Numerous studies report a positive individual-level association between happiness and two psychologically distinct states of mind: religious faith and subjective freedom (i.e., a feeling of life control). Although the strength of these relationships varies across countries, no general pattern driving this variation has been shown so far. After surveying 40,534 randomly selected respondents from 43 nations, we find that in countries where happiness is more closely related to religious faith, it is less strongly associated with subjective freedom, and vice versa. More importantly, we identify a driving force behind this inverse relationship. Rising individualism and emancipative values, as an outcome of modernization, diminish the importance of religious faith for people’s happiness, while increasing the importance of subjective freedom. We conclude that the dominant emancipatory direction of cultural evolution favors freedom over religion. If so, the current recession of liberal democracy observed in most part of the world is a temporary phenomenon and liberal democracy will resume its long-term ascension in the course of cultural evolution.