What I wonder, though, is if there is a deeper process at work here -- something that explains why illiberal religious fundamentalism has spread across the world alongside the supposedly liberalizing forces of capitalism.
[WS:] My hypothesis is that the causal link between the spread of liberalism and the growth of fundamentalism is that the former tends to undermine traditional authority structures.
Certain segments of population need certitude to function in every day life. That certitude is typically provided by religion, which traditionally relied on some institutionalized authority figure (the pope, the king etc.). The liberalizing forces of capitalism and their elective affinity to formal democracy and populism undermined those traditional authority structures, and consequently, the level of certitude religion could deliver.
However, the popular demand for certitude remained strong or even increased as a result of the fast pace of social and political changes. As a result, a new guarantee of that certitude was needed - one that is based on authority structures that are more compatible with the formal democracy and populism.
The literal interpretation of the holy scripture provides that authority structure. It is not based on the traditional authority (kings, popes, etc) but rather "modern" authority - the rule of law (formal democracy) and unmediated by experts, conventional interpretation of that law (populism.) These are the key ingredients of fundamentalism - populism, unmediated adherence to a holy scripture, and certitude enforced by "popular will" and unmediated interpretation of the sacred text. This place fundamentalism at a stark contrast with conventional religions that still rely on traditional authority structures (e.g. Catholicism, mainline Protestantism, or Buddhism.)
This may explain why fundamentalism makes the greatest inroads in societies where liberalization made substantial progress (e.g. US), but its spread is limited in societies where traditional authority structures still remain relatively intact (e.g. Asia)
Wojtek