The Roots Of Sustained Economic Development Rest On A State Of Mind – Values Shape Priorities And Actions

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[the-subtitle Education about value systems and priorities conducive to growth is essential for shaping successful development strategies – Part 6 – End of Series]

By Paolo von Schirach

Related story:

http://schirachreport.com/index.php/2012/07/26/the-roots-of-sustained-economic-development-rest-on-a-state-of-mind-classical-thinking-assumed-innate-economic-behavior-today-we-understand-that-economic-progress-depends-on-intangibles-such-as-cu/

July 27, 2012

WASHINGTONThis is the sixth and last installment in a series exploring what we know about “economic development” and the value system necessary to promote and sustain it. Please look at the link above to get to the previous pieces.

Max Weber: The unintended economic consequences of religion based ethics

A rather famous example may serve to illustrate that strongly held beliefs may have significant economic consequences. Long ago, the argument was made by the German sociologist and economist Max Weber that the successful emergence and self-reinforcement of capitalism was strongly supported by a value system that was the byproduct of religious beliefs.

Religion based ethics had profound economic consequences

In his seminal work “The Protestant Ethic and the Spirit of Capitalism“, Weber argued that the early successful capitalists, especially in Germany and North America, were not originally driven by the desire to improve their material conditions per se. They were not out there to “make money”. Rather, they were motivated by religious beliefs that influenced their economic activities. These beliefs made them successful wealth creators.

The successful will be saved

According to Weber, there is a correlation between the Calvinist theological belief of predestination and the development of an ethical and behavioral code that just happened to be conducive to the development of successful capitalist systems. Very briefly, strong belief in “predestination” meant that some individual souls were going to be saved and others damned according to decisions made by God.

This belief could have plunged people into a sense of complete fatalism. Instead the Calvinists, secure that somehow as witnesses of the True Faith they had to enjoy some special place, overtime developed a theory whereby there should be “signs” of predestination that would indicate to the “chosen ones” that they would enjoy eternal life.

According to this view, success in the material world should be considered as a positive “sign”. By permitting an individual to improve his circumstances through diligent labor, the Lord would provide “a sign of predestination”. Whereas, the lazy, the drunk, the good for nothing who failed in the material world were clearly sinners. They could not possibly be among the saved.

Capital accumulation

In the austere Calvinist environment, the goal was not to amass wealth in order to consume it by living the dissolute life of the rich as in other societies. This wealth was understood to be a testimony of God’s blessing. The producer was supposed to be the “steward”, the guardian of wealth and not its consumer. The good Christian would live a sober, simple, laborious and honest life. Capital was to be created but not spent; thus it would be reinvested. Furthermore, the Calvinist, constantly under the watchful eye of the Almighty, had to behave according to the Biblical moral code. Honesty and integrity had to be part of his life, just as hard work and frugality.

So, here we have the basic ingredients of capitalism: strong motivation towards enterprise, a mind constantly focused on devising ways to rationalize processes and improve on what exists. And this meant a mind set bent toward seeking technological innovation, while fostering capital accumulation and reinvestment. Finally, we had a behavior that had to be respectful of basic Christian rules –which happen to coincide, at least to a degree, with the rules of a free market economy. These rules would oblige individuals to keep their word, (contracts), to have respect for someone else’s property and rights; while they would create at least some deterrent to those tempted to engage in theft or dishonesty.

Behavior conducive to growth had its roots in religion

In all this, the salient element is that a certain economic behavior that happened to be conducive to the strengthening of a capitalist market economy, at least at its inception found its roots and its legitimacy in transcendental concerns that had nothing to do with economic development goals as such.

According to Weber, a set of beliefs spurred people to act in a fashion that just happened to have long lasting, significant economic consequences in spurring enterprise and investments. And so we can say that ideas and value systems are very real in their consequences. Indeed, a value system that happens to be conducive to the development of capitalism helped its inception and supported it in its early stages.

Economic behavior is determined by values and beliefs

Today, after the explosion of psychological studies encompassing practically every aspect of human life, most would agree that the ethical make up of an individual (which includes any values drawn from religion, culture or chosen ideology) and his general psychological inclinations have a strong impact on all activities the person would engage in, including economic activities.

Most would agree that the inner core of a person’s mind, the result of education received and of the culture absorbed, determine, among other things, an individual’s openness to change, willingness to take risks, dependability, honesty, conscientiousness, diligence, etc. All these happen to be qualities that have a direct impact on that person’s economic behavior as an employee, as an employer, as an entrepreneur, as a civil servant or as a judge.

Motivation studies and gurus

So, the mind set is a critical variable in economic behavior and this is why so many are bent on teaching people how to improve it. Indeed, a very fashionable field of study in the Western world focuses on “motivation”: i.e. how to improve individual performance and effectiveness, especially in economic activities. How do we make a worker eager to do better?

Motivation gurus would disagree as to the best recipes; but generally they would concur that the key to change human behavior and thus the outcomes of human actions is a modification of the individual’s value system and consequently of what should be the good priorities to focus on.

If the mind is critical, then we have to change it as we push forward any development agenda

This being the case, a constructive modification of the state of mind of those who are still outside of the development sphere should be a logical key component of any development strategy. And education about new ways of thinking and approaching reality is a lot more than “skills training”. As stated in the title of this series: “The roots of sustained development rest on a state of mind”.

While changing anybody’s state of mind is not at all simple, unless we engage those who are outside of the development mainstream on this critical level of education about values, beliefs and thus priorities conducive to growth, much of the development effort will be, as it has been, in vain.

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