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Religion, and its effect on economic development: A supernatural determinant?

An Introduction

Religion is usually defined as a social-cultural system of designated behaviours and practices, morals, beliefs, worldviews, texts, sanctified places, prophecies, ethics, or organizations, that generally relate humanity to supernatural, transcendental, and spiritual elements.

In society, religion, or at least the idea of it, is present in some shape or form no matter where you look (unless you live in North Korea or a similar atheist autocracy).

Of course, some states are more ‘spiritual’ than others, however, for the most part, all nations exhibit some attraction towards a higher power.

The question is, how does religion affect the development of nations around the world?

This is certainly a curious topic, especially when you look at economically ‘worse-off’ nations such as India, which allow religious ideals to be ingrained so deeply into their socio-political systems, while some of the world’s superpowers, such as China and the UK, seem to thrive, with religion being generally placed aside.

And this article aims to delve deeper into these very ideas, approaching them from both an objective and moral perspective, attempting to determine whether religion, as a systemized practice, is largely beneficial or detrimental to the population.

Economic growth

The first phenomenon we encounter when we begin to delve into this subject is the conflicting relationship between religion and economic growth. That is, there are two sides to the coin.

To start, studies have shown that increases in church attendance generally display a decrease in economic growth. This statistic rings true for any organized religion that demands attendance.

This is mainly an homage to the time and resources used by the religious sector and the adverse effects of organised religion on economic regulation — for example, restrictions on the markets for credit and insurance.

The other side of the coin is revealed to us when we look at the values that religion instils in the population.

Values such as honesty, perseverance and kindness all seem to attribute towards positive economic growth. This may be caused by increased confidence/motivation for the public which thus increases productivity.

Another fascinating correlation is found between economic growth and religious beliefs. This mainly includes ideas such as the afterlife, heaven and hell.

Interestingly, according to surveys, people from across the globe exhibited higher levels of belief in hell versus heaven, perhaps a spiritual representation of the negativity bias that encapsulates us.

These beliefs, whatever they may be, generally also seem to demonstrate a positive relationship with economic growth. That is, as people become more attached to these ideas, their productivity increases.

This may be a result of two things - fear, acting to avoid the flames of hell or a pursuit towards the blissful promise of heaven. In either case, these beliefs lead back to one thing - motivation and the instilling of ideals into the population, both of which are discussed in our previous point.

However, these beliefs aren’t so simple to understand.

Indeed, the effect of faith in these supernatural sites may reduce economic growth, for the World Values Survey themselves have found that it increases attendance in systemized religion, thus reinforcing our first point about the adverse economic effects of participation in the religious sector.

This leaves us with two main conclusions.

Firstly, we find that the belief in religious ideals themselves is beneficial for the economy as a whole. Generally, it leaves us with more motivated and productive citizens compared to if these beliefs were prohibited.

Second, we find that the religious sector, as a sector of the economy, is harmful. This is due to its consumption of time and resources, as well as the other restrictive effects of organized religion on the economy as a whole.

This may certainly be a contributing factor as to why developed nations like the Scandinavian bloc have lower levels of systemized religion in comparison with, say Italy.


One aspect we haven’t considered yet is religion’s effects on education.

This is yet another conflicting topic.

On one side, you have a very plausible argument being made, which states that belief in a systemized religion decreases as education in a nation goes up.

This is likely a result of the fact that the population can associate logic and science with abnormal phenomena, instead of turning to a higher power.

However, you also have an opposing view.

This can be demonstrated in countries like India itself. Take, for example, the upper caste in Indian society. Certainly, they are amongst the best educated in the population, and historically and presently have fixed a large precedent towards education.

But the upper caste definitely hasn’t stopped being religious, with obscene amounts of funding continuing to be thrown into the religious sector by them.

This is a direct result of the nature of a few religions.

Some religions, such as Hinduism and Judaism, which highly value the reading of sacred texts early in life, place education as a high priority.

This results in the overall growth and development of a nation’s economy facilitated through religious means, while religion itself continues to be merry in the face of logic.

Developed v Developing Nations


Our first encounter with this topic leaves us with many questions. To start off, why are developing nations so much more religious than developed ones?

Primarily, this is an inverse effect. Development may not be the result of religion, but religion may be the effect of development. That is to say, as nations become more urban and grow, both socially and economically, they experience lower levels of faith.

There are many contributing factors towards this, but the main response is generally this - the poor are the ones that truly believe. That is, the unfortunate individuals in society are those that suffer most, and as a result, turn towards a higher order in hope of bettering their situation, while the rich turn to logic, science and other real-world means of tackling their issues.

As you may have guessed, more development = less poor = less religion. This is the true nature of the situation.

But what of developing nations? What are the effects of the extremely strong forces of religion in their countries, and what can they do to manipulate it, in order to further their future?

Firstly, it is important to grasp the importance of religion in these societies.

The kind of spontaneous social coordination that religion creates through increasing trust, morals, informal incentives or imposing social sanctions is extremely important here, especially when there is an absence of well-developed legal systems and formal markets, as is the situation in most third-world nations.

Another aspect of development that seems particularly salient is the financing of religious activity and how religion might influence financial institutions in developing societies.

In most third-world nations, a huge amount of economic might is placed within religious institutions and the course of the future is majorly set by them. For these governments to truly succeed, taking advantage of their might may be the way forward.

Finally, what is the undisputed reform that these nations may make? Without question, it is the promise of religious liberty.

Religious liberty contributes to better business and economic outcomes. Statistically, countries with lower levels of religious hostilities and government restrictions on religion rank stronger in global competitiveness.

Religious freedom also contributes to peace and stability and helps lower corruption — two essential ingredients for economic development.

For nations to truly progress in the era of the free market, religious freedom is a must.

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