The effects of religious beliefs on economic performance


Christianity rescued woman from this degrading condition by giving her equal rights, and by making her the companion of the husband. This equality was in part recognized by imperial laws, which gave to women the right of controlling their property, and to mothers the right of guardianship. It has been proven that women with equal rights are very beneficial for an economy. Their input is just as important as those of men. Work Ethics In emphasizing one’s work as a “calling”, Christianity has glorified and elevated work as a part of one’s mission.

The concept of real capitalism is related with the Christian work ethic. The Christian view (and Protestant Christianity in particular), that one should try to work as hard and as much as possible, has helped increasing productivity in Christian economies. Calvinistic Protestantism as a theological belief system exerted an important influence on the emergence and growth of capitalism as a mode of economic organization. Calvinism served as important stimulating and reinforcing function for capitalism. Calvinism did not create capitalism nor was it even absolutely necessary for its triumph.

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Rather, Calvinism provided an environment which encouraged capitalism and hastened its development; the effects are visible in the societies where Calvinism wielded an influence. Hinduism Hinduism is not only a religion, but serves as a holistic view of life. It is the oldest of the world’s main religions, yet it does not have one sacred book or code of tradition to govern it. It is composed of a wide specter of scriptures and small communities share informal values and norms. There are literally thousands of gods and a set of cults, sects and ideologies. The effects of the religious guidelines changes from place to place.

The basic tenets of Hinduism are the concepts of Moksha (salvation), karma (sacred duty), and castes (Hindu social class). The Atman is the manifestation of the essential, eternal self trapped in the finite body, or a guna. Closing the gap between the eternal self and the finite self inevitably leads to salvation. Each person has their characteristics that are bound by their guna. It is by concentration on those characteristics and abilities that can bridge the gap, reaching salvation (Moksha). However, there seems to be a duality to this. There have been two valid interpretations of the way to salvation.

The first is described above; but the second interpretation is to bridge the gap by discarding the guna. This is the first dualism in the Hindu philosophy. Gita (a sacred Hindu text) combines the two ideologies providing that people should do “work without attachment”. This ideology, combined with the scripture of the Panchatantra (another sacred text) that states “wealth gives constant vigor, confidence and power”, “poverty is a curse worse than death”, should give result to something similar to the Protestant work ethic. However with the principles of karma and rebirth, there is potential that is not achieved.

Karma could be seen as a guiding force that promotes action and individual responsibility. However, if misinterpreted, Karma could raise fatalistic convictions. In addition, the idea of the eternal self makes the current life less important. Merriam Webster dictionary defines a caste as “one of the hereditary social classes in Hinduism that restrict the occupation of their members and their association with the members of other castes”. Hindus in India possess a rigid and inflexible caste system which is deeply embedded in the population. Castes are differentiated by rituals and beliefs that encompass all thought and conduct.

Within the caste system, the varna (color) system exists. This splits all Hindu society among five groups: the priestly and learned; the warriors and rulers; the farmers and merchants; the peasants and laborers; and the untouchables. One is bound to a caste by heritage, but people have the opportunity to move up and down in the varna. The caste in India before the Middle Ages was one where people could move freely between castes to better suit their needs and did not discriminate on the basis of caste in terms of economic opportunity and education.

However during the Middle Ages, the caste system took its modern form and stunted the potential in terms of education and growth, which we can say had a negative effect for India’s economy to come. Furthermore, the Hindu system became very rigid and ritualistic. The misinterpretation of scriptures to accept Karma as fatalism, and the adoption of a ritualistic style of life lacks the required aspirations and motivations of the individual to increase productivity and sustained economic growth. Additionally the protection of the caste system has been achieved by blocking technological change and occupational mobility.

There has been pressure to dissolve the caste system since the 19th century, but the attempts have so far proven to be without real consequence. As new jobs emerge, the caste systems seem to change, albeit it is slow and has friction. The ethical preconditions for the emergence of capitalism have been much more hospitable in India than they actually were in Europe7. An example is India’s successful ICT sector. People that work there are mainly of the Vaishya caste (merchants and traders), but currently the Brahmins (priestly and knowledgeable) have been taking their share.

However lower castes are imitating rituals and jobs done by the higher castes, and thus breaking the monopoly on certain crafts. Although India has many possibilities and resources to be a very economically developed country, there are certain aspects of Hinduism which affect this. Hinduism teaches people that they have to work, following what they are best at; and at the same time become separate from the working ego. It also teaches people that their acts have consequences. However, many economic sociologists agree that the modern caste system holds back the potential for people in terms of job distribution, education, and communication.

They are rigid, and hold monopolies over some professions and act as a barrier for people who were born in the wrong caste. The fatalistic view of eternal life, karma, the ritualization of life are often misinterpreted and results in people not being motivated to innovate or to have the mentality required to create true value in the modern world. The term stagnation is commonly used when describing the effects of Hinduism on the economy. Our conclusion is that despite attempted changes, Hinduism does not allow a country to reach its potential. Islam Introduction

Many in the Islamic and Western world perceive that economic performance of Islamic nations of today lag behind those of in the Western world. However, many also know that in the golden ages of the Islam it was the Muslim societies that led the world in subjects such as science, philosophy, culture and also prosperity. Though if one scours the Koran, there are no passages that relate negatively pertaining to the pursuit of wealth and economic development. The spread of Islam throughout the world was in fact due to the travels and trading activities of Arab merchants.

This was the case in most of West and parts of East Africa, where with its introduction, it brought a common language (Arabic), money and accounting system and a legal code to enforce financial contracts and dispute. 8 It appears that Islam as a religion does stimulate trade, though it shows that predominantly Muslim nations have a lower rate of economic development than its Western counterparts (Guiso, Sapenzia ; Zingales, 2002). Till the eleventh century, Islamic scientific developments were leading the world.

Since then, Muslim empires have been defeated, invaded and colonized by the Christian West. Since the age of imperialism, independence has been gained, but still many Muslim countries nowadays fall under the category of “Less Developed Countries”. Of course there are rich Muslim nations; however their economies usually rely heavily on the natural resources they possess, such as oil. We will try to answer the question as to what extent the poor economic situation of many Muslim nations is self-administered or caused by external factors.

The direct influences of Islam on the economy in terms of laws There are some essential ingredients to achieve economic growth; namely the three factors of production, natural resources, physical resources and human resources. Of course, a religion can not influence the factor of natural resources, as this is just a matter of circumstance. However, religion does play an important role in the ‘physical resources’. Physical resources are man-made resources and their availability depends on past accumulation of physical investment in building construction, purchase of equipment and maintenance.

The wealth of an economy, called capital, represents the physical wealth of an economy which is needed to generate income. The question that arises is whether a Muslim society provides an encouraging environment for this factor of production. Islam is like all religions one that contributes to the order of society and a feeling of well-being of citizens. As stated in the Qur’an, work should always have an ethical-moral component, either in itself or in its outcome. It creates a stable environment for all. However, it can also be argued that Islam is outdated and does not stimulate economic growth.

To give an example, the Qur’an states that one is not allowed to charge interests on a loan. How could a modern bank possibly operate under this rule? The fact that a bank cannot ask for interest has no additional benefits and can therefore be considered a hindrance. Of course Islamic banks nowadays have developed little rules to go around this, but there is no additional purpose for this prohibition and therefore not being able to directly ask for interest only decreases economic efficiency. The Role of Women in the Islamic Economy

The difference in role of women in society between the Islam and other religions is another factor which may contribute to the fact that Muslim nations are less economically developed. In the Islam, as almost literally stated by the Qur’an (4:34), women are inferior to men. Women are often not educated as well as men in traditional Muslim societies nor are they included in the labor force as much as men. This is a large constraint to economic development. If women were to participate in the workforce and be more educated, chances are high they will have fewer children.

Fewer children means a smaller population, leading to a higher per-capita income. The fact that they are participating in the workforce means an even higher family income, thus again increasing the per-capita income. This also means that instead of building more houses, roads or schools which would be needed for a large population, these resources can be devoted to the building of technological capital such as factories for more efficient production. Recent data from the ILO indicates that 28% of the women in the Middle-East and North Africa (where the Islam is dominant) are active in the workforce.

That is low to the world average of 40%. Saudi-Arabia has a lowest of 16%. The largest impact of a low number of women in the labor force is the fact that families where only the husband works have lower incomes than families where bother the wife and husband work. It is reasonable to assume that national income would increase if women were more included in the workforce. Islamic Education and Religion/Beliefs Another factor which is essential for economic growth and which is greatly influenced by religion and culture is human resources.

People need to be educated and trained to make advantage of capital or to make society function well. There are many practices and teaching norms of the Islam that prevent fast economic development. The nature of Islam education is not very encouraging in developing open minded citizens to fulfill their goals. For example, centuries ago, Muslim society gave away its scientific leadership due to the strict rules of the Islam. Also, the amount of time which is devoted to religion greatly exceeds that of, for example, Christianity or Judaism.

A Muslim spends much of his/her time on religion, as they pray five times a day and spend much of their time on religious traditions, such as the Ramadan. The Ramadan, an annual feast where Moslems fast for a month, significantly reduces economic productivity. People that are fasting have less resistance and are more easily fatigued. Productivity slows down in most sectors of the economy during this month. Not only because of physical deterioration does economic inefficiency increase, but also because the Ramadan is more about doing good thoughts and deeds, as one of the five pillars Islam is based on is charity.

Profit making is not seen as important in this period either. In one ‘Hadith’ (sayings of Mohammed or his companions), the Prophet said that one should work in life as if one were going to live forever. This saying suggests that there should be continuity in life. It also suggests that one should not be obsessed with attaining immediate results and worldly success. On the other hand, the Hadith states that an individual should act with respect to life in the hereafter as if he/she were to die tomorrow. In this, it suggests a sense of urgency about having one’s conscience in good order.

These correlative maxims rest on the ethical-moral prescription in the Qur’an to do good and reject evil. The Islam beliefs in a pre-determined world, where the actions of individuals have already been determined by Allah. This may contribute to a general attitude of fatalism (“it is Allah’s will”) and complacency. Whether this makes people work harder or less hard is disputable. Also, religious constraints on freedom of speech and on the power of the government in charge may collide with democratic rights and political freedom and the ability to expose and terminate political corruption.

Dialogue is almost nonexistent. The Islam resists promotion of other religions more than any other religion. To “proselytize” in a Muslim country is to get in prison. The fact that Muslim nations nowadays are often Less Developed Countries can be argued to be due to many factors. For example the influences of external factors, such as Western policy, differences in climate, corrupt governance of countries but also the influences of the Islam on the economy. Certain laws, education policies, beliefs and the role of women in Muslim communities may all contribute to a lower economic growth than could be achievable.

However, the Islam is rapidly adapting to the modern economy. For example, almost all Muslim nations nowadays have accepted the use of the Internet, which in the beginning was prohibited. Another example: “Saudis like to note that there was a time, in the 1950s and ’60s, when radio and television were viewed as works of the devil; now, they are accepted”9. All this shows that the Islam is adapting to the modern needs of the economy, because like many other religions, it is not fully compatible with the economy of today. Conclusion Many factors affect the economic performance of countries.

According to David Landes these factor may be geographic, government policies or institutional and cultural factors. Religion would fall into the latter category. In this paper we have attempted to surmise the effect of religion on economic development. In the first segment, we have collated several prominent research papers and concluded that religion does have a distinct impact on economic growth. In the second segment, we briefly introduced three religions and the specific factors within these religions that affect economic growth. We can conclude that religion seems to impede economic development.

It appears in general that religion is relatively incompatible with modern economics. Religion provides people with mores and norms and it does promote endeavor and pride in one’s work. However this is very different from the accumulation of material wealth, which religion deeply frowns upon. This is one of the factors that make religion hamper economic development as the accumulation of material wealth is one of the prime bases upon which modern capitalism is built upon. There are other reasons that make religion seem antithetical to economic advancement.

Hinduism’ caste system causes certain professions to be monopolized by certain castes. This prevents members of other castes to join these professions, in fact discouraging overall competition and enterprise. Also the belief in the karmic circle, if wrongly interpreted, gives a fatalistic view of life together with the ritualistic lifestyle discourages innovation or to create true value in the modern business world. With Islam, the unequal rights of women, prevents them from partaking in the labor force, resulting in a lower economic welfare.

The fact that so much time is allocated to the religious sector instead of the industry sector, in terms of religious activity, reduces output and overall economic activities. Ramadan, where Moslems fast for a month, increases inefficiency in the work force as people have less resistance and are easily fatigued. There is generally a drop in economic activities during this month period as wealth accumulation is a distant thought as more importance is given to good thoughts and deeds. The ritualization of life, and the conservatism provided by these religions act as a good social framework.

However they do hamper ideas which could be good for the economy in terms of productivity, innovativeness and overall economic advancement. We have shown how different religions influence the mentality of people and the context in which they operate. In this sense it definitely affects the economy and although it is very debatable, we have found that in these cases religion does not provide a positive influence towards economic development.

Bibliography Barro, R. J. and McCleary, R. M. (2002) “Religion and Political Economy in an International Panel”, Harvard University Press. Barro, R. J. and McCleary, R. M.(2003) “Religion and Economic Growth”, Harvard University Press. Eisenstadt, S. N. (1968). The Protestant Ethic and Modernization: A Comparative Study, New York, Basic Books. Ensminger, J. (1997)

“Transaction Cost and Islam: Explaining Conversion in Africa,” Journal of Institutional and Theoretical Economics, Vol. 153(1). Grier, R. (1997) “The Effect of Religion on Economic Development: A Cross-National Study of 63 Former Colonies” in Kyklos, Volume 50. Parry, J. (1996 [1989]), On the moral perils of exchange, in John Parry and Maurice Bloch(eds. ), Money and the Morality of Exchange, Cambridge: Cambridge University Press.

Steuart, I. (1999). “An Investigation into the Relationship between Religion and Economic Development” in Wits Student Journal of Economics, 1999. Taeube, F. A. (2001) “Culture, Innovation, and Economic Development: The Case of the South Indian ICT Clusters” Weber, M. (1930). The Protestant Ethic and The Spirit of Capitalism, London, Allen & Unwin. Castes in India, http://www. factmonster. com/ce6/society/A0857200. html Catholic Encyclopedia, “Influence of the Church on Civil Law”, http://www. newadvent. org/cathen/09066a. htm Sociuma, “Does religion influence economy? , http://www. asp Johnstone R. L.

“Religion in society: A sociology of Religion”, NJ, 1988 1 Eisenstadt, S. N. (1968). The Protestant Ethic and Modernization: A Comparative Study, New York, Basic Books. 2 Weber, M. (1930). The Protestant Ethic and the Spirit of Capitalism, London, Allen & Unwin. 3 Steuart, I. (1999). “An Investigation into the Relationship between Religion and Economic Development” in Wits Student Journal of Economics, 1999. 4 Grier, R. (1997) “The Effect of Religion on Economic Development: A Cross-National Study of 63 Former Colonies” in Kyklos, Volume 50. 5 Barro, R. J.and McCleary, R. M. (2002)

“Religion and Political Economy in an International Panel”, Harvard University Press. 6 Barro, R. J. and McCleary, R. M. (2003) “Religion and Economic Growth”, Harvard University Press. 7 Parry, John (1996 [1989]), On the moral perils of exchange, in John Parry and Maurice Bloch(eds. ), Money and the Morality of Exchange, Cambridge: Cambridge University Press, 64-93. 8 Ensminger, J. (1997) “Transaction Cost and Islam: Explaining Conversion in Africa,” Journal of Institutional and Theoretical Economics, Vol. 153(1). 9 http://www. library. cornell. edu/colldev/mideast/islmecx. htm.


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