The Effects of Religious Beliefs on Economic Performance

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The Effects of Religious Beliefs on Economic Performance                 

The Effects of Religious Beliefs on Economic Performance

International Investment and Trade


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Introduction

The economic performance of a nation is affected by many different factors. But successful explanations of economic performance have to go beyond narrow measures of economic variables and include political and social forces. Explanations for economic growth should go further to include a nation’s culture. Culture is usually thought to influence economic outcomes by affecting personal traits such as honesty, thrift, willingness to work hard, and openness to strangers. One very important dimension of culture is religion. And religious practices and beliefs therefore should have important consequences for economic development.

Religion is rarely associated in our minds with the economic state of a nation. But recent studies find that economic growth responds positively to the extent of religious beliefs, especially those in hell and heaven, but negatively to church attendance. These studies strengthen the perspective that organized religion would affect economic performance mostly indirectly, that is, through influences on the religious beliefs. Religious beliefs influence individual traits and as a result influence economic performance.

Our principal aim in this paper is to analyze the effects of religious beliefs on a nation’s economy. For example, organized religion might influence laws and regulations that affect economic incentives. Adverse examples would be restrictions on credit and insurance markets and more general discouragement of the profit motive.

We would like to know how religiosity affects economic performance, but we also have to worry about reverse effects from economic development to religion. And is it also a possibility, as religions are as diverse as they are numerous, that different religions have different influences on economic performance?

In order to compare the effects of religious beliefs on the economy and vice-versa, we need a brief introduction of some of the most influential world religions. Each of these religions has characteristic traits and values. Although some of these are similar, the way that the culture embodies them makes them unique. They all have specific traits, common practices, moral values, and taboos which can influence the economy through work ethics, productivity, and spending patterns.

Is religion a determinant of economic development? And if so, do different religions have different influences on economic development?


Religion and Economic Development: Past Research Papers

As there seems to be a large number of research papers previously conducted on proving the hypothesis that religion does influence economic development, we would like to further explore the possibility that different religions are having different effects on economic performance. By choosing this approach, we avoid attempting to replicate previously documented research, as it is both time consuming and far beyond our capabilities. Therefore this paper will be divided into two segments. The first segment will summarize various research papers and their supporting arguments, while the second will further delve into the different effects that the various religions have on economic advancement.

The foundation of contemporary research that explores the relationship between religion and economic growth has its foundation with Max Weber’s The Protestant Ethic and the Spirit of Capitalism. Weber’s paper was meant to explore the relationship between Protestant values and the rise of the Industrial Revolution and Western Capitalism. The Protestant Ethic does in fact makes the “earning of more and more money, combined with the strict avoidance of all spontaneous enjoyment of life,” not only encouraged, but more of a duty. This form of materialism is what has driven the progress of the Western economies during the Industrial Revolution. Despite the intuitive association between the Protestant ethic and the spirit of capitalism, Weber fails to provide any logical connection, from a religious point of view.

Another approach to analyzing the effects of religion on economic performance is to depart from attempting to find a causal link between Protestantism and capitalism, but instead to examine the transformative effect of the Protestant movement. This is due to the fact that when the Protestant movement did come about, it did “contribute directly to the weakening of the traditional framework of European society,” (Eisenstadt, 1968). Eisenstadt, in his 1968 paper, which in a manner defended Weber’s theory, argues that the significance of Protestantism was not its direct impact of society but instead on the contribution it made on the restructuring of European society  (Steuart, 1999). This transformational capability of religion is what caused Protestants to embrace “this worldly” ethic (Weber, 1930), as it created a path where the Protestant Reformation created new economic roles that were no longer tied to existent economic or political frameworks and also legitimized and provided the resources they needed (Eisenstadt, 1968). Eisenstadt’s argument supports the research conducted by Grier in 1997 of former British, French and Spanish colonies. In this research, Grier uncovers that the rise in Protestantism has a positive correlation with economic growth and development. Grier’s results matches with Eisenstadt’s arguments of the transforming capabilities of Protestantism, where within these nations the growth of Protestantism is linked to the realization of new motivations and organizations which made possible the ensuing economic development. Though one must note that Grier’s results only suggests a correlation between the rise of Protestantism in these countries and real GDP growth, not causation (Steuart, 1999).

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Religion’s indirect influence on economic growth can be found in its norms, whether it encourages activities such as the accumulation of wealth and thriftiness, as found in Calvinist Protestantism during the Reformation, or whether it’s in incentives for productivity due to rewards or punishment in the afterlife. Religion can also have negative influences on economic growth. When it discourages the pursuit of profit or interferes with free market activities, such as credit markets, religion becomes a negative factor.  A prime example can be found in Islam, where the Koran explicitly prohibits the taking of interests on loans. In their ...

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