FACTORS OF PRODUCTION

Capitalist view
Four factors of production
1. Capital: The produced means of
production.
2. Labor: any exertion on part of man
3. Land: All natural resources
4. Entrepreneur or organization: The
factor which brings together the other
three factors , exploit them and bears
the risk of profit and loss in production
 The wealth produced is distributed as
under:
One share to capital in the form of
interest
The second share to labor in the form
of wages
Third share to the land in the shape
of rent
Fourth share to the entrepreneur in
the shape of profit
 Socialist view
Capital and land owned by the state
Entrepreneur is also the state
Labor keeps the right to get wages
 Islamic view
Three factors of production
1. Capital: Includes the consumable
items or those whose forms get
changed.
2. Land: Those means of production
which are not consumed like
machinery, building
3. Labor: Mental and physical both.
Entrepreneur and capital owner is
the same entity
 Distribution of wealth
One share go to capital in the form of
profit not interest
Second share to the land in the form
of rent
Third share to the labor in the form of
wage
 Socialism and Islam
In Socialism, wealth is distributed only in the
form of wages
In Islam, wealth is given in the form of wages
and also to the capital owner in the form of profit
Philosophy of ownership in Islam
No ban on private property but should be owned
and used according to the Islamic teachings.
No individual ownership in Socialism so against
human nature
State capitalism
 Islam and Capitalism
Entrepreneur is not an independent
factor in Islam but is included in any
one of the three factors
Not interest but profit is the reward
of capital
In Capitalism, capital include both
consumable and non consumable
items while in Islam capital includes
only consumable items
 In Capitalism, entrepreneur takes the
risk of profit and loss in the business
while the other three factors
including capital owner remains
immune from loss but eligible for
profit
In Islam, the risk of loss is linked with
capital itself. The risk of loss and
profit will be taken by the capital
owner. So the capital owner is the
 Three ways of business in
Islam
Private business
Partnership
Cooperation of capital and
organization (Modarabah)