Religion and Economic Development

By McCleary, Rachel M. | Policy Review, April-May 2008 | Go to article overview

Religion and Economic Development


McCleary, Rachel M., Policy Review


READING THE HISTORIAN Arnold Toynbee's lectures on the British Industrial Revolution, it is quickly apparent that conditions in England prior to 1760 were in many respects similar to those in developing countries today: Poor infrastructure and communication, lack of technological innovation, no division of labor, a focus on local commerce, and a weak banking system. (1) Surprisingly, the modern study of religion and economics begins with Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations (1776), an examination of conditions leading to the Industrial Revolution. In his book, Smith applies his innovative laissez-faire philosophy to several aspects of religion. However, Smith's fundamental contribution to the modern study of religion was that religious beliefs and activities are rational choices. As in commercial activity, people respond to religious costs and benefits in a predictable, observable manner. People choose a religion and the degree to which they participate and believe (if at all).

Smith's contribution to the study of religion is not simply theoretical. He held substantive views, for example, on the relationship between organized religion and the state. Smith argued strongly for a disassociation between church and state. Such a separation, he said, allows for competition, thereby creating a plurality of religious faiths in society. (2) By showing no preference for one religion over others, but rather permitting any and all religions to be practiced, the lack of state intervention (short of violence, coercion, and repression) creates an open market in which religious groups engage in rational discussion about religious beliefs. This setting creates an atmosphere of "good temper and moderation." Where there is a state monopoly on religion or an oligopoly among religions, one will find zealousness and the imposition of ideas on the public. Where there is an open market for religion and freedom of speech, one will find moderation and reason.

A contemporary of Smith (though they were not acquainted) and a public intellectual during the British Industrial Revolution, John Wesley had much to say about the relationship between religion and economic development, though his perspective differed radically from Smith's. Wesley (1703-1791), a theologian and the founder of Methodism and the Holiness Movement, championed the two-way causation between religion and economic growth, preaching in 1744, "Gain all you can, Save all you can, Give all you can." Later, in his famous sermon of 1760, "The Use of Money," Wesley expounded upon these three points, emphasizing hard work, self-reliance, and mutual aid. Finally, just two years before his death (he lived to be 88), Wesley berated his congregants from the pulpit for their comfortable lifestyle and urged them to give away their fortunes. In the 45 years between these two sermons, Wesley's followers, by working hard and saving, had raised themselves up into the comfortable middle class. Wesley understood very well the direct causal relationship between religious beliefs and productivity. He also understood well that wealth accumulation could weaken religiosity both in terms of beliefs and participation. Wesley concluded that economic growth was detrimental to religion. Is it? And, if so, must it be?

The two-way causation

LET US LOOK at the two-way causation and, thereby, the relationship between religion and development. First, how does a nation's economic and political development affect its level of religiosity? When we look at the effects of economic development on religion, we find that overall development--represented by per capita Gross Domestic Product (GDP)--tends to reduce religiosity. (3) The empirical evidence supports, to a degree, the secularization thesis which holds that with increased income, people tend to become less religious (as measured by religious attendance and religious beliefs). Economic development causes religion to play a lesser role in the political process and in policymaking, in the legal process, as well as in social arrangements (marriages, friendships, colleagues).

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