Religion and economic development

Religion and economic development

Muhamad Ali, Lecturer, The State Islamic University
(UIN) Sharif Hidayatullah, Jakarta

The New York Times recently reported about two Harvard
scholars who found that religion is not an impediment to economic
development, after analyzing data collected in 59 countries
between 1981 and 1999.

"Our central perspective is that religion affects outcomes
mainly by fostering religious beliefs and individual traits such
as honesty, work ethic, thrift and openness to strangers," the
two researchers, Robert J. Barro and Rachel M.McCleary, said.
"For example, beliefs in heaven and hell might affect those
traits by creating perceived rewards and punishments that relate
to 'good' and 'bad' lifetime behavior."

The data included attendance at places of worship and
religious beliefs and measures of economic development, including
per capita gross domestic product, educational attainment by
adults, the urbanization rate and life expectancy.

The finding are not very surprising because scholars like Max
Weber and Maxime Rodinson, in their books The Protestant Ethic
and the Spirit of Capitalism and Islam and Capitalism,
respectively, have argued for the connection between religion and
economic development. But this most recent study by Barro and
McCleary is based on a sophisticated analysis of a huge set of
data and seems more convincing.

My own library research on Islam and economic development
during the New Order era also suggests such a connection. Then
president Soeharto attempted to accommodate Muslims in his
development ideology through Pancasila, instead of capitalism and
socialism, and interestingly Muslim intellectuals and
institutions did not resist such appropriation.

Government officials used religious festivals as a forum for
conveying their development messages and the Muslim society at
large showed its support in speeches and publications that linked
Islam and development.

Muhammadiyah and Nahdlatul Ulama (NU), the two largest Muslim
organizations, for example, have long had their own economic
initiatives, even if they were not very sophisticated, such as
alms giving, endowments and setting up local cooperatives to
prevent economic exploitation. More recently both organizations
established People's Credit Banks and have supported local
export-import activities.

Interestingly, religious differences have not prevented
Muslims from doing business with non-Muslims such as the ethnic
Chinese and foreign companies. For example, Muhammadiyah has
cooperated with Bank Central Asia (BCA) and a life insurance
company, while the NU has created a joint venture with other
companies.

Why have Muslims encouraged themselves to do business? For
Muslims, economic activities are part of human social
interactions (muamalat). As the Prophet Muhammad and his wife
were traders, Islamic doctrines are interpreted as motivating
hard work and honesty.

Muslims also believe that God created the earth and everything
on it not to be destroyed but to be managed properly for the best
benefits of humankind. Yet development and modernization have
carried with them environmental destruction and moral decadence,
such as individualism and excessive materialism. Islam serves as
a controlling and balancing power.

While agreeing on values, Muslims differ in systems and
strategies. Only recently (i.e. the 1970s) did Muslims disagree
on the issue of an interest-based banking system. Some interpret
the Koranic riba as not merely usury but also interest. Some are
establishing what they call Islamic economics, deriving from
Western economic principles plus Islamic values.

Many still believe that interest is not un-Islamic because it
simply represents a transaction fee and is used for productive
purposes. In any case, both "Islamized" and conventional banking
systems coexist and engage in healthy competition.

Do the above research findings represent a criticism of the
secularization thesis -- the idea that a country becomes more
secular as it becomes richer and more industrialized? This is a
controversial issue and has different answers from different
perspectives. What makes sense to me might be the following.

First, in any period of history, religion has never been
merely a private matter, although many have attempted to push
religion into such a direction.

It is hard to make a generalization about whether or not
religion becomes more and more privatized or religion becomes
increasingly public. It depends on the perspective. My own view
is that if religion should turn to the public across religious
boundaries, it is not its exclusive characteristics but its
inclusive, tolerant and more universalized values such as justice
and peace that come to be emphasized.

Second, religion is often if not always connected with other
aspects of life. It is difficult for many to create clear
boundaries between what is religious and what is not religious.
It is thus quite plausible to consider what Prof. Paola Sapienza
said, "are you picking up religion or something that correlates
with it, like certain laws or social and economic institutions".
In other words, social and cultural circumstances may have
affected economic behavior the same as religious belief may have.

Third, doctrinally, religion (including Islam) and capitalism
are not incompatible. However, if Islam and capitalism are not
incompatible, would that logic also mean that Islam and socialism
are not incompatible?

In my view, the relationship between religion and ideologies
cannot be regarded in an idealist ahistorical way. The connection
can only be made in relation to a particular agency in a
particular time and space. Whether or not religion and economic
development are actually related, there are many who wish to
assert that they are in fact related, but there are also others
who do not wish to assert such a connection.

Therefore, the connection that exists, or is believed to exist
between religion and economic development is mediated by cultural
principles. It should also be recognized that the nature of the
causal process linking religion and economic development is
complex, multifaceted and varies from situation to situation. It
involves more general questions of ideology, political
organization and the structural properties of the social system
within which religion is embedded.

The last point demands particular attention as the
Muhammadiyah, the NU and other religious organizations have been
promoting an "anti-bad" political movement. Why can't religion
prevent its adherents from bad economic practices such as
corruption and collusion? This question should be primarily
answered by the people themselves who claim to be religious but
commit social sins. But one thing seems to be indisputable: no
religion justifies activities that are harmful to others, both
humankind or the environment.

The writer is a PhD candidate at the University of Hawaii at
Manoa and a fellow at the East-West Center in Hawaii.