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Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Chief Consulting Editor's Desk
Rajita Chaudhuri
Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Editor-in-Chief
Dr. Arindam Chaudhuri
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BOOTH SCHOOL OF BUSINESS
People's Opium? Religion and Economic Attitudes
Religious beliefs may explain why capitalism spread so successfully in East Asia (where Buddhism prevails), while finding less support in Islamic countries
 
Economists, sociologists, and political scientists have long been interested in explaining the economic success of certain countries and the persistent poverty of others. The first, and most famous example, is the German sociologist Max Weber. In his 1905 treatise, “The Protestant Ethic and the Spirit of Capitalism,” Weber attributes the emergence of capitalism to the Protestant doctrine of salvation and concept of good works.

Though the original debate centered on the economic virtues of Protestantism versus Catholicism, today’s debate encompasses the economic effect of all major religions. In a study titled, “People’s Opium? Religion and Economic Attitudes,” I, along with Luigi Guiso of the University of Sassari, Italy, and Paolo Sapienza of Northwestern University’s Kellogg School of Management, took a new approach to answering the question of whether religion has an impact on a country’s economic development. Previous research on this topic has focused on cross-country studies. The problem with the approach adopted by us, however, was the difficulty of distinguishing between effects that are specific to religion and those that are specific to the country.

Our new approach focuses on the differences in religion within a given country, pooled across 66 countries. In doing so we eliminate the spurious effect of other environmental variables and focus on the link between religion and attitudes, such as trust, that have been found to be conducive to economic growth.

We found that religious beliefs are generally associated with “good” economic attitudes, where “good” is defined as attitudes conducive to higher per capita income and growth. Religious people tend to trust others more, trust the government and legal system more, are less willing to break the law, and are more likely to believe that markets’ outcomes are fair. There are exceptions, however. Religious people tend to be more racist and less favourable to the rights of working women.

Of the six major religious denominations represented in the survey (Catholicism, Protestantism, Judaism, Islam, Hinduism, and Buddhism), we found that overall, Christian religions are more positively associated with attitudes conducive to economic growth, while Islam is more negatively associated.

World Values

We based our study on data from the World Values Survey, a collection of surveys administered to a representative sample of people in 66 countries from 1981 to 1997, coordinated by the Institute for Social Research at the University of Michigan. The surveys contain information about demographics (sex, age, education) and self-reported economic characteristics (income, social class). These data allowed us to control for differences in individual characteristics. The survey also included answers to specific questions about religion, political preferences, and economic attitudes, including religious affiliation, intensity of beliefs (frequency of attending religious service), and whether or not the person was raised religiously.

 
We analyzed how religion in general, independent of denomination, affects six groups of variables: 1) attitudes toward trust and cooperation; 2) attitudes toward working women; 3) attitudes toward the government; 4) attitudes toward legal rules; 5) attitudes toward the market economy and its fairness; and 6) attitudes toward thriftiness. On average, we found that religion is positively associated with attitudes conducive to free markets. Both a religious upbringing and active religious participation increase trust toward government institutions and markets. However, being religious is also linked to greater intolerance toward others and a more conservative attitude toward working women.

Results are generally the opposite for self-proclaimed atheists: they are more tolerant of others; less trusting of the government and the police; have more progressive attitudes towards working women; trust the legal system less; are more willing to break the law; and have worse attitudes toward the market and its perceived fairness.

Spectrum of Beliefs

In terms of economic impact, the three most relevant attitudes are: the degree to which people are willing to accept inequality (for example, in income) in order to provide better incentives; the degree to which people are willing to support private over public ownership; and whether people think competition is good.

We found that the six denominations differ most in their position on the trade-off between income equality and incentives. Catholics and, to a greater extent, Muslims and Jews are biased in favour of income equality, while Protestants, Hindus, and Buddhists are more in favour of incentives.

Religious denominations also differ in their attitude toward private ownership. Buddhists, Catholics, Protestants, and Hindus support private ownership more than the average non-religious person. In contrast, Muslims show considerably less support for private ownership.

Regarding competition, Buddhists, Jews, Catholics, and Protestants support competition, while religious Muslims and Hindus are strongly opposed to competition. In addressing attitudes about poverty, we found that religious people of all denominations except Buddhism are more inclined to believe that the poor are lazy and lack will power, rather than being short changed by society.

In sum, Buddhism seems to promote the most positive attitudes toward the free market system, with Christian religions following. Muslims and Hindus showed the most negative attitudes toward the free market system.

Free Markets

Based on our findings, we suggest that religious beliefs may explain why capitalism spread so successfully in East Asia (where Buddhism prevails), while finding less support in Islamic countries.

For most of the religious denominations represented in the survey, religion is not necessarily a hindrance to building support for a market economy. For example, it does not seem that the relative underdevelopment of Catholic versus Protestant countries is due to Catholicism itself. However, as we note, the religion that stands out in many dimensions is Islam, because Muslims tend to be opposed to many aspects of the free market system, including private property, granting incentives, competition, and tolerance of women’s participation in the work force.

If we go by these results, I think the Americans trying to build a market-based democracy in Iraq should be prepared for a wild ride.

Anirudh Raheja           
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