Impact of Religion on Global Economy - Essay Example

Impact of Religion on Global Economy and Section # of It is a well known quote that Economics is the intellectual religion of the day. Over the period of time, the field of economics has been developed and prospered remarkably, especially after the industrial revolution. Since its very inception, it has been a key concern of the economists that what factors drives the economic activities and to what purpose these activities are intended to? As an attempt to respond to this question a number of schools of thoughts came into existence and providing a number of factors responsible for the global economic activities. Initially the focus was on the material resources like land, labor, capital and entrepreneurship. With the advancements in studies, the focus shifted to scope of growth, literacy, infrastructural advancements and the human resource development to meet the challenges etc. Another recent development in this regards is the attention towards religion as the driving and blocking force for many economic activities on individual as well as global level. This paper is intended to analyse the nature of impact of the religion on the economic growth, economic policies and global economy. To achieve this purpose, the discussion ahead would be divided into two parts. The first part is dedicated to analyze what various theories and the researchers have to say about the issue. While, the second part of the discussion would be focused on some examples demonstration what is revealed out of the researchers and their theories. First of all lets look at the theories forwarded by various researches regarding the influence of religion on the economic activities and economic growth. This subject area was not considered as a research area few decades ago. However, with the passage of time, people realize that the religion indirectly, if not directly, has an influence over the economic growth. Iannaccone (1998) is one of the most eminent modern researchers in the domain of the study of the relationship of economics and religion. In his elaborative survey, he has classified the study of the religion and economics into three broad categories. The first category is about the micro-foundation of participation of the religious foundations. The second deals with the economic implications of the religious participation. The third category investigates the religious teachings to critique economic policies. Throughout the discussion, the focus would be on the second category, which is the economic implication of the religious participation. There is loads of literature on the economic implications of the religious affiliations. For example, Lowry (1998) asserts that since the religious affiliation plays a vital role in developing in his mind the image of an ideal society and thus, the society in which the people of a particular religion dwells, reflects the religious beliefs of the people of the society. For example, in a society where high value is given to honesty or trustworthiness tells that the religion prevailing in that society has given high value to the ethical values and thus, as the implication of such high emphasis on the ethical values, the business matters would also not go against the ethical premises of the religion prevailing in that society. One of its best examples is the business of wine in the typical Muslim countries as Pakistan, the use as well as trade of wine is strictly prohibited in Islam. The same value reflects from the Muslim society prevailing there and hence the idea of doing a wine business there is simply futile. So on the basis of these reasons; Lowry claims that the religious affiliation provides the basis of one’s belief about the “good society”. This belief is then reflected in the particular policies that affiliation adopts. The same researcher, Lowry (1998) also argues that the strength of an individual’s attachment, as a result, affects the degree of the policy convictions. There is an interesting finding of Lowry, he finds that the number of members per household of Judeo Christian denominations has an inverse and noteworthy effect on state membership rates to groups which are in the favor of the preservation of the environment. The issue of the preservation of the environment is related to many heavy industries and the future of those industries can exist only when the environmental advocacy calms down. The outcomes of his finding further tells that religious attachment directly affects the membership to sportsmen groups that is in the favor of the private stewardship of natural resources. Again, this issue related to natural resources is vital and thus monitored regularly by the industries which use these natural resources as their raw material. Almost a century ago, the renowned political philosopher and sociologist, Max Weber claimed that the Reformation in the Protestants created a mental revolution that led to the invention of modern capitalism. Gleaser and Glendon (1998) have tried to test the proposition forwarded by Max Weber. They found that on average, discounting the factors such as health status, age, gender, education, income and perceived social status, as well as country fixed effects, on average, the religious beliefs are conducive to higher GDP, per capita income and other economic indicators, thus indicating the positive relationship of the religious beliefs and economic growth. One more interesting proposition in this regard has been developed by Barro and McCleary (2003). They assert that the religious beliefs are directly related to the economic growth. This part of their proposition was more like verification to what Weber as well as Gleaser and Glendon. However, what additional he found out is more interesting. He although testified the direct relationship of economic growth and the religious beliefs, but he also asserted that the increased level of participation may yield the negative impact on the economic growth, even if the efforts are made to control for possible reversal causation. Likewise, Mehanna (2002) also found out of her research that the countries where the protestant faith is more dominant tend to be more open to develop bilateral relationships with other countries than those where Catholic beliefs are dominant. The measure used to test the level of openness is the percentage of imports in the total Gross Domestic Product. He does not limit his findings to the Protestant versus Catholic, rather he applies the same finding Protestant versus Catholics or a Muslim nation. There is however, one issue in his findings. There are many other factors take influence the import decision, there are chances that the two variables in the proposition of Mehanna would have correlation but not necessarily causation. On the similar lines, researchers like Guiso, Sapienza and Zingales also evaluate the relation of the religious affiliation to various issues like the trust of government, thriftiness, women working etc. They found out that the religious beliefs of Christians are more conducive to develop a ‘good’ economic attitude. Such religious affects, however, differ among various religious denominations. Gwin and North (2002), while studying specifically the cross country differences in religiosity, reveals that the establishment of a state sanctioned religion reduces the elements of religiosity while the cases where the religions are state sponsored, the religiosity is more likely to spread there, thus, influencing the state policies, including the economic policies of the state. Again, a good example in this regard is Pakistan, a Muslim country in South Asia. That country is claimed to be attained in the name of Islam, which is the state religion of Pakistan. The economic policies of Pakistan are therefore to some extent, influenced by the radical fundamentalists prevailing there. For example, this country can not have trade relations with Israel, as Pakistan has not accepted Israel on the religious grounds. As an effect of this scenario, Pakistan can not do any trade agreement with Israel, no worthwhile that may become for Pakistan. So we can see from this example that the religious affiliation and the element of religiosity is more impacting the economic decision making in the countries, where there is some religious declared as state religion by the government or where the government sponsors or subsidizes any religion. If we believe and build upon the assertion that religion plays an important role in determining the economic direction of an economy, it becomes very important to know that how the religious beliefs do affect the economic policies of a nation? What is the process through which the religious beliefs eventually affect the economic policies? Regarding this issue, several researchers have done the work, however, the most prominent ones are those of Gay (1991), Leege and Kellstedt (1993), Hofrenning (1995), Jelen and Wilcox (2002), Bane and Mead (2003), Bearce (2003), and Blank and McGurn (2004) and Amstutz (2001). Among these researchers, Amstutz (2001) has specifically focused on the role of religion in formulating the foreign policy of a nation and he has provided a framework too that determines the impact of religion on the economic growth. He asserts that, the religion, acting as an institution directly affects the foreign policies. In order to endorse his assertion, he provides an example that almost 70 percent of the Americans (that is almost three fourth of total American population) recognize themselves to be a member of certain church or synagogue. Thus, in the view of Amstutz, thus, now religion has become one of the largest voluntary associations of the United States of America. It was the view of every 4 out of 10 people in the United States in 1960 that their churches should participate in the political affairs. Statistics show that the trend is growing continuously. In the late 1990s, this ratio was almost half, which is every one out of the two believes that the church should intervene the political affairs. As a result of it, there has been an increasing existence of the exchange between the religious leaders and their members that permits the religious organizations to lobby. The lobby that has been created that way is in one way or other aimed to influence the political and economic policies. Another important tool with the religious organizations to influence the policy decision is by the way of ideas. It is so because these are religious organizations that promote that values that result in the favor dislike of certain policies among masses. These religious organizations deal with the issue like just war, equality etc. these religious organizations can and do influence the way people see various political and religious issue and thus have a important stake in the policy making, whether political or economical. In this way, religious values and ethical paradigms influences at least indirectly, if not directly, the formulation of the foreign policy. This approach is indirect because these religious organizations shape the opinions of the individuals and as the cumulative effect, the public opinion is shaped. According to Graham (1994), public opinion has always been an important factor in the foreign policy making. Another tool that the religious organizations use to influence the foreign policy and thus the economic policy is the services that they provide. These religious organizations also provide the humanitarian assistance service thus that is also one way of influencing the people. As a result of all this, the foreign policy thus shaped under the influence of religious organizations, it affects the trade and immigration policies. However, the literature is quite silent about it. Over the same lines, Gay (1991) assesses the evangelical debate over capitalism, which is based on the statements by the “Intellectuals”. These intellectuals are not the actual members of those religious organizations. Rather, as a true example of micro-socialization mechanism, these are the religious leaders and what they say and preach becomes the opinion of others. Thus the public opinion so formed becomes the main influencing factor on foreign as well as international and economic policies. Thus we can say that what Gay found was that the adherent, most of the time, blindly follow what is explicitly or in implied manner promoted by the leaders. Such implied or explicit promotions may include, the sermon from the pulpit etc. For example, the 2000 General Conference Amendments to the social principles of United Methodist Church, which included the statement: “Increasingly economies of nations are related through the international economy. There is the rise of globalization through multinational corporations. Countervailing powers need to be developed to counteract exploitation by these corporations.” Also, the United States Conference of Catholic Bishops (2002) statement on international trade made the statement that: “Trade liberalization is designed to open markets and increase general economic welfare by promoting efficiency of production and hence increasing the availability and reducing the cost of goods and services. However, trade liberalization, while it may produce job gains in some areas, can produce job losses and family and community dislocation in other areas and can also lead to environmental degradation. There is also a growing concern that trade rules may unduly benefit investors in some countries to the detriment of workers and the economies of poorer countries creating a widening gap between rich and poor.” Examples Having already seen that what does the theories, literature and the researchers have to say about the impact of religion on economic growth, let us now explore some examples where the religion has directly or indirectly affected the economic condition of a nation(s). Immigration policies of US and its economic significance Immigration policies in the United States of America are not just the matter of foreign department, rather the entire manifesto of the political parties of the United States have significant portion devoted to their policies regarding immigration. In order to determine the economic impact of religion, first we need to determine the issue of immigration. United States of America is the land of immigrants which is formed by the migration of people from Europe for political, religious or economic reasons. (Rodman D. Griffin 1994). Over the period of time, the same phenomenon (immigration) that populated the country has now become a major debatable issue in the political, economic and social domain of the land. (Hendricks A4) Once immigration was taken for granted in the US policy but now, immigration policy occupies a significant space in the political agenda of both, the democrats and the republicans. The immigration rules in the United States have been affected by various religious and ethnic lobbies since a long time, however, these immigration policies also had a strong pressure from the business community, to whom, the foreign immigrants, whatever their castes, ethnicity or the religion may be. But, those immigration laws were made strict beyond any expectation for the Muslims especially, after the incident of 9/11. Though the target was a particular religion and thus, the religion should have been affected rather than the economy. However, due to such strict immigration laws and the cracking down of illegal Muslim immigrants led to the deportation of the Millions of Muslims from United States leading to the stoppage in the cheap supply of labor. So, as a result of it, a religious biasness in America resulted in the economic loss of cheap labor to it. Trade relations of Israel with many Muslim countries Another example of the affect of the religion is the relation of the Israel with the Muslim countries. In order to inquire this matter, we must look into the history of Isreal. The area of Bait-ul-Muqaddas has always been a holy place for all the three Abrahamic religions; Judaism, Christianity and Islam. It was almost the end of 19th century when the Jews from every part of the world started to settle in Palestine, around the holy land. The population of Jews grew there very rapidly. The Jews were supported by the then superpowers. The Arabs, on other hand, seriously and severely argued against this mass migration, as it was a threat to their hold on the holy land. Finally, what was feared by the Arabs, actually took place and the United Nations, with the support of then super powers, declared the establishment of the state of Israel. Since the establishment of the state of Israel is against the interest of Mid Eastern Muslim nations and a threat to their security and sovereignty, the Arabs resisted against its establishment and as a matter of religious brotherhood, many other Muslim nations too, did not accept the state of Israel. All this shows that this was at all a political matter based on religious sentiments. But those anti-Israel religious sentiments influence the formulation of the foreign policies of the Muslim countries. As a result of those anti-Israel foreign policies, those countries did not accept Israel and thus there could not be any trade relations between Israel and other nations. In this way, a religious sentiment has directed the economic policies of many of the Muslim nations. Importance of Religious Ethics The religious ethics are also the key players in influencing the economic policies. One fine example in this regard is that of the business of Casinos in the Muslim countries. The ethical value system presented by Islam forbids to gamble or to carry on any such business which involves gambling. This has led to create a profound influence on the economic policies of Muslim countries, especially the orthodox ones. Therefore, no one can think of building a casino there, no matter how profitable this business may be. Oil Crisis of 1973 According to many economists, Oil is the driving force of all the major industrial nations. If the supply of oil is blocked for several days, this black gold has the potential to completely collapse any economy. The import, export and transport of the oil is totally an economic decision and it has nothing to do with the religion, apparently. However, looking at and browsing through only the recent history of the oil trade, the Oil Crisis of 1973 provides the most remarkable example of the impact of religion on the global economy. This crisis began on October 17, 1973 when the members of Organization of the Arab Petroleum Exporting Countries (OAPEC) decided to block the supply of Oil to all those nations who were supporting the Israel in its confrontation with Syria and Egypt in the Yom Kippur War. The countries affected thereof were United States, its allies in Western Europe and Japan. Furthermore, as a result of it, the oil prices rose sharply within few days. Since the economies of the industrialized world were sharply dependent on the oil exported by these countries, the prices rose sharply and the economic activities in those countries were collapsed. The effect of this crisis was also in the long term strategies of many nations. As a result of it, the Japanese decided to move from the oil intensive industries to technology intensive industries such as electronics. The central banks of Western nations decided to dramatically cut the interest rate in order to foster economic growth. Conclusion All this shows that an action motivated by the religious sentiments so drastically affected the global economies. Business / economics and the religion both affect each other. The examples of the US Immigration Policy, the trade relation of Israel, oil crisis of 1973 etc. all these portray a fine picture of the fact that the religion has, to a very great extent, been a source of effecting the economy. The economic motives are often influence by the religious motives, or on vise versa, the economic policies may impact the religion as well. Thus we can say that in the contemporary world where nations are getting closer to each other, the change in any dimension of one nation may affect another nation significantly. Bibliography 1. Amstutz, Mark R., 2001 “Faith-Based NGO’s and U.S. Foreign Policy,” in Elliott Abrams, ed., TheInfluence of Faith: Religious Groups and U.S. Foreign Policy, New York: Rowman and Littlefield. 2. Bane, Mary Jo, and Lawrence Mead 2003 Lifting Up the Poor: A Dialogue on Religion, Poverty and Welfare Reform, Washington DC: Brookings Press. 3. Barro, Robert J., and Rachel M. McCleary, 2002 “Religion and Political Economy in an International Panel,” Harvard University. 4. Bearce, David, H., “Societal Preferences, Partisan Agents, and Monetary Policy Outcomes,” International Organization, 57(Spring 2003) 5. Blank, R. 2004. 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