In Defense of Religious Fundamentalism in Bangladesh: How the Fear of Hell Might Fire Up the Economy
- From: Shomir101@xxxxxxxxxxx
- Date: 24 Oct 2005 16:51:45 -0700
In Defense of Religious Fundamentalism in Bangladesh: How the Fear of
Hell Might Fire Up the Economy
By Kevin L. Kliesen and Frank A. Schmid
Economists have long been interested in why some countries are rich and
why some countries are poor. Differences in labor productivity,
inflation, and saving and investment rates are traditional economic
explanations for variations in wealth across countries. But when these
explanations fall short, researchers sometimes turn to noneconomic
factors. Two such factors are a country's legal and social
institutions. Religious factors can also help explain variations in
economic growth, many economists are increasingly finding.
Conventional Theories:
Over time, a country's economic growth is ultimately a function of
growth rates in population and labor productivity (output per hour
worked). But since population growth tends to change slowly, a
nation's labor productivity growth is what ultimately determines
whether it will be rich (high productivity growth) or poor (low
productivity growth).
What causes productivity growth rates to speed up or slow down?
Improvements in the quality of labor, such as a more educated
workforce, seem to matter, as do the quantity and quality of the tools
and equipment that each worker uses. Also generally deemed important is
a country's saving rate, since saving is used to finance investment in
capital goods. Other factors that improve a country's prospects, but
which are not readily captured by measured labor and capital inputs,
are improvements in the distribution of goods and services that arise
from just-in-time inventory processes. Another significant influence
seems to be a country's public and private institutions. These include
laws and regulations that enforce contracts, guarantee property rights
and promote well-developed financial markets.
1 Secure property rights, such as patents and software piracy laws,
provide individuals and firms the needed incentive to take economic
risks, while deep capital markets better enable financial resources to
flow toward promising but unproven technologies.
2 Also critical are laws that promote good corporate governance by
imposing harsh penalties against firms or government officials that
have enriched themselves from illegal or immoral activities. When these
public and private institutions are lacking, or not very
well-developed, there tend to be high levels of corruption and
financial malfeasance, which can create economic uncertainty and
destroy wealth. Recent examples of corruption and other misconduct can
be found even in advanced economies, as in the United States (Enron,
Tyco and WorldCom), Italy (Parmalat) and the Netherlands (Ahold). While
traditional growth theories go far in explaining cross-country patterns
of economic growth, some economists believe they do not go far enough.
Instead, many researchers are increasingly turning to noneconomic
factors, such as religion.
Religion's Early Role:
Adam Smith wrote that one of religion's most important contributions to
the economic development process is its value as a moral enforcement
mechanism.
3. He argued that, in a society imbued with these religious
mechanisms, fewer resources will be devoted to determining the veracity
of an individual's or firm's business ethics - what economists call the
credit or default risk associated with lending to an unknown
individual. In short, argued Smith, in societies where there is a
widespread belief in God, the values of honesty and integrity are more
prevalent.
In a similar fashion, Alexis de Tocqueville, writing about early 19th
century America, said that "religion . . . for if it did not impart a
taste for freedom, it facilitates the use of free institutions," so
that Americans held it "to be indispensable to the maintenance of
republican institutions."
4. To de Tocqueville, a religious country lessened its dependence on
the public sector, which not only left a larger amount of resources for
the private sector but enhanced the country's moral fiber.
German sociologist Max Weber argued that the work ethic that was
inspired by the Protestant Reformation helped to explain the rise of
capitalism in Western Europe and America.
5 According to Weber, capitalism existed in antiquity-for example, in
China, India, Rome and Babylon-and even during the Middle Ages, but it
couldn't have matched the rise and sustainability of Western European
and American capitalism because a "particular ethos was lacking." The
ethos that set the Protestant apart from all other religions, and which
facilitated economic growth, was an intense commitment to work,
dependability, diligence, self-denial, austerity, thrift, punctuality,
fulfillment of promises and fidelity to group interests.
6 Weber's critics instead argued that the Protestants, rather than
helping to spur the rise of Western capitalism, were much better than
other religious adherents in adapting to this newfound economic
structure.
7. Current Topics, Controversies:
According to the secularization hypothesis, as a country's
inhabitants become richer and more educated, their faith in religion
and religious institutions wanes, and they attend church less
regularly. Economists Edward Glaeser and Bruce Sacerdote find some
support for this hypothesis. They wrote in 2002 that increased
education results in a decrease in the extent of religious beliefs,
perhaps because public school systems tend to reinforce secular
education that, the economists argue, conflicts with traditional
religious beliefs. By contrast, economist Laurence Iannaccone wrote in
1998 that church attendance rises with education, which suggests that
rich Western countries should have higher rates of church attendance.
Ultimately, then, the issue is whether religious beliefs, as Weber and
Smith argued, can be shown to have an effect on a country's economic
growth.
In a paper last year, economists Robert Barro and Rachel McCleary
provided evidence that church attendance and economic growth are
negatively related, but a belief in hell-their measure of religious
beliefs-was positively related to increased economic growth. According
to Barro and McCleary, increased church attendance could lower growth
because of more resources flowing to the religious sector. However, the
net effect would be uncertain because increased church attendance may
also increase religious beliefs, which, as Weber believed, raises
economic growth by spurring individual behavior and actions that are
thought to encourage productivity. Interestingly, Barro and McCleary
also found that economic performance was largely unrelated to the
dominant religious theology of the nation.
Kevin L. Kliesen is an economist and Frank A. Schmid is a senior
economist at the Federal Reserve Bank of St. Louis. Thomas A. Pollmann
provided research assistance.
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