Is Religious Freedom Good for Business?: A Conceptual and Empirical Analysis

Against a global backdrop of steadily rising religious restrictions and hostilities, we expand the religious economies theory by articulating how religious freedom contributes to better economic and business outcomes. Most important, we expand on previous empirical work on the social impact of denying religious freedom, first by examining and finding a positive relationship between global economic competitiveness and religious freedom as exemplified by low government restrictions on religion and low social hostilities involving religion. Second, going beyond correlational relationship, we empirically test and find the tandem effects of religious restrictions and hostilities to be detrimental to economic growth while controlling for other theoretical, economic, political, social, and demographic factors. We conclude that religious freedom contributes to better economic and business outcomes, as is suggested by the religious economies theory. † Jens Rasmussen and Bill Atkin provided helpful assistance in the development of this article. Grim, Clark, and Snyder: Is Religious Freedom Good for Business? 3 A wave of religious hostilities has swept the globe during the early years of the 21st century. The terrorist attacks of September 11, 2001, leading to the wars in Afghanistan and Iraq, made clear that even a few people motivated by religious extremism can trigger wars and major economic disruptions. Beyond such wars, data show that 74 percent of people today live with high levels of religious hostilities, violence, or conflict, a markedly higher percentage than just five years ago, when 45 percent of people lived with such levels (Pew Research Center 2014). This wave of religious hostilities, violence, and conflict has been accompanied by a rising tide of government restrictions on religious freedom. The number of people living with high government restrictions increased from 58 percent of the world's population in 2007 to 64 percent in 2012 (Pew Research Center 2014). The simultaneous rise of religious hostilities and government restrictions is not a coincidence. Research shows a robust and consistent connection between the lack of government respect for religious freedom and higher levels of social hostilities involving religion (Grim 2012). Indeed, previous theory and research go beyond drawing correlational connections to establishing a case for causation. The religious economies theory postulates that as restrictions on religious freedom by governments increase, adverse outcomes for religion and society result and that one of these outcomes is more violence, not less (Grim and Finke 2007). Multivariate tests of this theory have empirically demonstrated that government restrictions on religious freedom are the strongest predictor of religious violence and conflict, even when the tests control for other theoretical, economic, political, social, and demographic factors (Finke 2013; Finke and Harris 2011; Grim, Skirbekk, and Cuaresma 2013). 1 In this article, we expand the religious economies theory by briefly articulating how the lack of religious freedom contributes to worse economic outcomes and how the presence of religious freedom contributes to better business and economic outcomes. We then expand the empirical work of previous research by the examining the relationship between global economic competitiveness and religious freedom. We also test whether the tandem effects of religious restrictions and religious hostilities are detrimental to economic growth, controlling for other theoretical, economic, political, social, and demographic factors. RELIGIOUS FREEDOM AND BUSINESS Religious hostilities and restrictions create climates that can drive away local and foreign investment, undermine sustainable development, and disrupt huge sectors of economies. Such has occurred in the ongoing cycle of religious regulations and 1 The religious economies perspective was first innovated in the late 1980s through the work of Rodney Stark, Roger Finke, and others (see Finke and Stark 1988, 1992; Finke 1990; Gill 1994; Iannaccone, Finke, and Stark 1997; Stark and Finke 2000; Froese 2001). 4 Interdisciplinary Journal of Research on Religion Vol. 10 (2014), Article 4 hostilities in Egypt, which has adversely affected the tourism industry (see Bell 2013). A few current examples from the Muslim-majority countries, which are countries with particularly high levels of religious restriction (Grim and Finke 2011), illustrate how the lack of religious freedom contributes to worse economic and business outcomes. Examples from Muslim-Majority Countries Religious restrictions in Muslim-majority countries take many forms. One direct religious restriction that affects economic freedom involves Islamic finance. For instance, businesses involved in creating, buying, or selling Islamic financial instruments can find themselves in the situation that one Islamic law board deems a particular instrument acceptable while another board does not (Lawrence, Morton, and Khan 2013), making the instrument’s acceptance on stock exchanges subject to differing interpretations of Islamic law. Other examples include the banning of Hollywood films in some Arab countries for religious reasons (Browning 2014) and the misuse of anti-blasphemy laws to attack business rivals (Tarin and Uddin 2013). Perhaps most significant for future economic growth, the instability associated with high and rising religious restrictions and hostilities can influence young entrepreneurs to take their talents elsewhere (Younis and Younis 2011). Positive Impact of Religious Freedom on Economies More generally, research has shown that religious freedom is a key ingredient to peace and stability, as measured by the absence of violent religious persecution and conflict (Grim and Finke 2011). This is particularly important for business because where stability exists, there are more opportunities to invest and to conduct normal and predictable business operations, especially in emerging and new markets. Beyond promoting peace and stability, religious freedom can contribute to positive socioeconomic development in much the way that freedom in general does. Amartya Sen (1999: 3), for instance, argues that societal development requires the removal of sources of “unfreedom.” According to Sen’s reasoning, religious restrictions are a source of unfreedom. Removing impediments to religious freedom facilitates freedom of other kinds. Research finds that religious freedom is highly correlated with the presence of other freedoms, such that it can be considered part of a bundled commodity of social goods that have significant correlations with a variety of positive social and economic outcomes ranging from better health care to higher incomes for women (Grim 2008). Religious freedom is also correlated with one of the key ingredients of sustainable economic development: lower corruption. For instance, Lipset and Lenz Grim, Clark, and Snyder: Is Religious Freedom Good for Business? 5 (2000) find that laws and practices burdening religion are related to higher levels of corruption. This is borne out by comparing the Pew Research Center’s 2011 Government Restrictions on Religion Index with Transparency International’s 2011 Corruption Perceptions Index. Eight of the ten most corrupt countries have high or very high governmental restrictions on religious liberty. 2,3 Gill (2013) reviews six theoretical frameworks for understanding why religious freedom may relate causally to positive economic outcomes. These models are the religious economy model, the religious ideas model, the civic skills model, the charitable giving model, the migratory magnet and merchant model, and the contingent liberty model. Gill (2013: 6) observes that the religious economy model perhaps provides the most direct causal path because it recognizes that “religious activity is economic activity and that religious freedom results in more religious activity, hence more economic growth.” Indeed, when religious groups operate in a free and competitive environment, religion can play a measurable role in the human and social development of countries. For instance, Robert Woodberry (2012) found that the presence of proselytizing Protestant faiths, that is, faiths competing for adherents, was associated with economic development throughout the world. Alexis de Tocqueville (1955 [1835, 1840]) recognized that in the United States in the 19th century, Protestant associations—in an open and generally free environment with other religious and civic associations—had established seminaries; constructed inns; created churches; disseminated books; and founded hospitals, prisons, and schools. Contributions of this type are not just a legacy from the past. Katherine Marshall, former director of the Development Dialogue on Values and Ethics at the World Bank and former director in the World Bank’s Africa and East Asia regions, recognized that present-day faith communities not only provide education and health services, but also provide social safety nets for orphans, disabled people, and people who fall behind (Pew Forum 2006). 2 The ten countries that are listed as the most corrupt on the 2011 Corruption Perceptions Index are (1) Somalia, (2) North Korea, (3) Myanmar, (4) Afghanistan, (5) Uzbekistan, (6) Turkmenistan, (7) Sudan, (8) Iraq, (9) Haiti, and (10) Venezuela (Transparency International 2011). 3 The countries with “very high” governmental restrictions on religion are Uzbekistan and Burma (Myanmar). The countries with “high” governmental restrictions on religion are Turkmenistan, Sudan, Afghanistan, Iraq, and Somalia. Although North Korea is technically not classified as a “very high” or “high” restriction country, lack of information about the country has led to its not being categorized at all. I consider the following note sufficient to classify North Korea as “very high” or “high” restriction country for the purposes of this article: “The sources clearly indicate that North Korea’s government is among the most repressive in the world with respect to religion as well as other civil and political liberties. . . . But because North Korean society is effectively closed to outsiders and independent observers lack regular access to the country, the sources are unable to provide the kind of specific, timely information that the Pew Forum categorized and counted . . . for this quantitative study. Therefore the report does not include a scores for North Korea” (Pew Forum on Religion & Public Life 2009: 5). 6 Interdisciplinary Journal of Research on Religion Vol. 10 (2014), Article 4 Positive Impact of Religious Freedom Within Companies Religious freedom, when respected within a company, can directly benefit the company’s bottom line. The benefits include both lower costs and improved morale. An example of lower costs includes less liability for litigation. The clothing retailer Abercrombie & Fitch fought and lost a religious discrimination case in 2013 related to firing a Muslim stock girl for wearing a scarf in violation of the company’s dress code. The case resulted not only in substantial legal costs but also in negative national publicity. Respect for reasonable accommodation of religious freedom in the workplace can improve employee morale, increase retention of valued employees, and help with conflict resolution (Richards, Svendsen, and Bless 2011). Moreover, businesses may gain a competitive advantage by engaging the expectations of stakeholders who are increasingly demanding that companies play a positive role in addressing environmental, social, and governance concerns. As business consulting group McKinsey & Company points out, the ethical stakeholder “has clearly emerged and is on the rise” (Oppenheim et al. 2007: 8). Important business stakeholders include business partners, investors, and consumers; and a growing segment of ethically sensitive customers tend to prefer companies that are responsive to human rights (Schwab 2010). Schwab argues that consumer (and, we would add, government) preferences given to human-rights-sensitive companies may give such companies an advantage in competitive markets and enable them to charge premium prices and land choice contracts. Recognizing the impact of human rights concerns on branding, companies such as Gap, Inc. have assumed shared responsibility for the conditions under which its goods are manufactured (Wright and Sage-Gavin 2006).