A Religious Market Theory Explained

Nadeem F Paracha in The Dawn

In 1987, the American sociologists Rodney Stark and William S. Bainbridge formulated a ‘Religious Market Theory.’ The theory is a critique of the ‘Secularisation Thesis.’ The secularisation thesis was initially developed by the German sociologist Max Weber in the early 20th century. In the next five decades, it was further evolved by numerous scholars.

To Weber, due to modernisation, especially from the late 18th century onwards, societies entered a process of ‘spiritual disenchantment.’ Space for ‘pre-modern’ beliefs in magic, faith and superstition shrank and people began to adopt more rational modes of thinking.

Even non-Western societies started to adopt models of modernisation and, indeed, here as well, the traditional variants of religion began to decline. They were replaced by secularised formations of traditional faiths, framed and monopolised by the state.

But the secularisation thesis came into question when, from the mid-1970s onwards, the exhibition of religiosity, especially in modernised Muslim-majority nation-states, began to grow.

In the 1980s, when religiosity saw an increase in the US as well, Stark and Bainbridge formulated their religious market theory, challenging the secularisation thesis. The religious market theory suggests that when religiosity declines, it eventually revives itself, because the decline opens up spaces for new faiths and modified versions of the old faiths to emerge.

Stark and Bainbridge saw the rise and decline of religiosity as a cycle, which moves like markets do in capitalist settings. Religions which fail to adjust to the needs of changing conditions, fall by the wayside and lose followers. Readjusted religions and new faiths begin to emerge in a scenario where religiosity seems to be receding.

Gradually, though, new and readjusted variants are able to revive interest in faith, by providing services and products that are better suited to meet the needs of changing conditions.

According to Stark and Bainbridge, this cycle produces a diverse collection of faiths, cults, sects and subsects, which compete against each other in the ‘marketplace of faiths’ and improve to attract followers. The religious market theory posits that this renews an interest in faith and religiosity.

In 19th century India, during the complete fall of the Mughal Empire and the mushrooming of British colonialism, the established variants of Islam began to struggle to keep pace with the changing conditions. It seemed that the modernity introduced by the British was rapidly secularising the polity. But as the old religious ethos dwindled, new variants emerged to address the changing needs of India’s Muslims.

On the one hand, new Sunni sects such as Deobandi, Barelvi and Ahl-i-Hadith sprang up and, on the other, the Ahmadiyya, the Ahl-i-Quran and Muslim Modernism emerged. They competed against each other, promising the most suitable narratives to India’s ‘depressed’ Muslims and, in the process, gathering followers — more importantly, followers who had political and economic clout.

From the mid-19th century till the 1920s, the marketplace of faiths in South Asia flourished with new variations of Islam and Hinduism. The variants were products/brands, and their followers were consumers. This indeed witnessed a renewed interest in religion and religiosity.

However, from the late 1940s, when India split into two nation-states, Bharat and Pakistan, the state in both countries decided to monopolise the marketplace of faiths, through an overarching meta-narrative.

India formulated a nationalist secularism that sought to build a socialist democracy. It was to provide economic services that religious organisations had been offering to attract followers. The state in Pakistan began to shape a nationalist-modernist variant of Islam and it regulated the marketplace of faiths by bringing its shops and products under the state’s control.

According to some contemporary proponents of the religious market theory, the presence of a centralised and ‘official’ faith eschews religious diversity. It nationalises the marketplace of faiths. This causes a decline in religiosity, as has been the case in various Scandinavian countries and in Britain.

The state in India (through nationalist-secularism) and Pakistan (through modernist-nationalist Islam) attempted to do this. Religion did not decline as such, but religiosity did.

In the 1970s, new economic and political challenges emerged in Pakistan and India. These also challenged the nationalisation of the marketplace of faiths. In Pakistan, political elites tried to absorb the alternatives offered by Sunni and Shia sects and subsects. They privatised the marketplace and began to gather fresh followers, who could not find remedies anymore in the centralised state-approved variant.

By the 1980s, the marketplace of faiths was once again booming. In Pakistan, the state continued to try absorbing the new variants by discarding the old modernist variant. But, as the middle class and the lower-middle class segments expanded, they became the most active consumers of new variants, thereby re-energising the marketplace of faiths.

These variants ranged from renewed and modified versions of evangelical Islam, to the more radical versions of Sunni and Shia sects and subsects. Religiosity revived itself.

In India, economic liberalisation weakened the monopoly of the nationalist-secular narrative in the marketplace of faiths. The Indian historian Meera Nanda, in her book The God Market, has closely tracked the trajectory of the expanding elite and middle-income groups in India, from being consumers of the nationalist-secular narrative, to becoming the most prominent consumers of Hindu nationalism — especially after benefitting from the post-1980s ‘neo-liberal’ economic policies.

According to Nanda, these segments, who now exercise increasing economic influence, “re-ritualised and re-enchanted Hinduism.” They now view Hinduism as being inherently compatible with modern economic ideas that guarantee profitability and prosperity. This, too, is how the renewed evangelical variants of Islam peddled their narrative to the elite and middle-income groups in Pakistan.

Consequently, exhibitions of religiosity have witnessed a manifold increase in both the countries. However, within the marketplace of faiths are also variants that are problematic. These include the more reactionary manifestations of faiths. For example, those looking to undermine Muslims in India in a violent manner will shop for variants that aid the consumer to theologically justify acts of violence.

This is also true in Pakistan. There are sectarian and sub-sectarian variants in the marketplace of faiths, which ‘theologically’ validate actions of those who want to use or instigate violence against an opponent in the name of faith.

More worrying is the fact that many urban, ‘educated’ folk, too, buy these variants, especially products (in the shape of narratives) that justify or instigate violence. These are often used to demonise perceived enemies as ‘Ahmadiyya sympathisers,’ or ‘anti-Islam’.

The marketplace of faiths is now almost entirely unregulated. And the state and governments whose job it was to regulate it, too, have become consumers in the marketplace of faiths to justify their own existence.

Jordan Peterson's Licence Revoked

 

A Level Economics: Practice Questions on Monetary Policy

1. What is the primary objective of the Bank of England's monetary policy? a) Promoting economic growth b) Ensuring financial stability c) Maintaining price stability (inflation targeting) d) Managing exchange rates Answer: c

2. The Bank of England operates under a ____________ framework, aiming to achieve a specific target for the Consumer Price Index (CPI) inflation. a) Financial Stability b) Exchange Rate Targeting c) Inflation Targeting d) Full Employment Policy Answer: c

3. Which committee of the Bank of England is responsible for making decisions on monetary policy, including setting the Bank Rate? a) Monetary Policy Committee (MPC) b) Financial Policy Committee (FPC) c) Prudential Regulation Authority (PRA) d) Inflation Targeting Committee (ITC) Answer: a

4. What does the "lender of last resort" role of the Bank of England entail? a) Providing emergency liquidity assistance to financial institutions facing funding difficulties b) Setting interest rates to control inflation c) Regulating and supervising financial institutions d) Overseeing the smooth functioning of payment systems Answer: a

5. The Bank of England's inflation target is set at: a) 1% Consumer Price Index (CPI) inflation b) 3% Consumer Price Index (CPI) inflation c) 5% Consumer Price Index (CPI) inflation d) 2% Consumer Price Index (CPI) inflation Answer: d

6. The Bank of England's subsidiary responsible for supervising banks and financial institutions is: a) Monetary Policy Committee (MPC) b) Financial Policy Committee (FPC) c) Prudential Regulation Authority (PRA) d) Financial Conduct Authority (FCA) Answer: c

7. Which of the following is a factor considered by the Bank of England when setting interest rates? a) Global Economic Environment b) Exchange Rate Targeting c) Government Spending d) Housing Market Conditions Answer: a

8. The symmetrical nature of the Bank of England's inflation target means that: a) The Bank aims for inflation to be below the target b) The Bank aims for inflation to be above the target c) The Bank treats deviations of inflation below the target more seriously than deviations above the target d) The Bank treats deviations of inflation above the target with the same importance as deviations below the target Answer: d

9. How does lowering interest rates typically affect consumer spending? a) It encourages more borrowing and higher spending b) It discourages borrowing and reduces spending c) It has no impact on consumer behavior d) It leads to fluctuations in consumer spending Answer: a

10. Changes in interest rates can influence the exchange rate by: a) Increasing inflation expectations b) Attracting foreign investors seeking higher returns c) Encouraging carry trades d) Reducing the interest rate differential between countries Answer: b

1. What is the primary goal of Quantitative Easing (QE) by central banks? a) Reducing inflation b) Controlling exchange rates c) Stimulating the economy and increasing money supply d) Lowering short-term interest rates Answer: c

2. How does the interest rate differential between two countries influence exchange rates? a) Higher interest rates lead to currency depreciation b) Higher interest rates lead to currency appreciation c) Lower interest rates lead to currency depreciation d) Lower interest rates lead to currency appreciation Answer: b

3. Which of the following is a risk associated with Quantitative Easing (QE)? a) Deflationary pressures b) Asset price bubbles c) Reduced money supply d) Increased interest rates Answer: b

4. What is the purpose of Funding for Lending (FLS) by central banks? a) Providing low-cost funding to households b) Encouraging banks to increase lending activity c) Controlling inflation through lending restrictions d) Supporting government spending Answer: b

5. What is the objective of Forward Guidance by central banks? a) Controlling exchange rates through communication b) Lowering long-term interest rates c) Reducing inflation expectations d) Providing clarity on future monetary policy to influence borrowing decisions Answer: d

6. In the context of direct intervention, what does TLTRO stand for? a) Targeted Long-Term Reserve Operations b) Timing of Long-Term Rate Offerings c) Targeted Long-Term Refinancing Operations d) Term Limit for Long-Term Reserves Answer: c

7. What happens when a central bank implements negative interest rates on banks' reserves? a) Banks increase lending activity b) Banks pay interest on reserves held at the central bank c) Banks hold excess reserves to earn higher interest d) Banks reduce lending activity Answer: a

8. What is one potential unintended consequence of direct intervention measures by central banks? a) Increased inflation b) Reduced market liquidity c) Higher interest rates d) Excessive risk-taking or asset price bubbles Answer: d

9. How can central banks adjust Funding for Lending (FLS) to enhance its effectiveness? a) Increase short-term interest rates b) Reduce the amount of low-cost funding provided to banks c) Implement negative interest rates d) Periodically review and make adjustments to the scheme Answer: d

10. Which of the following is the primary objective of Quantitative Easing (QE)? a) Boosting borrowing and spending in the economy b) Controlling exchange rates c) Reducing government spending d) Encouraging saving and investment Answer: a

--- Essay Questions

1. "Assess the Effectiveness and Risks of Quantitative Easing (QE) as a Monetary Policy Tool."

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   • Analyze the role of QE in stimulating economic growth, increasing money supply, and supporting financial markets.
   • Evaluate the potential risks associated with prolonged QE, such as asset price bubbles and inflationary pressures.
   • Consider the challenges faced by central banks in unwinding QE and transitioning to a more conventional monetary policy stance.
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2. "Discuss the Impact of Central Bank Interventions on Exchange Rates and Economic Stability."

   • 
     
   • Analyze the relationship between interest rates and exchange rates, emphasizing the role of interest rate differentials and capital flows.
   • Evaluate the effectiveness of direct intervention methods, including Funding for Lending (FLS) and Forward Guidance, in influencing lending activity and economic growth.
   • Discuss the potential risks of central bank interventions on economic stability, including the impact on asset prices and financial market behavior.

3. 
   

4. "Compare and Contrast Quantitative Easing (QE) and Interest Rate Policies as Tools of Monetary Control."

   • 
     
   • Analyze the objectives and mechanisms of QE and interest rate policies, focusing on how they influence money supply and borrowing costs.
   • Compare the impact of QE and interest rate policies on inflation, exchange rates, and overall economic activity.
   • Evaluate the strengths and limitations of each policy tool, considering their effectiveness in various economic contexts and potential risks to financial stability.

 

A Level Economics: Practice Questions on UK's Financial Sector

What are the key factors contributing to the growth of the financial sector in the UK?

1. a) Decreased globalization and restrictive monetary policies b) Technological advancements and increased consumer spending c) Presence of a well-developed financial infrastructure and London's status as a global financial hub d) Reduced investment in fintech innovations and strict financial regulations

Solution: c) Presence of a well-developed financial infrastructure, including stock exchanges, financial services firms, and London's status as a global financial hub, has contributed to the growth of the financial sector in the UK.

Asset bubbles occur when:

2. a) Asset prices rise to sustainable levels, driven by solid economic fundamentals. b) Speculative behavior is absent in the financial markets. c) Loose monetary policies encourage borrowing and speculative investments. d) Financial regulations prevent excessive leveraging by investors.

Solution: c) Asset bubbles occur when loose monetary policies encourage borrowing and speculative investments, driving up asset prices to unsustainable levels.

3. What is one of the economic consequences of bursting asset bubbles? a) Increased consumer confidence and spending b) Enhanced financial stability in the banking sector c) Reduced wealth for individuals and institutions holding the affected assets d) Encouragement of investment and economic growth

Solution: c) One of the economic consequences of bursting asset bubbles is reduced wealth for individuals and institutions holding the affected assets as their prices collapse.

4. What is the purpose of financial regulation? a) To promote market manipulation and excessive leveraging b) To safeguard the interests of consumers and investors c) To encourage systemic risks that threaten the stability of the financial system d) To reduce transparency and fair competition in financial markets

Solution: b) The purpose of financial regulation is to safeguard the interests of consumers and investors, ensuring fair treatment and transparency in financial markets.

5. What are the benefits of the UK's large financial sector? a) Increased income equality and reduced GDP contribution b) Enhanced financial stability and lower employment rates c) Greater vulnerability to financial crises and reduced global competitiveness d) Significant contribution to GDP and attraction of foreign investment

Solution: d) The benefits of the UK's large financial sector include its significant contribution to GDP and its role in attracting foreign investment to enhance global competitiveness.

6. Which factor has contributed to the growth of the financial sector in the UK by allowing financial institutions to operate more freely across borders? a) Globalization b) Technological advancements c) Asset bubbles d) Deregulation

Solution: d) Deregulation has allowed financial institutions to operate more freely across borders, contributing to the growth of the financial sector in the UK.

7. How do asset bubbles impact consumer and business confidence? a) They have no impact on confidence levels. b) They lead to increased consumer spending. c) They erode consumer and business confidence, leading to reduced spending and investment. d) They create financial stability and boost confidence.

Solution: c) Asset bubbles erode consumer and business confidence, leading to reduced spending and investment due to uncertainties and wealth erosion.

8. What is the role of financial regulation in the UK? a) To increase systemic risks and promote excessive leveraging b) To concentrate wealth in the financial sector c) To ensure financial stability, protect consumers and investors, and maintain market integrity d) To reduce the competitiveness of the financial sector

Solution: c) The role of financial regulation in the UK is to ensure financial stability, protect consumers and investors, and maintain market integrity.

9. How do technological advancements contribute to the growth of the financial sector in the UK? a) By promoting economic downturns and reducing investment b) By attracting skilled professionals and foreign investment c) By encouraging speculative behavior and asset bubbles d) By increasing income inequality and wealth concentration

Solution: b) Technological advancements contribute to the growth of the financial sector in the UK by attracting skilled professionals and foreign investment through innovations in financial services.

10. MCQ: Which challenge is associated with the UK's large financial sector? a) Increased financial stability and reduced vulnerability to financial crises b) Lower income inequality and wealth concentration c) Overreliance on finance, diverting resources from other sectors d) Encouragement of investment in various sectors of the economy

Solution: c) The challenge associated with the UK's large financial sector is overreliance on finance, which can divert resources from other sectors of the economy.