Divine economics

Posted: March 7, 2012 in Economics, Religion
Tags: , , , ,

As worries of a banking crisis have started to weigh on China in recent months, economists’ eyes have been fixated on Wenzhou. Entrepreneurs in the Zhejiang business hub tend to forgo the banks and simply lend money to each other. This has traditionally served the city well, as it allowed small enterprise to thrive. But now trouble is brewing.

Overinvestment and a slowing economy are starting to see many defaults on loans in Wenzhou. Scores of business owners have already fled the city or committed suicide to escape their debts to shadow lenders. In one case, the daughter of a businessman was taken hostage by a creditor to insure repayment of debt. Because of the growing network of shadow lenders across the country, as well as over-lending by official banks, Tsinghua economist Patrick Chovanec has said Wenzhou is the “canary in the goldmine” for China.

Those interested in the implications of Wenzhou’s economy may do well to look at the city’s other claim to fame: Its Christians. The city has around a 20-30% Christian population – abnormally high for China. Cao Nanlai, Hong Kong University professor and author of Constructing China’s Jerusalem: Christians, Power, and Place in Contemporary Wenzhou, recently told me how religion and economics relate in the city.

He said that Wenzhou Christian entrepreneurs tend to take loans from one another because of the trust and shared values they’ve cultivated together in church. When the city’s debt crisis began, preachers started giving sermons about God’s punishment for greed and telling congregants to keep this in mind in their business dealings. “Wenzhou Christians tend not to put on pressure to repay loans, while their secular counterparts may have resorted to extreme measures that caused an exodus from the city,” Cao said. “In this sense, Christian values and networks do have a very positive impact on Wenzhou’s regional economy.”

In 1905 German economist Max Weber introduced the idea of a “Protestant work ethic.” It said the religion was instrumental in the development of many western countries because of the Calvinist emphasis on honest hard work that would lead to worldly success – a sign that one was heaven-bound.

Recent research has suggested even further economic benefits to religion. A study last year found that people who believe in a vengeful god (ie- one that might send you to hell) cheat less often. And another study that looked at economic data in 59 countries over 20 years found that rises in a belief in hell, and to a lesser extent heaven, correlated with spikes in economic growth.

In 2002, Hong Kong University Professor Wang Xiaoying wrote on China’s “post-Communist personality” and how the country is suffering the excesses of capitalism. Becoming rich is the focus and any attempt at moral guidance is scorned. “Nothing better represents such problems as the sheer scale of corruption and the ineffectiveness of all measures to keep it in check,” Wang writes. “Whatever the intrinsic flaws of capitalism as a social system, China’s social problems seem to come as much from the failure to establish a viable capitalist social order.”

Wang fears China doesn’t have the established social order that the west did during its development to reign in the capitalist excesses. Religion might be one effective way to establish this order and perhaps even turn a few corrupt officials honest. “Christianity may play a very important and positive role in the public sphere at the local and grassroots level,” said Cao Nanlai. “An informal local network of churchgoing relatives and friends can embed local officials within a shared emotional structure, shaping their moral values. This is certainly the case in Wenzhou.”

But religion’s potential in helping China develop might not just be about stopping the strong from exploiting the weak. It could be just as much about keeping the exploited quiet and working through the excesses of development. We’ll dig deeper into that tomorrow.


Christianity series Part 1: Can Lei Feng compete with Jesus?

Christianity series Part 2: The new Christians

Christianity series Part 4: What Marx may have gotten right

Christianity series Part 5: Communist Christianity

  1. Lorin Yochim says:

    I’m following the series, so I think I’ll save my more complex complaints with this line of argument (e.g., in the Wang piece) for later. Recognizing that you’re attempting to write at a fairly low level for this blog, I’ll just say that the characterization of Weber is simplified (and to some extent sanitized) to the point of distortion. A few of points are important. One, Weber was concerned with pointing out why capitalism emerged where it did when it did. The focus was on capitalist development, not development per se. Two, the thesis is not that “honest hard work…would lead to worldly success,” but that the already existing ethic of devotion to one’s work, an earthly vocation peculiar to Calvinists, provided the moral grounding that justified participating wholeheartedly in what was a) absurd (the endless pursuit of unneeded money) and b) otherwise morally repugnant. In other words, capitalism did not spring forth because some protestants happened to believe in hard work. Rather, and this a third point about Weber, it took hold in a particular time and place. In sum, and I’m not sure if Wang holds to this line or not (I’ll read that article as soon as I can), the relation between Christianity and capitalism is not a necessary one. The emergence of capitalism in China demonstrates this. Finally, the notion that Wenzhou capitalists ‘take it easy on each other because they go to church together’ is an argument that suggests what goes on there is not, in fact, capitalism, and is inconsistent with Weber’s thesis. Overall, the author may be confused because he is looking for a way to save the nation (China) rather than the society. If one cares to look for a Chinese spirit of capitalism, religion is not the only place to look. Indeed, the Fei Xiaotong notion of differential mode of association could be seen to provide the moral framework upon which the rise of capitalism in China rests. Much more could be said, but I’ve already broken my promise to be brief.

    • Lorin Yochim says:

      Embarrassingly, I found a pdf of Wang’s article on my computer…filled with highlights. I’d say your characterization of the article is basically right. But I would reiterate my point above about his conflation of “nation” and “society.”

  2. Alliana says:

    i already knew a bit of this thanks to a sociology class but i didn’t know the impact of christianity was that strong. so i suppose this supports the belief that christianity can be useful economically too! XD quite enlightening. i’m glad to have come across this.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s