That's true. Though some of the most economically prosperous nations still prefer to live with Islamic laws. The UAE has a higher per capita GDP than the US and still bases their legal system heavily on sharia law. I think sometimes it comes down to cultural differences more than material ones. Oman and Saudi Arabian also score very high on the human development index, but still prefer many 'hyper-religious' policies.

In general I think the trend is towards secular society with improved material conditions, but it can get dicey to try and prescribe a secular state on people who aren't ready for it.

Regardless of the civil structure, if even just a fraction of what is currently spent on the IDF could go towards reparations and reconstruction, it would be amazing to see how quickly material conditions improve.