclusively defined.

Before proceeding to explain these forms of ownership, it should be noted that neither socialism nor capitalism was able to exclusively stand by their definitions of ownership. The socialist rulers in the Soviet Union were forced to relax their strict view of public ownership and open the door for limited private ownership, especially in the farming industry. By the same token, the Chinese socialists have also allowed a limited private ownership in the manufacturing industry. Within the world of capitalism, nationalization of private property for different reasons is more than common. The government takeover of banks, insurance companies, and auto industries in the United States and some European countries has become an acceptable response to financial crisis and economic problems. The scope of property ownership in a world dominated by the ideas of socialism and capitalism can be visualized as shown in the diagram in figure 31. State economies based on private ownership end up adding public ownership to their systems; those with public property ownerships end up adding private ownerships.

Practically this shows that optimal and stable political economies are the ones that deploy more than one form of ownership. The proper mix of ownerships and the scope of what constitute a private and what makes a public ownership cannot be obtained through a trial-and-error, wait-and-see kind of process. This mix should be more formally defined so that the resulting political economy can be a stable one and can lead to the desired objectives of resolving poverty and hunger.

What defines the proper mix of ownerships is the way the society is formed and viewed by different ideologies. If the society is perceived as being as a group of individuals, then it is natural to emphasize the private ownerships of individuals and to partially or completely exclude other ownerships. If the society is perceived to be as a single material unit with individuals being only as parts of the whole unit, then it is natural to emphasize the collective ownership in the society. However, if the society is perceived as a structure composed of distinct and independent components, then property ownerships will diverse according to the diversity of its components.

The Islamic view of society is such that the society has three distinct components. Each has its specific needs which are different form the needs of the other ones. The first of these components is the individual human being who possesses specific instincts and biological needs which need to be satisfied on a continuous basis. Each individual in the society has his own needs for food, shelter, health, rest, mating, worshiping, and breeding. In order to satisfy these needs, the individual must own the means and tools necessary to satisfy each of these needs. When the means and tools are owned by one person, or by the community at large, there will be no guarantee that the needs of another person who does not own them will be satisfied. For example, if John, Ali, and Adam each has a loaf of bread, but Sam does not have any, then Sam may go hungry while John, Ali, and Adam are full. By the same token, if four loaves of bread are collectively owned by John, Ali, Adam, and Sam, then it is possible that one of them can go hungry as well. To guarantee the satisfaction of the individual basic needs, the individual must be able to own the commodities and tools which are necessary to fulfill these needs.

The only philosophy that verily denied the property ownership of individuals is the Marxist philosophy which viewed the individuals as materialistic parts of a larger materialistic entity called the society. It maintained that individuals posses no instincts of any kind, and therefore property ownership of individuals is an illusion. The reality of human daily living proves this theory incorrect. Islam rejects this theory and insists that the human strife to own the commodities and tools to satisfy his basic needs and instincts are intrinsic and inherent to the creation of the humans.92

The second component in the society which has its own distinct needs is the public. The public is not the sum of individuals. Rather it is the group as a whole which requires its own resources such as the land, water resources, atmosphere, minerals, and the like. The needs of the public as one unit differ from the needs of the individuals. The public does not have instincts or biological needs like those of hunger, thirst, shelter, and the like. However, it has its own requirements which must be satisfied in order to sustain the integrity of the public. The public needs include security, maintenance of resources, protection of the land which hosts the public, maintenance of the atmosphere, maintenance of homogenous relations between the members of the society, and the like. The satisfaction of these needs cannot be guaranteed as a result of the satisfaction of the needs of individuals. Just like the individuals who must own property in order to fulfill their needs, the public needs to own in order to meet the requirements of its needs. Public ownerships cannot be substituted by individual ownerships. Islam recognized the public requirements and insists that the public must have its own ownership. It is reported that Prophet Mohammad had said, “The people collectively have the ownership of water resources, forests, and fire.93” This narration confirms the public as an independent entity in terms of ownerships.

The third component in a society which should be recognized with its specific needs for ownerships is the state. The state is the political entity which is responsible for caring for the affairs of the individuals and the public alike. The state has its own specific needs which are different from the needs of individuals or the needs of the public. The state needs include its ability to organize, administer, and conduct the affairs of the individuals and the public. As an independent entity, the state must have its own property. This property must be well defined and guaranteed not only by the power of law, but also by the core principles of the ideology. Islam recognized the state as an entity which has its own specific properties.

It is true that all political economies in the world have used a mixture of individual, public, and state ownerships in various forms. But it is also true that the policies have been more random than systematic. Privatization of public property has been used excessively in many countries in the world to convert publicly or state-owned property to private ones. The rules for conversion have been driven mostly by the states’ need for immediate cache flow rather than by fundamental principles of the economy. By the same token, the nationalization of private properties which prevailed in the second half of the twentieth century was mostly driven by revolutionary regimes and aimed at reducing the influence of multinational corporations.

In the most recent financial crisis in the United States and Europe, the nationalization of banks and other industries was mostly driven by temporary policies aimed at preventing a major crash of the financial industry. In other words, the contemporary political economies under the dominance of both socialism and capitalism have accepted the three types of ownerships. However, they have not specified the domain of each in a fundamental way. On the other hand, Islam has clearly accepted and defined the three types of ownerships at the core foundation of its political economy. It has also prevented the transfer and conversion of one type of ownership into another one. Under Islam, it is not allowed to privatize the public ownership. It is also prohibited to nationalize the private property. Furthermore, the state is not allowed to tap into the wealth of individuals or the wealth of the public, since it has its own funds and property. In the subsequent sections, we discuss each type of property ownership in Islam.

In a world dominated by the capitalist ideology, the private ownership of commodities, goods, and means of production is the default norm of ownership. However, within the realm of socialism, private ownership is considered to be against the norm. When I lived in the Soviet Union in the mid-1970s, I had a hard time convincing my colleagues that private ownership was a normal human behavior. It was not easy to belong to a religion, like Islam, which protects private ownership to the extent that it invokes the harshest punishment against the crime against the private property ownership. My experience in the capitalist world was totally the opposite; private property was the norm, and anything else was the exception.

Unlike socialism, Islam recognizes the innermost characteristic of a human which calls for the acquisition of wealth and the means to produce wealth. But it also differs with capitalism in the sense that it restricts the scope and the range in which private ownership is allowed to operate. Islam does not allow an individual to own or produce things which are categorized as prohibited goods in Islam. For example, it is not allowed under Islam to produce or own drugs, alcoholic drinks, or a casino. Islam also restricts individuals from acquiring property which is considered to be a public property such as oil fields, forests, or rivers.

Essentially, Islam does recognize the intrinsic nature of humans and admits that private ownership is a natural manifestation of the human instinct for survival. In the meantime, it recognizes that certain properties should remain in the hands of the public at large in order to guard against the imbalance caused by the variations in capabilities of individuals to acquire wealth. It is not uncommon for some people in a society to acquire more skills than others, or some people to have more motivation for wealth acquisition, or even for some people to have certain disabilities or handicaps which prevent them from acquiring enough wealth to provide for their needs. Various conditions such as wars and internal upheaval, natural disasters such as earthquakes and tsunamis, slavery and discrimination, and political and economic injustice can also contribute to the case where some people lag behind in terms of ownerships.

A quick reading of the progress and growth of societies throughout history shows that some portion of the society always remains completely or partially deprived of property ownerships. In order to account for this imbalance, Islam limited the scope of private ownerships and restricted certain categories of wealth to be exclusively owned by the public, such that the deprived individuals can benefit from the revenue generated by the publicly owned wealth resources.

Explaining the necessity to create a balance between the individual rights and the rights of the public, Prophet Mohammad (PBUH) gave the following example:

Your example is like a group who happen to travel on a boat. Some travelers were seated at the upper deck and others were seated at the lower level deck. Passengers at the lower level deck had to pass by the upper deck in order to access the sea water. One passenger, out of inconvenience, thought to dig a hole at the lower deck and access the sea water directly instead of climbing to the upper deck every time he needed to access water. If the rest of the group allows him to go ahead with his plans, saying it is his property and right, then the boat will sink with all on board. If the rest of the group prevents him and stop his plan, then the boat will be saved and so all the passengers.94

Human labor is the first and foremost means of wealth acquisition. Using physical or mental labor, a man or woman can create an original wealth which becomes his or her private property, protected by law and enforced by the state. It is reported that Prophet Mohammad (PBUH) had said, “Whoever cultivated a dead land, it becomes his.”100 This statement of the Prophet applies to bare land that has never been used in any form before and had not been owned by any people. By cultivating a piece of land and converting it into a useful piece for farming or development, one becomes the sole owner of the land.

Islam also allowed the individual to own what he can extract from beneath the ground such as stones and marbles, from the sea such as precious pearl,101 or from the air such as oxygen and nitrogen. An exception would be the minerals which exist in large mines since these minerals are known to be the property of the public. By the same token, wealth acquisition can be attained by hunting of birds, animals, fish, and other sea products. The Quran says in Surah Al-Mai’dah (chapter 5, verse 96), “Lawful to you is (the pursuit of) sea hunting and its use for food.” In another location, the Quran speaks of hunting on the land as a means of possession.102

People can use their mental and physical labor to broker legal deals between trading partners; note that the traders have the original wealth, whereas the broker uses his labor to own part of that wealth. Also people can engage in a specific partnership called “Mudharaba.” In this form of partnership, one party provides the money and the other party provides only labor. The one who participates with his labor creates wealth for himself. This type of partnership can be extended for farming as well.

The most widely used form of wealth acquisition has been employment, where the employer utilizes the physical or mental labor of the employee. The employer in this case is using the benefit of the employees to increase wealth. The employee on the other hand uses his or her labor to create and possess wealth. Islam allowed employment in general except where the work to be performed is prohibited. There are several references in the Quran and Sunnah for labor work and employment. It is reported that Prophet Mohammad (PBUH) had said, “Allah (SWT) said: On the Day of Judgment, I will be the opponent of three types of people.” One of these types is “A man hired a worker; the worker delivered all the work required from him; but the employer did not pay him his full wage.” There are various ways in which Islam differs from capitalism and socialism in relation to labor and employment. Islam restricts employment to areas where the target benefit is legally permitted in Islam. For example, Islam does not allow any person to use his labor to produce wine out of vine products. It is narrated that Prophet Mohammad (PBUH) had stated that the sin involved in winery extends to the people who make and sell wine.103 In another narration, the Prophet stated that the one who writes the contracts of usury is as fallible as the ones who participate in the usury transaction.104 Similarly, Islam does not permit all forms of prostitution, because the obtained benefit is prohibited in Islam. Employment in gambling casinos is not allowed either. The wealth acquired by individuals through employment in areas deemed prohibited in Islam is considered illegal wealth. This is a major difference between Islam and materialistic systems which only look at profitability when considering wealth acquisition.

The second means of wealth acquisition is inheritance. Inheritance in Islam is a well-defined process, whereby the wealth of a deceased person is distributed among the children, parents, spouses, brothers, and sisters according to a certain formula. Inheritance rules in Islam allow the wealth to be broken and distributed after the death of the wealth owner. It is possible in the process of economic growth for wealth to accumulate in the hands of a few individuals during their life. The rules of inheritance are then used to break this tendency and cause the wealth to be recycled among several individuals. There are three distinct cases of inheritance in Islam:

1. The first case is when the inheritors take the whole inheritance according to the laws of inheritance, whereby all the wealth is distributed amongst them.

The second case is when the inheritors are entitled for part of the 2. inheritance only. For example, the deceased leaves behind only the spouse (husband or wife). In these cases only a quarter or half of the wealth is inherited, while the rest of the inheritance goes to the state.

The third case is when the deceased leaves no inheritor behind; in 3. this case the whole property goes to the state.

The wealth is thus broken up and the property is transferred to the inheritors, where the exchange of the property resumes in an economic cycle amongst the people. The property is not kept in the hands of a particular person where the wealth accumulates. Inheritance is a legal means of property ownership, so anybody who inherits a thing owns it legally. Thus the inheritance is one of the means of property ownership, which the Islamic Shari’ah has permitted

Despite all measures taken to relieve the society from poverty, it is expected that some individuals will end up in a state of poverty for all types of reasons. In order to attend for the needs of these individuals, Islam recommended the state to provide a suitable opportunity for the employment of those who could not find employment on their own. The Prophet (PBUH) said, “The Imam (head of state) is a Shepard, and he is responsible for his subjects.”108 Employment enables individuals to use their labor to acquire wealth. In case it is not possible to find a job due to market conditions, or the person becomes unable to work due to age, sickness, or disability, then his support and sustenance becomes the duty and responsibility of his next of kin such as sons, father, and husband assuming that these parties are able to provide the required support. This is outlined in the books of Islamic jurisprudence under the section of “Nafaqah” (alimony).

If the immediate relatives are unable to maintain the required alimony, then responsibility is escalated up to the state. The state uses the funds available from the revenues of the public properties as well as from the Zakah. The Zakah is a specific amount of wealth taken out of the property of the rich and relayed to the poor. In Surah Al-Ma’arij (chapter 70, verse 24-25), and Al-Tauba (chapter 9, verse 103), Allah says,

[70:24]And those in whose wealth there is a known right; for the beggar and the destitute.

[9:103] Take Sadaqah (alms) from their wealth in order to purify them and sanctify them with it In other words, the Zakah allocates certain amount of wealth for the poor from the original wealth of the rich. Islam makes this portion of wealth a right for the poor individual rather than a favor made by the wealthy ones. In Surah Al-Tauba (chapter 9, verse 60), the Quran lists eight categories of people who are entitled to acquire wealth from the Zakah fund:

[9:60] Zakah (funds) are only for the poor, and Al-Masakeen (very poor) and those employed to collect (the funds), and to attract the hearts of those who have been inclined (towards Islam); and to free the captives,

and for those in debt, and for Allah’s Cause, and for the wayfarer (a traveler who is cut off from everything); a duty imposed by Allah. And Allah is All-Knower, All-Wise The concern about the plight of poor and their right for wealth acquisition is emphasized in many ways in Islam. Imam Ahmad narrated that the Prophet said, “Allah and his Messenger will disown a community which allows one of its members to sleep hungry.” It is also narrated that the Messenger of Allah said, “He who resorts to his bed with full stomach while his neighbor is hungry is not a true believer.” It is also interesting to note that when the conditions of hunger and famine persist in a certain society, Islam halts the implementation of the strict rule of hand amputation for theft.109 Further stressing the concept of resenting poverty, Abu Dhar, one of the companions of the Prophet, is reported to have said, “I am most shocked by a poor man who cannot find food at home and does not come out carrying his sword in his hand.” Consequently, Islam lines up several steps in a sequential order to make sure that the poor is never left behind to be totally deprived of the means of ownerships. Thus the wealth provided to a poor person is a legal means for acquiring private property.

The Islamic state is allowed to provide grants for people in the society for the purpose of stimulating productivity and enabling people to grow their business to a profitable stage. The state uses both state as well as public property to issue stimulus grants. It is narrated that the second caliph Omar Bin Al-Khattab provided stimulus money for the farmers in Iraq to help them cultivate their farms. The help was in a form of state grant, rather than loans.

Prophet Mohammad is reported to have given land for Abu Bakr and Omar after the migration to Medina. He also gave a piece of land to Al-Zubair. After the death of Mohammad (PBUH), the caliphs continued to give part of the public lands to various individuals in an attempt to utilize unused bare land. It should be noted that the state does not use tax money or the funds of the Zakah for the grants. The only fund the state is allowed to use is the one that comes from the state or public property.

Besides these means of property acquisition, there are other means of private ownership such as gifts and wills of deceased. Prophet Mohammad permitted gift giving110 and he accepted gifts from both Muslims and non-Muslims. Also, Islam allowed a Muslim to designate part of his wealth in form of a will such that the recipients of a will should not be among those who are entitled for inheritance by law; also the amount of will should not exceed one-third of the total wealth.111

Another means of legal wealth acquisition is the compensation a person receives due to injury incurred against him by another person. If a person is killed by someone then his inheritors are entitled for compensation. The compensation for killing a person is equal to the value of one hundred camels.112 The compensation in return for damage incurred for any part of the body is detailed in the books of Islamic jurisprudence.

Marriage contract in Islam includes certain amount of wealth to be paid to the woman. This wealth is the property of the woman and is not in exchange of a certain benefit, because both men and women have a mutual benefit in marriage; however, only the man is obligated to transfer part of his wealth to the woman. This wealth becomes the property of the woman as a result of the contract of marriage and not as a result of divorce as is the case in contemporary laws and systems.

Lost property found by people can be legally transferred to their property after it has been announced as “last and found” for a whole year. If the found property belongs to the category of precious metals, then only 80% of the property will be owned by individuals and the rest will become state property.

Thus individual private property is a well-structured type of property in Islam. Islam has clearly defined all reasons by which property can be initially owned by an individual. Islam further defined the laws to protect private ownership as well as the laws to increase the privately owned wealth. Islam also prohibited the ownership of property gained through theft, fraud, bribery, illegal trade, usury, and other illegal means of property ownership or growth. Furthermore, Islam prohibited the private individual ownership of property which is defined as either state or public property unless that property is legally granted by the state for an Islamically valid reason.

Islam recognized the existence of public as an entity which has its own needs. These needs are not the sum of the needs of individuals, and therefore the satisfaction of the public needs cannot be achieved by satisfying the needs of each individual. The security of the public, the integrity of its territory, the cleanness and purity of its atmosphere and environment, the solidarity among its units, the preservation of the seas, river, and water reservoirs, and its image in front of other nations are all needs which pertain to the public as a whole and not to specific individuals. In order to preserve the public as one unit in the society, Islam defined certain types of property and declared them as a public property.

The category of public property includes water resources, forest preserves, and energy resources.113 Old tribal societies used to move and change their location based on the availability of water and green meadows for their cattle. Whenever water springs dry out or fall under the dominance of another tribe, the tribe would be forced to move and search for a location where water is plenty. The same happens when the forests dry out and leave less food for the cattle of the tribe. Realizing that water resources and meadows are essential for the survival of the whole group, Islam announced that these resources should be owned by all and not by any single individual. If these resources fall in the hands of one or few, then the integrity and unity of the public may be compromised. The same applies to energy sources. Earlier Muslims scholars interpreted the word “fire” in the statement of the Prophet to mean the source of fire like woods (in the older societies). Today “fire” refers more generally to energy resources.

Following this analysis, it is recognized in Islam that all water resources such as rivers, lakes, seas, oceans, gulfs, and underground water basins are the property of the public. No single individual or enterprise is allowed to privately own any of these properties. The revenues generated due to the use of these resources will be returned to the public property fund in the state treasury. The state in its capacity as a caretaker of the affairs of the public will be responsible for delivering drinking water for all the people at the cost of pumping and delivering. Similarly, the state will deliver electricity generated from water resources at the cost of generating and delivering electricity. The state will not sell water or electricity for profit; it will not allow individuals or companies to sell water or electricity generated from public resources. However, the state will enable individuals to directly benefit from water resources through pumping water, generating electric power for their own use, or navigating the water pathways given that this will not diminish the ability of others to use and utilize water resources.

Similar to water resources are the wild forests. The woods, grasses, and meadows of the forests will be left for all people to utilize and use as freely as possible. Assaults on the forests and woods by building, pollution, or burning are considered a crime against the public and it is the state’s responsibility to protect the forests. Revenues generated from the use and utilization of wild forests are returned to the public property fund in the treasury.

Islam designated certain types of property to be owned directly by the state. The main difference between state and public property shows in the way the property revenues are used. The public property is administered by the state but not owned by the state. The state may use revenues of the public properties to spend on state’s functions only when the state own revenue falls short of meeting its needs. The state property, on the other hand, gives the state full authority to spend as it sees fit to conduct its affairs and the affairs of the citizens.

Throughout the history of the Islamic state, the largest source of income for the state has been the revenue generated from the property ownership of land called Kharaj (the lands annexed to the Islamic state through war). Kharaj literally means output. The term kharaj replaced the term fai’i, which was used for the land annexed without a fight. Abu Obaid narrated in his book Al-Amwal on the authority of Az-Zuhri that Prophet Mohammad (PBUH) considered the lands of Bahrain after its conquest a land of Kharaj even after the people in Bahrain had converted to Islam.116 Kharaj land is defined as a land added to the territory of the Islamic state and whose ownership belongs to the state. The state grants the right to use the land for farming or development in exchange for a predefined fee. The fee is due to be paid by the user of the land whether he was able to benefit from the land or not. The fee is not in exchange for the product of the land; it is in exchange for the right to use it. If the user of the land is a Muslim, he still has to pay the Zakah portion of the products. If the user of the Kharaj land is not a Muslim, he only has to pay the Kharaj fee.

During the reign of Caliph Harun Ar-Rasheed,117 the land of the Islamic state was enormous due to the expansion of the state into Africa, Central and East Asia, and well into Europe. The caliph requested his chief judge Abu Yousuf 118 to write a book detailing the rules related to the wealth associated with the land of Kharaj, and to explain the various ways of spending the Kharaj money. Following the footsteps of Abu Yousuf, several other books on the subject of Kharaj were compiled.119 The famous book of Hadeeth compiled by Abu Dawoud, known as Sunan Abu Dawoud, contains a section titled “The Book of Kharaj.” Referring to the huge land of the caliphate state, Harun Ar-Rasheed once addressed a passing cloud over the city of Baghdad saying, “You may drop your rain wherever you wish; your Kharaj will eventually come back to me.” It was the second caliph Omar Bin Al-Khattab who first constituted the laws of Kharaj. Abu Yousuf narrated in his Kharaj book the following incident. In the year AH 16, the Muslim armies of the caliph Omar occupied a huge land in Iraq after the battle of Qadisiyyah. Prominent Muslim companions and army generals Bilal Al-Habasihi, Abderrahman Bin Awf, and Zubair Bin Al-Awwam divided part of the occupied land among the fighting soldiers. They treated the occupied land as spoils of war and thought to divide it among the fighters according to Islamic method for dealing with spoils of war. The caliph Omar had another opinion. He wanted the land to remain a property of the state and convert it into a land of Kharaj. After consulting with his advisers in Medina, Omar proclaimed,