The Weaknesses of the Prosperous Country Economic System

In conclusion the book Islam and Economic Challenge (1992) 3, Dr. M. Umer Chapra explain a number of weaknesses of the Prosperous Country economic system.

Prosperous countries, the limited market system, trying to combine the price mechanism with a number of other devices, mainly by financing the welfare state, to guarantee "fairness." Phobi with the attitude of the considerations of values and the Pareto criterion optimality be on himself, there is no problem about the difference between important and unimportant, or the use of test assets. Prosperous countries try to provide welfare services to all, both rich and poor together, through the addition of expenditure by the public sector. Initially this caused a Euphoria - a feeling that the allocation and distribution problems have been solved are ideal. Is not; this strategy is not sufficient to assume this task. Because the addition of expenditure for the public sector is not at the same time with a reduction in compensation claims over other sources of power, increase the budget deficit has been determined, although a heavy tax burden. Because the consumer culture also leads to an increase in expenditure with the private sector, there is no increase in compensation in the private sector savings. Fact that there is an excessive monetary expansion in the banking system with a comparable backup (a portional cassanova-reserve banking) that are willing to lend it a desired, by both private and public sector based on assumptions about the security and lower risk. That way the top of the resources the poor, improve internal and external disproportion.

Problems of poverty and come off still persists, and even more in. Needs are not met. Inequality is growing. Problem facing the country now is how prosperous the creation eliminate imbalance. This system does not have a filter mechanism which was agreed to set the price than the aggregate demand, and it only relies entirely to the market mechanism to eliminate the imbalance that exists. The increasing of belief in the market, bear market failures and injustice and the inability of the poor to pay the market price. With such a prosperous country that is confusing dilemma. If the pressure is given in the main market and the role of the welfare state to eliminate the imbalance to decrease, then return to the prosperous state of the field - the field position capitalism began. Then what to do now? The only remaining primary device for prosperous countries to help poor people is a high economic growth rate. But the high growth does not always improve the income distribution. As has been shown by Adelman and Morris data based on a representative sample, "Development is at the same time with a decrease in the absolute and relative income in the average poor person." Moreover, the prospects for accelerating growth rate is not bright enough in the near future without a raise inflation and enlarge this imbalance.