This site is solely dedicated to publish my writing, mostly on the topic of Islamic finance. Some of the articles were written as partial fulfillment for completing the Chartered Islamic Finance Professional (CIFP) certifications and for the Ph.D in Islamic Finance that I am currently undertake. Interested parties, including reporter/press or students, may reproduce or quote materials published provided that the credit has to be given to my blog (arzim.blogspot.com). Comments must be accompanied by names or pseudonyms. Anonymous postings and those containing profanities and obscenities will be rejected.

Friday, February 26, 2010

What is the difference in value systems of societies prior to industrialization and those we find today, especially the economic values of profits, success, efficiency, equity and well being?

Industrialisation also known as Industrial Revolution, is a process of social and economic, whereby a human society is transformed from traditional to industrial state. The transition has brought tremendous change in the philosophical view of society, and this, in turn, bring the modernisation process in social and economy into technology revolution.

Pre-industrial society or traditional society has their set of values in social and economy. For example, economy philosophy of traditional society in Britain is based on Paternal concept, whereby employers were impliedly responsible to protect the employees in whatever conditions they were in. Even the magistrates were entrusted to ensure the workers’ salary were reasonable and basic goods and services were being sold at reasonable price so that the poor can buy it. 

Generally, pre-industrial society was divided into two which are the leaders and commoners. The leaders encompassed of the kings and aristocrats which have powers over commoners. The commoners were also known as the 'Serf ' including the peasants. They, however, were not slaves, but did not have fully control over their destiny. Both parties were interdependence to each other. The leaders were fully responsible over their group of Serfs. The leaders were known as the 'Vassal'. In other words, the leaders will take their own Vassals. During this period, the land will be the symbol of one’s prosperities. The leaders will have a lot of lands while the Serfs’ didn’t. Thus, the Serfs will grow crops or raise livestocks on the land provided by their leaders or masters for their own needs. In return, they will obey to their masters and will do anything asked by them including being the mercenaries. The excess production from the farms will be exchanged to other Serfs for other goods needed by them. This type of economy activities known as Barter Trade System. On this instance, the traditional societies’ economy activities did not confirmed on profits aspects, success, efficiency and equity. The economy system during this period is also known as Economic WelfareThus, when measuring the economic welfare of a society, one must take account of the role played by government (the kings and aristocrats) intervention in affecting the distribution of gains from economic growth. They produced limited productions (e.g. artisanship Vs mass production) and primarily had an agricultural economy. These had lead to the limited division of labors. Their economy value of well being was of being 'master-servant relationships' and with no varieties of social classes. There were no equity in the economy systems. Economic policy often requires a trade off between efficiency and equity. The core of analytical economics is to obtain an optimum allocation of resources. This represents an efficiency objective. However, question of welfare relate to equity as well as efficiency and acceptable trade-offs between the two can be said was found during this period.

On the other hand, the modern economy systems is primarily based on the Laissez-faire concepts or free economy as explained by Adam Smith in The Wealth of Nations. There’ll be the Invisible hand that will control the demand and supply in the markets. This is also one of the pillars in Capitalism which take views on material scarcity. Thus, when the goods are in scarcity, it must be used efficiently to achieve wealth maximisation. The wealth maximisation and the profit terms are being used interchangeably. When profit maximised, so does profit. This is the success in economy activities. The modern economy system is more complex than in feudal system. It is the mechanism dealing with production, distribution, and consumption in any society. It relates to the efficiency in allocating resources in order to achieve the goal of the society. This, in turn, leads to the Cost of Opportunity forgone when allocating the resources. When the focus is more on efficiency, the equity process such as the well distribution of wealth are neglected. The modern economy view on well being is only to be materialistic.

No comments:

Post a Comment