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Religion & economic growth

July 18, 2017

AT first sight, the black francolin (kala teetar) looks like a fairly ordinary creature, but one that many bird lovers are partial to. The grocer from whom I do my shopping, located in one of Islamabad’s katchi abadis, has one at his shop. But it is difficult to believe that this nondescript bird is part of what drives a substantial part of economic growth in surrounding areas. Let me explain.

Economics normally takes into consideration four factors of production (land, labour, capital and entrepreneurship). But what about ‘divine information’? Such information is supposedly the preserve of gifted holy men, in this instance the ‘pirs’ who advise keeping a black francolin to ward off evil spirits, counter black magic and build a successful business because the bird emits a certain cry. This, they contend, is enough to keep the household safe and business booming.

Of course, there is a price to pay for such information, deposited with the disseminator. This income has spawned economic growth in this area in the form of real estate (mostly the property of the pirs) and other businesses. Construction activity is the main driver, which provides jobs to thousands of labourers from all parts of the country. Their earnings generate an entire service industry specialising in food, accommodation, etc. This sprawling business activity, that has helped propel economic activity, is based solely on ‘divine’ information since there is very little government or private investment that has ever taken place here.

Belief is central to understanding the riches of those who disseminate religious knowledge.

The gist of the argument is that religion and economic growth are linked, and that link is based on ‘information’ that only a very small percentage of the population can deliver. Yet this link has never generated much attention. Perhaps the sensitivities surrounding religious beliefs are a contributing factor. Another impediment is the exertion encountered in determining the direction of causality, ie does the causality run from economic growth to religion or from religion to economic growth? Put another way, what causes what? This is a very tricky question to answer.

There have been historical exceptions, such as sociologist Max Weber who opined that the ‘protestant work ethic’ is what made Europe and the US rich. Economic historian Richard Tawney traced the rise of capitalism while discussing religion and its significance. British historian Niall Ferguson reignited this argument when he commented that Europe’s below-par economic performance in recent times owes to the decline of this work ethic (citing the decline in church attendance and religious beliefs). But except for Tawney, none were economists.

In 2002 and 2003, Robert Barro and Rachel McCleary (two economists) sought to break this impasse with their research. To take care of the causality problem, they took into account factors that were not directly influenced by growth in GDP. Their most important finding was that what matters the most is belief, and not the time spent attending a church or religious congregations. Economic growth responds positively to the prevalence of belief in the afterlife, heaven and hell.

Why? Probably because it instils fear against committing wrong, and incentivises practitioners of various faiths to persistently work hard. Other findings corroborated some of the generally held beliefs, such as lower church attendance in wealthy countries (the US was the exception though, in countries with Christians constituting the majority).

Barro and McCleary’s research lends support to the connection between religion and economic growth. However, religion is only a part of the complex mix that constitutes the story of economic growth. For example, the growth story of the last three decades has China at the top of the pile. Yet religion is a negligible force in China, where state and society normally have non-religious leanings.

The research also brought to light the importance of belief. In our example of the pirs, information related to the divine accentuates and strengthens an adherent’s belief. This would also explain, for example, how an economic system and religion can cohabit. America is currently the bastion of laissez-faire capitalism, but also a country where religious belief is a core part of society. Traditionally, their mutual existence has been thought to be impossible.

Similarly, belief is also central to understanding the riches of those who disseminate religious knowledge. The contributions received by the Catholic church help it run a global business empire valued in billions of dollars. Its properties worldwide cover 716,290 square kilometres, and it has holdings in banking, insurance, construction, etc. In the aftermath of the great recession of 2008, which led the pope to severely criticise capitalism’s workings, an astute observer reminded him that almost the entire donation to the Catholic church comes from economies based on capitalism.

Across the border in India, temples hold an estimated 4,000 tonnes of gold, besides diamonds and precious stones. There is no estimate of how much wealth is in the possession of Pakistan’s religious seminaries or religion-based organisations, but nobody should be surprised if it runs into billions. Similarly, there is no estimate of the wealth owned by synagogues, but we know that their adherents pay an annual fee. Money is also raised through different fees, donations and holiday appeals. This helps synagogues run multimillion-dollar funds. In the eyes of many among the religiously inclined, holy men are genuine interlocutors between them and God, and that sustains this drive to acquire wealth.

The mention of religious institutions and their wealth is not meant to discredit them, but I notice a striking conundrum here. The apostles of God preached simplicity and that the pursuit of wealth should be avoided. Yet the institutions perpetuating their teachings have no qualms in accumulating wealth.

The answer to this conundrum lies in historical developments, especially the expansion of cities, trade and economic growth that ultimately led to the unshackling of certain stringent conditions. Theologians, over time, ultimately found ways to get around these and give their blessings to wealth accumulation and economic growth. For the present, it is enough to acknowledge that religion is no barrier to economic growth or wealth accumulation. And given that the pirs can have it so good, perhaps we all should seek their blessings.

The writer is an economist.

shahid.mohmand@gmail.com

Twitter: @ShahidMohmand79

Published in Dawn, July 18th, 2017