Protestantism and Economic Development
There is much empirical research with respect to the relationship between Protestantism and economic development. Especially in the fields of economic history, social economics and economic sociology the hypothesis which says that higher proportions of the population being member of a protestant church correlate with higher levels of wealth. It all started with the thesis by Max Weber, who saw a relationship between Protestant individualism and entrepreneurship.
We define Protestantism as a movement of Christian people, who see themselves as stewards of the earth. God has created a world full of treasuries, including humans, who are gifted with talents, which can be developed and used to live a meaningful life. In this essay we will discuss the theoretical foundations of the above-mentioned empirical relationship. Especially the idea of Protestantism will be considered. In the next section we will discuss ideal-typical Protestantism. In a third section we will consider realistic specifications of protestant culture and attitudes. A last section concludes.
- A Theory of a Protestant economic actor
The concept ‘theory’ is used in a sloppy way most of the time. A philosophically satisficing way of defining considers theory as one of the elements in a well-defined structure of knowledge. Keizer (2015) argues in favour of the following knowledge structure: paradigm – analysis – theory – hypothesis. The paradigm (P) formulates the framework of interpretation and defines the essential elements, which play a part in the research. The analysis (A) formulates the interrelationships between the various elements that are distinguished. Now theories (T) can be derived from the analysis; they are statements about the relationship between a variable to be explained, and one or a few explanatory variables. If a researcher wants to apply a particular theory to a particular place and time, he specifies a hypothesis (H), and tries to find how strong each of the explanatory variables affect the variable to be explained.
When talking about an economic theory we start with the orthodox-economic interpretation of the concept. Humans are assumed to be economic, rational and non-social actors. They maximise their utilities under the constraint of resources available. In other words, in this economic world there is always scarcity, and actors are motivated to optimise the use of these resources. Keizer (2015) shows that the assumptions of perfect rationality and non-sociality are not realistic. This makes it impossible for an orthodox economist to apply his theoretical apparatus (P-A-T) to the real world (H). In the economic world the introduction of Protestantism makes no sense. Every individual is assumed to be able to serve his own interest well (perfect rationality), and a world with self-interested actors tends to an optimum for the world as a whole (general equilibrium). Every individual is in his optimum and nobody looks at other people, and gets dissatisfied because some other people have reached a higher level of prosperity (assumption of non-sociality). This result holds for Protestants, Catholics, and Atheists alike. If some people have a higher savings rate than others, their wealth will grow faster at the cost of their short run consumption levels. But this is the result of people’s own choices: apparently they prefer this development. Even if many people have a higher savings rate, economic growth will not be higher. According to orthodox economic theory it just leads to a lower rate of interest. The only factor, which affects the level of utilities per capita is the level of production technology. In the simple version of the orthodox economic theory this level is an exogenous variable – it is determined by factors outside the analysis. In a more sophisticated model of the economic world technological progress results from R&D-activities.
If we introduce Protestantism in this analysis it might have a positive effect on human well-being if we assume that Protestants are more curious or more driven to discover new technologies, in comparison with non-Protestants. We will turn to this point later.
To analyse the influence of Protestantism more thoroughly we should also relax the assumptions of perfect rationality and non-sociality. In the next subsection we will discuss Protestantism in an economic world, in which actors are imperfectly informed about their preferences and the possibilities to get them satisfied. Thereafter we consider the case in which actors are imperfectly rational. Finally we discuss Protestantism in a world where social relationships do exist.
2.2 The Role of Information and Technology
The simple orthodox economic model, as we know from introductory textbooks assumes that actors are not only perfectly rational, but also perfectly informed about their preferences and about the properties of the goods, that are supplied and demanded on the markets. A more sophisticated analysis assumes imperfect information. It means that actors must develop expectations about future prices and properties of goods, in which they expect to be interested. They are constantly making mistakes and have to adjust their behaviour, as soon as they discover their errors. Some people are more keen on discovering errors than other people. This difference in attitude might explain that some people are more wealthy than others. Take a worker on a low or medium level in the hierarchy. Some workers are more scrupulous and punctual than other workers. The English language offers two synonyms for the term scrupulous, namely ‘conscientious’ and ‘religious’. When we realise that Protestantism as against Catholicism is characterised by individual responsibility, we can imagine that a Protestant attitude of an individual worker is more conscientious and religious than a Catholic attitude. Later we will come back to this issue.
People who are brought up with the idea that they are responsible for the development of their talents and the discovery of the treasures of our reality, are more inclined to continuously search for improvement. This progressive attitude is a necessary condition for ongoing technological progress. The same attitude is also responsible for a climate in which individual initiative is appreciated, be it the erection of a new firm or being a whistle-blower in a large government agency in case of large-scale fraud.
2.3 The Role of Irrationality
The economic world isolates the economic problem from the psychic and the social problem by assuming that actors are perfectly rational and that all relationships between people are of an economic kind only – not of a social type. In this subsection we relax the rationality assumption and assume that all actors are imperfectly rational. In the next section we do the same with the non-sociality assumption.
In the literature on rationality we see two elements of irrationality. The most important one is the phenomenon that people’s frames of interpretation are quite rigid. Even in case of overwhelming evidence, humans are inclined to stick to the way they interpret their situation – the frame functions as a comfort zone. Why is it so difficult to recognize that we make serious mistakes all the time. Classical liberals are very reluctant to admit that the credit crunch of 2008 took place in a deregulated market. Econometricians have difficulty in recognising that by far most predictions are not realised. Men have difficulty the acceptation of the fact that many women are capable leaders. A person, who is economist, and recognises that economists can learn from sociology, are put under enormous pressure by mainstream economists to leave the group. Nowadays it is hardly impossible in The Netherlands that a Christian or an atheist states that in particular respects we can learn from Muslims. The framework of interpretation functions as a safe haven, which must protect the self-respect of the person who should admit his closed-mindedness. A second element of irrationality is the lack of will-power. Even if we know quite well what is good for ourselves, we have difficulty to stop doing what is wrong for the self of the person. The two elements of irrationality are interacting with each other. If a person has a lack of will-power to realise a particular goal, he is strongly motivated to find out that the particular goal is not important or even a bad one. Western banks are a good example of this relationship. Just after the credit crunch the banks admitted they had made serious mistakes, and they developed plans to improve their behaviour. After a while they increased their resistance against change. Now most banks are back on the old track, and take the same risks as before: ‘let the markets do the job’ is their defence again.
What is a typical Protestant attitude towards the problem of irrationality? The Reformation of 1517 is a nice example of a rational reaction on the lack of transparency, and fraud and corruption of the Roman-Catholic Church. Typical Protestants are inclined to take responsibility on the basis of a well-trained will-power. It makes persons and systems more rational, leading to ongoing progress in the field of psychic, and therewith also in the field of social and economic development. Weber made a distinction between instrumental and value-rationality. The first is the typical rationality of the economic world. The second form of rationality belongs to the social world. According to Weber Protestants contributed also to the second form of rationality.
2.4 The Role of Sociality
The social world – as against the psychic and the economic world – is an isolated abstraction, in which people only face social problems. The psychic and the economic problem has been solved, and our actors are social and perfectly rational. Individuals are inclined to form groups and to rank these groups in terms of status. Within groups members are solidary with each other, and between groups there is rivalry. When persons deviate from the culture of the group, they are exorcised. If the status distance between two groups becomes smaller the two groups are inclined to fight a status battle, thereby showing the world who is the superior and who is the inferior group. By reducing the human motivation to rival with relevant others, more resources remain available for the maximisation of economic utilities.
The hierarchy in a Protestant organisation has especially economic meaning, while the hierarchy in a Roman-Catholic organisation has also a strong social aspect. In the Protestant one there is more room for individual authority, responsibility and initiative. In the Roman-Catholic organisation the power distance between the various levels of governance are larger and is the communication more top-down.
- Protestantism as an Empirical Phenomenon
The Protestant movement started with the Reformation: Marten Luther nailed a piece of paper with 95 statements on the door of the Roman-Catholic church of Wittenberg in 1517. He protested against the practice of indulgences: laymen could by an indulgence from the church in exchange for God’s forgiveness. Luther stated that God forgives sins only in case the persons really felt repentance or even contrition, and converted themselves into true believers in God and his healthy laws of life. Weber described Protestants as hard working, punctual people, who save and invest, so as to build a better future. They pray God to bless their work, but accept the results, whatever they are. If we want to find an empirical indicator of the degree of Protestantism of persons, we get into serious trouble. Membership of a Protestant church is the most familiar indicator. But we all know that memberships of organisations are multi-motivated; social motivations do play an important role as well. Moreover, it is not always clear whether a particular organisation can be called a Protestant church. There are so many independent groups of believers – how does a researcher decide whether the group is Protestant or not. Within the Protestant movement there are significant differences between the various groups and persons. Some people are actually waiting for the return of Jesus Christ, who will liberate true believers from this sinful world. Others are more progressive and horizontal in their orientation, and strive for a better place in the here and now. Some Protestants are close to anarchism, while others tend to obey official authorities, even if the leaders are quite notorious.
As long as we have no well-developed theory of Protestantism, based on an ideal-typical definition and analysis of this phenomenon, it is hard to find adequate empirical indicators. Even if we take a historical perspective, we need such an analysis. But then we should distinguish between different stages of development in Protestantism, such as early, late and secular Protestantism. Without paradigms, which are responsible for the establishment of substances it is impossible to establish relationships between the properties of those phenomena.