Spiritual Capital and Economic Enterprise

By Rebecca and Timothy Shah

While it is possible to approach the question of the relationship between spirituality and economics from numerous perspectives and using any number of methodologies, it is both practically relevant and theoretically worthwhile to approach it from the standpoint of the world’s poor. Some four billion people live on less than two dollars a day. Although spirituality may be a source of comfort or even inspiration to this vast number of people, is it a help or a hindrance as far as their economic lives are concerned? In other words, is spirituality a crutch, or is it a kind of capital that the poor can leverage for long-term economic betterment? If religion makes an economic difference, it is the poor — as well as those who make policy to help the poor — who most need to know what kind of difference it makes, if any.

If spirituality serves as a resource for anyone, whether poor or non-poor, it can reasonably be thought of as a form of “capital” by analogy to financial capital, human capital, and the now widely used concept of social capital. For our purposes, we define spiritual capital as specifically religious resources, such as religious beliefs, practices, networks, and communities, that individuals can draw on to improve their well-being, including their economic and political well-being. Spiritual capital is more than a subset of social capital, though the two partially overlap. Spiritual capital goes beyond the bonds, bridges, networks, and associations of human interaction, but includes these where they are religiously generated. But it also includes interactions with the transcendent and involves access to, and the marshalling of, transcendent resources. While spiritual capital is often dramatically evident in groups and organizations such as church meetings, Bible studies, temple pujas or Friday prayers in a mosque, group membership is not a prerequisite for generating spiritual capital. At the heart of spiritual capital is personal religious conviction and practice.

What kind of difference spiritual capital so defined makes for the economic well-being of the poor is of special practical relevance for two specific reasons.

First, whether spiritual capital makes an economic difference, and what kind of difference it makes, has direct implications for social and development policies designed to assist the world’s poor. If religion is an obstacle to economic betterment by being either an enervating crutch or distracting illusion, then those domestic and global “faith-based” approaches to poverty reduction that have become increasingly popular in recent years may be of limited value or even counterproductive. On the other hand, if religion aids economic betterment by serving as spiritual capital, then it is urgently important that faith of the poor be tapped as a resource for economic development, and faith-based anti-poverty policies and strategies may be one way to do this.

Second, although the world’s poor are by definition economically impoverished and lacking in financial capital, a recent study based on the World Values Survey demonstrates that they are remarkably rich in religiosity, in terms of both belief and practice. [1] If it were demonstrated that the poor can leverage their vast stocks of religiosity as economically beneficial spiritual capital, this could translate into a new paradigm for development practice and policy. Strategies could be devised to help the poor to become even more effective in marshalling their reserves of spiritual capital for developmental purposes.

The question of how spirituality relates to economics is often thought of as a grand theoretical question. And it is. It constitutes the heart of the great divide between Marx and Weber on whether religion is a stimulus or obstacle to economic progress, and whether religion is a causal or merely epiphenomenal reality. This great debate has been famously carried on by E. P. Thompson, R. H. Tawney, Talcott Parsons, Robert Merton, and more recently by scholars such as Edward Banfield, David Martin, Bernice Martin, Peter Berger, Paul Gifford, Lawrence Harrison, David Landes, Robert Barro, Rachel McCleary, Robin Grier, and Robert Woodberry. But it is clear from the discussion above that this great theoretical question is also one of practical urgency and direct policy relevance.

What, then, does the relevant scholarly literature say about whether religion is an enervating crutch or fungible form of capital for the poor? Though there exists a growing interdisciplinary literature on religion and economics, including religion and economic development, almost none of it provides hard evidence that religion is either a help or hindrance to the economic well-being of poor individuals. There are several reasons for this deficiency.

First, much literature on religion and economics examines the relationship between religion and macro-economic growth in general, with no particular focus on the economic betterment of the poor. For example, Barro and McCleary found on the basis of a broad cross-country panel that economic growth responds positively to the prevalence of some religious beliefs — such as belief in hell — but negatively to church attendance. [2] While overall economic growth obviously bears on the economic well-being of the poor, such literature still leaves us ignorant as to whether there might be a direct, dynamic causal relationship between spirituality and economic betterment in the lives of the poor. For example, do certain religious beliefs constitute a kind of spiritual capital for the poor in particular, and if so, how do they do so?

Second, literature such as that of Barro and McCleary, as well as that of Harrison, Grier, and to a lesser extent Woodberry, adopts a macro-level approach. [3] That is, it examines the religiosity of a whole society, or the religious “culture” of a whole society, or the religious distribution within a whole society, and asks whether any of these factors is positively associated with that society’s overall economic performance. In other words, the unit of analysis in such studies is an entire society or nation, not individuals or even any particular subset of individuals such as the poor. An additional problem is that such approaches — especially when their independent variable is the proportion of a given population adhering to a particular religion — often do not sufficiently distinguish specifically religious or spiritual factors from broadly cultural or geographical factors. Such studies, therefore, cannot tell us anything about the causal influence of “spiritual capital” in particular. Finally, a further difficulty when one’s unit of analysis is so large and complex is that there is a greater likelihood that unknown confounding variables — for which one cannot control — render one’s results spurious.

Third, such macro-level research, as valuable, insightful, and intrinsically interesting as it may be, has almost no practical or policy relevance. What would a policy-maker do with the information that the prevalence of belief in hell contributes to macro-level economic growth, as Barro and McClearly have shown, or that developing societies with more Protestants have greater post-colonial economic growth rates, as Robin Grier has shown? [4] It certainly offers nothing that could inform development policies designed to help the world’s billions of poor.

Fourth, even where existing studies adopt a micro-level approach to understanding the impact of religion on the economic well-being of the poor in particular, almost all such studies are beset by common problems: lack of reliable baseline economic data that does not depend exclusively on self-reporting; lack of statistically significant sampling; lack of quantitative, longitudinal study that systematically observes cause-and-effect relationships over time; and lack of systematic, controlled comparisons between a broad range of different forms and levels of religiosity.

In general, a major problem with existing studies of religion’s micro-level economic impact is that they are typically impressionistic or ethnographic in nature and thus not based on quantitative, longitudinal study that begins with reliable baseline economic data. This research, such as that of Martin as well as that of Chan and Aaron, is indispensable for providing an insightful picture of the “life worlds” of the religious poor and for generating hypotheses as to how spirituality and micro-economics causally interact. [5] But without quantitative study of statistically significant samples, one cannot know how representative such ethnographies are or gain adequate insight into the causal direction and dynamics between variables.

While other studies of religion’s micro-level economic impact, such as that of Sherman, attempt to introduce greater rigor through a standard survey instrument and a reasonably large sample, they often gather data only about the correlation between religious identity and attitudes presumed to be economically beneficial, but not data about actual economic performance. [6]

This raises a prior, pervasive problem: the intrinsic difficulty of collecting reliable baseline data on the economic well-being of poor individuals that do not rely exclusively on the self-reporting of the poor themselves. This represents a crucial problem, after all, because one cannot undertake quantitative, longitudinal study of the causal relationship between religion and micro-level economic performance without reliable baseline data. Even where there is an attempt to carefully gather such data, as in the current research of Ann Bernstein and Peter Berger on the economic consequences of Pentecostalism in South Africa, almost invariably such data are derived exclusively from the self-reporting of the respondents themselves (about, for example, their past and current income levels, their past and current savings rates, etc.). The accuracy of such self-reporting, however, is a major question.

Finally, almost all existing studies of religion’s micro-level economic impact examine only a narrow range of religious options and thus provide little comparative breadth. Typically, such studies have been conducted in overwhelmingly Christian contexts such as Latin America or predominantly Christian areas of sub-Saharan Africa, and thus are able to throw light on the economic consequences of a fairly narrow range of religious communities and traditions: mainline Protestantism, evangelical and Pentecostal Protestantism, Roman Catholicism, and possibly charismatic variants of Catholicism, along with “indigenous” traditions such as African Traditional Religion in Africa and Afro-Brazilian religion in a country like Brazil. We are thus left without studies that can not only compare the economic consequences of different types of Christianity but also compare the economic consequences of different Abrahamic religions, such as Islam and Christianity, as well as the economic consequences of Abrahamic versus non-Abrahamic religions, such as Hinduism.

Taken together, however, all the works just discussed remain invaluable in providing a solid basis for believing that religion’s micro-level economic impact is worthy of study. They powerfully suggest that religion may well serve as a form of spiritual capital that the poor can leverage for their economic betterment, and they also suggest a number of credible and empirically grounded hypotheses concerning the mechanisms whereby spiritual capital may contribute to economic betterment. Such hypotheses include: the hypothesis that spiritual conversion to a life of moral rigor yields thrift, sobriety, and other economically beneficial or “progress-prone” personal qualities; the hypothesis that supportive religious networks and communities strengthen the capacity of the poor to mitigate the economic consequences of unforeseen shocks, such as natural disasters and sudden deaths in the family; and the hypothesis that a “domesticated” husband and a harmonious family life yield significant economic benefits for poor families.

[1] Pippa Norris and Ronald Inglehart. 2004. Sacred and Secular: Religion and Politics Worldwide. New York: Cambridge University Press.

[2] Robert J. Barro and Rachel M. McCleary. 2003. “Religion and Economic Growth.” American Sociological Review, Vol. 68 (October): 760-781. See also Robert J. Barro and Rachel M. McCleary. 2002. “Religion and Political Economy in an International Panel.” National Bureau of Economic Research, Working Paper No. 8931.

[3] Lawrence E. Harrison and Samuel P. Huntington, eds. 2000. Culture Matters: How Values Shape Human Progress. New York: Basic Books. Robert D. Woodberry. 1999. “Religion and Democratization: Explaining a Robust Empirical Relationship.” Presented at the annual meeting of the Religious Research Association, Boston, MA, 5-7 November. Robert D. Woodberry. 2004. “The Shadow of Empire: Christian Missions, Colonial Policy, and Democracy in Postcolonial Societies.” Ph.D. dissertation, University of North Carolina, Chapel Hill.

[4] Robin Grier. 1997. “The Effect of Religion on Economic Development: A Cross National Study of 63 Former Colonies.” Kyklos 50 (February): 47-62. Robin Grier. 1999. “Colonial Legacies and Economic Growth.” Public Choice, Vol. 98, Nos. 3-4: 317-35.

[5] David Martin. 1990. Tongues of Fire: The Explosion of Protestantism in Latin America. Oxford: Blackwell. David Martin. 2002. Pentecostalism: The World Their Parish. Oxford, Blackwell. See also Bernice Martin and David Martin. Forthcoming. Betterment from on High. The studies by Kim-Kwong Chan and Sushil Aaron are their detailed quasi-ethnographic studies of the micro-level impact of evangelical Protestant conversion on the economic and social lives of poor and marginalized (and often tribal) peoples in China and India, respectively. The studies appear in David H. Lumsdaine. Forthcoming. Evangelicals and Democracy in Asia (Oxford University Press).

[6] Sherman, Amy L. 1997. The Soul of Development: Biblical Christianity and Economic Transformation in Guatemala. New York: Oxford University Press.