Respect the altar of every belief. Spanish America, limited to Catholicism to the exclusion of any other religion, resembles a solitary and silent convent of nuns . . . To exclude diff erent religions in South America is to exclude the English, the Germans, the Swiss, the North Americans, which is to say the very people this continent most needs. To bring them without their religion is to bring them without the agent that makes them what they are. Juan Bautista Alberdi (cited in Landes, 2000, p. 5)
Juan Bautista Alberdi, a distinguished Argentinian of the nineteenth century, believed that religion and culture play the most signifi cant role in shaping the economic destiny of a nation. This is what he wrote in 1852, half a century before Max Weber’s remarkable work The Protestant Ethic and the Spirit of Capitalism.
In this section, I discuss some of the notable theories that link religion, culture and economic performance. I classify the religion and culture theory into fi ve broad categories, as follows: the Protestant work ethic view, the religious intolerance view, the collective belief view, the middle class virtues view and the trust view.
The Protestant work ethic view is due to Max Weber and it goes back to the early twentieth century when he published his thesis entitled The Protestant Ethic and the Spirit of Capitalism. Weber (1930) argues that the epoch- making Protestant Reformation changed societal outlook and sowed the seeds of modern capitalism. Protestantism’s emphasis on indus- try, thrift and frugality, along with its moral approval of risk taking and fi nancial self- development, created a social environment conducive to investment and the accumulation of private capital. This became an inspi- rational force in transforming traditional societies into modern capitalist ones. Catholicism, on the other hand, considered trade and accumulat- ing riches to be sinful, an attitude which was quite inimical to economic progress. Samuelsson (1993) points out that Weber’s theory hardly applies to Lutheranism, which retained the traditional attitudes of Catholicism towards trade and commerce at least at the time of its inception. But it undoubtedly applies to Calvinism, which supports trade and commerce.
One of the central themes of Calvinism is predestination. According to this belief, some individuals are chosen and saved by God while the others are not. This process of selection by God is predestined and unal- terable. Calvin, in his discourses, did not mention who had been chosen.
Therefore, the only practical way for the followers of Calvin to breed hope of attaining salvation is by performing intense worldly activities. Weber (1930, p. 69), also cited in Acemoglu et al. (2005a, p. 15), states that,
‘however useless good works might be as a means of attaining salvation,
they are indispensable as a sign of election. They are the technical means, not of purchasing salvation, but of getting rid of the fear of damnation.’
Calvin’s doctrine encourages economic activity, but condemns enjoying the fruits of such activity by means of leisure. The followers of Calvin con- sider morality to be a virtue not because it can bring salvation but because it helps in acquiring moral credit. All these characteristics of Calvinism are essential preconditions for economic progress and this is how, according to Weber (1930), Calvinism infl uences economic performance. Given the provocative nature of Weber’s thesis, it is not hard to understand why it fails to achieve universal acceptance. In an infl uential study on religion and growth, Tawney (1926) rejects Weber’s view. He argues that the English economy took off in the sixteenth century when the religious infl u- ence in society was replaced by secular attitudes.
The religious intolerance view is due to Landes (1998). This adds another dimension to the theory that links religion and economic performance. In his book The Wealth and Poverty of Nations, he argues that the profi t motive of the entrepreneurial class coupled with invention and productivity gain are core to achieving material progress. Therefore, it is crucial for reli- gious beliefs and practices within the society to encourage hard work and not inhibit rational and scientifi c thought and profi t making. He uses the example of eighteenth century Britain to illustrate the eff ect of Protestant work ethics and values on economic performance. According to his thesis, Britain’s numerous scientifi c successes after the Industrial Revolution were made possible due to the supportive and tolerant role played by the Church. In contrast, the orthodoxy of the Catholic Church in Portugal and the culture of intolerance diff used by the Catholic Church in Spain and Italy strangulated scientifi c thinking and halted progress even though they were the fi rst to make signifi cant progress in cartography and ocean navi- gation. The infamous ‘Roman Inquisition’ in sixteenth century Europe is a testimony to the religious intolerance and orthodoxy of the Catholic Church which virtually stalled the European renaissance. To summarize, Landes (1998) maintains that the culture of intolerance in Catholicism and Islam limits the potential of a country to grow. Protestantism, on the other hand, facilitates economic growth by encouraging hard work and showing a more tolerant attitude towards scientifi c research.
The collective belief view is due to Avner Grief. Grief (1994) holds that diff erent cultures and religions generate diff erent sets of beliefs about how people behave and people’s behaviour has a direct role in shaping eco- nomic performance. According to his argument, this can generate diff erent growth equilibria across the globe even with the same set of institutions.
These beliefs can also infl uence institutional quality in the long run and aff ect economic performance indirectly.
The ‘middle class virtues’ view is due to Gregory Clark (2007). Clark’s main proposition is that the lack of growth in the preindustrial world is due to the lack of ‘middle class’ virtues of thrift and hard work. He argues that industrial revolution took place in England because the middle class virtues spread down the social scale in the sixteenth and seventeenth cen- turies. The poor experienced relatively high death rates during this time.
Therefore, they did not have enough surviving children. In contrast, the infant survival rate amongst the rich was higher. As a result, many of the rich off spring were forced down the social scale carrying middle class virtues with them. This led to a change in work ethic of the entire society and rapid economic progress. This, however, did not take place in Asia, Africa and Latin America. The infant survival rates amongst the rich and the poor were largely similar in these societies. Therefore, the spread of middle class virtues was at best slack. This, in Clark’s view, explains the diff erence between the rich and the poor countries. Clark’s view, however, is criticized by many including Allen (2008) for its lack of evidence. Even the evidence provided by Clark appears to be unreliable (Allen, 2008).
Finally, the trust view is due to Putnam (1993). He holds that the Catholic tradition emphasizes vertical bonds with the Church which tend to undermine horizontal bonds with fellow citizens. This reduces the level of trust in society and increases the transaction costs of economic exchange. Therefore, Catholicism has a negative eff ect on institutions and hence a negative eff ect on growth. Trust also has a direct impact on cred- itworthiness. Lack of trust in society creates a creditor unfriendly environ- ment that limits economic progress. The creditor unfriendly environment is also due to the anti- usury culture prominent in the Catholic tradition (Stulz and Williamson, 2001).
In a related thesis, Kuran (1997) argues that a large divergence in indi- vidual and social preferences may lead to a decline in social capital. He formally defi nes the phenomenon of divergence in individual and social preferences as preference falsifi cation. To illustrate this further, one could think of a situation where social preference is moulded by an authoritar- ian state and is diff erent from individual preferences. In such a situation, individuals would never reveal their true individual preference in public, which is diff erent from the social preference put forward by the state, due to the fear of a backlash. Kuran describes this phenomenon as preference falsifi cation. In his book, he describes both positive and negative implica- tions of preference falsifi cation. One of the negative implications could be a decline in social capital and trust which may have negative eff ects on long-term development.