Do they know it’s Christmas?  Band Aid reminds us that the rich of the world have been celebrating Christmas and the poor have not.  But this is not because Christmas is a festival of the rich, but because Christmas is a Christian festival.   The affluent Japanese are the main exception to the general rule that rich countries have a Christian tradition and poor countries mostly do not.  The Japanese have not been celebrating Christmas either.

This critique may sound like pedantry of a sort which could only be perpetrated by the kind of people who do not know it’s Christmas and spend that day penning columns for the Financial Times.  But the observation contains a clue to the causes and cures of world poverty which may be more significant than the emotional appeals and dire lyrics of Band Aid.

The relationship between religious tradition and economic development was first explored exactly one hundred years ago by the German sociologist Max Weber, who observed the correlation between the Protestant reformation and the growth of modern capitalism.   Prosperous countries were mostly Protestant and even in Christian countries with a mixed Protestant and Catholic population – such as the Netherlands, Germany, Switzerland and the United States – business was largely controlled by Protestants.  In Baden, Weber’s home, Protestants averaged almost twice the wealth of Catholics (although Jews were much richer than either). 

The historical origins of the relationship are complex. When Martin Luther began the Reformation by posting his 95 theses on the door of Wittenberg Cathedral, he did not imagine that he was posting a capitalist manifesto.  If he had been, he would quickly have recognised that 95 was rather too many propositions for a world which would be buffeted by five forces and deploy the seven habits of highly effective people:  even ten commandments strain the limits of short-term memory.

Luther was actually protesting against the corruption of religion by the market, especially through the sale of indulgences. These documents could not only relieve the burden of past sins but provide immunity for sins yet to be committed   The corrupt clerics who hawked these papers are recognisable figures.  They were to reappear almost five centuries later as accountants who sold audit opinions and equity analysts who bestowed buy recommendations on their banking clients.  In Henry Blodget we see the reincarnation of Johan Tetzel.  In both eras, the proceeds of indulgences enriched the sellers and financed the grandiose building plans of their employers.  Cathedrals then, trading floors today.

The Reformers despised the idleness and greed of worldly priests.  In Geneva, John Calvin preached the virtues of austerity and hard work. Switzerland’s astonishingly successful capitalist model – very boring and very rich – was moulded there.  Swiss private banking has been reliably conducted for centuries by French-speaking Protestants.  

Weber gave the language a phrase – the Protestant ethic – which today refers, not to religious belief, but to workplace behaviour.  He emphasised the Protestant calling: ‘the fulfilment of duty in worldly affairs as the highest form which the moral activity of the individual could assume’.   In contrast, the monastic life exalted by traditional Catholicism was ‘the product of selfishness, withdrawing from temporal obligations’:   ‘the type of attitude which sees and judges the world consciously in terms of the worldly interests of the individual, the special peculiarity of people such as the Italians and the French’.  Weber did not even trouble to speak of those who lived even further south.

John D. Rockefeller would describe his own calling in what sounds like bizarre hypocrisy to a modern ear:  ‘I believe the power to make money is a gift from God – just as are the instincts for art, music, literature, the doctor’s talent, yours – to be developed and used to the best of our ability for the good of mankind’.   

The notion of business as a profession, at once morally legitimate and morally demanding, distinguished the Protestant tradition not only from other modern religions but from the secular political cultures of ancient Greece and Rome. Neither Luther or Calvin would have recognised the priesthood of investment bankers, and the calling was not an approach from a headhunter.  The Protestant ethic which Weber described as the spirit of capitalism was very distant from the world of annual bonus rounds and executive share options.   The accumulation of wealth was associated, not with greed and excess, but with industry and sobriety.

But there was more to Protestant capitalism than the calling.  Modern economic historians such as David Landes have given equal importance to the pluralist character of Protestant thought.  The reformers emphasised education for all, and seized the control of knowledge from the hands of priests.  The Catholic tradition, organisationally centralised, stressed obedience to authority:  the Protestant ethic was decentralised and free-thinking, especially amongst sects – such as Quakers and Puritans – which played a disproportionate role in economic life. 

The Reformation released that spirit of scientific inquiry and organisational innovation which is fundamental to economic growth. The market economy derives its dynamism from this disciplined pluralism – the process of continuous organisational and technological experiment.   Innovations that fail, as innovations mostly do, are discarded:   innovations that succeed are quickly imitated.  Religion is often the enemy of innovation: but in the Reformed church, it was not.

Religious observance was already in decline as Weber wrote.  But Weber realised that what mattered was not the content of religious doctrine but the ways in which religious teaching shaped personal values and religious traditions influenced political and economic institutions.   These factors became independent of the beliefs themselves.  As the influence of all religions declined, the Protestant ethic, and the virtues of enlightenment, ceased to be the exclusive property of Protestants, with important consequences.

The loss of the political and economic influence of the Catholic church was to be a central fact of modern European economic history.  Ireland, Italy, Portugal and Spain all enjoyed rapid growth.  Catholic Bavaria would emerge from being one of Germany’s poorest provinces to one of its richest, and the same would be true of Swiss Catholic cantons such as Lucerne and Valais. Catholics achieved economic power earlier in the United States, the business success of the Kennedys would elect the first Catholic President.  But American Catholicism, it has been said,  has always been … so Protestant’.

Ultimately Protestant virtues began to encroach on cultures that were not even Christian.  Japan would accept pluralism, and embrace with astonishing success the notion that wealth creation was a higher form of public service than political or military leadership. Other Asian economies followed.  Prosperity is the product of market institutions in a culture shaped by the values, though not necessarily the beliefs, of the religious Reformation.   The spread of these ideas is the most effective means to feed the world.