How Confucius’ Teachings Guided the Creation of Japan’s Modern Economy: Part 1

Portrait of Shibusawa Eiichi
Portrait of Shibusawa Eiichi
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By Liu Ru

To many modern Chinese, Confucianism is considered obsolete – a relic of the past that holds little relevance today. Yet few know that Japan’s modern capitalist economy was founded on the teachings of Confucianism.

The father of Japan’s capitalist economy is Shibusawa Eiichi (1840 – 1931), a Japanese industrialist who spent much of his life studying the Confucian classics. After attending the 1867 Paris World Exposition as part of a Japanese delegation, the young Shibusawa became inspired to introduce Western capitalism to Japan on a foundation of good ethics.

Shibusawa first established one of Japan’s first joint-stock companies, before joining the Ministry of Finance where he spearheaded many economic reforms. He went on to establish and serve as president of Japan’s first modern bank, Dai-Ichi Kangyo Bank (First National Bank).

For the next 40 years, Shibusawa devoted his life to founding and supporting over 500 enterprises in Japan, which formed the foundation of the Japanese economy.

Guided by his studies of Confucius’ Analects, Shibusawa believed good ethics and business should be in harmony.

He refused to maintain a controlling stake in the hundreds of corporations he helped develop, thereby preventing himself from having any sort of monopoly.

Shibusawa consolidated his life experience and ideas in his book, The Analects and the Abacus, which guided the development of Japan’s various business fields. Through studying his book, I gained much insight into how Confucianism created the foundation of the modern Japanese economy.

The Analects’ Secret Unveiled

As I read Shibusawa’s The Analects and the Abacus, I am reminded of a similar Chinese historical figure – Zhao Pu (赵普), the famous Song Dynasty prime minister who effectively ran the country based on the sole study of The Analects.

How does a single book give people like Shibusawa and Zhao Pu the knowledge and skills to manage countries and economies? What is The Analects’ secret?

Unfortunately, Zhao Pu did not leave behind any writings to explain how The Analects guided his decisions in governance. But Shibusawa did in the form of The Abacus, thereby unveiling the wisdom of Confucius that has been misunderstood by generations of scholars.

Clarifying Confucius’ Views on Wealth

Shibusawa wrote The Abacus in his later years with the aim of nurturing future generations of businessmen. While the book explains how one can harmonise the conflicting ideals of moral obligations and personal gain, it also clarifies particular misunderstandings in Confucius’ teachings.

Let’s start with Chapter 4, where Shibusawa discusses Confucius’ perspectives on wealth. He says Confucius’ views on the matter have been seriously distorted by Confucianists: “[These Confucianists construe] that the wealthy are not ethical or benevolent at heart, so if one wants to become a benevolent person or gentleman, one cannot have thoughts of being wealthy.”

“In fact, in all 20 chapters of The Analects, I have not found a single sentence that even hints at this view. Instead, I have found discussions by Confucius that relate to how one should manage businesses.”

In the chapter “Shu Er (述而)” of the Analects, Confucius was quoted as saying, “If the search for riches is sure to be successful, though I should become a [horse carriage] groom with whip in hand to get them, I will do so. As the search may not be successful, I will follow after that which I love.”

Many traditional Confucianists have construed this as Confucius abhorring wealth and the rich. But Shibusawa does not see it this way: “My interpretation is that Confucius is willing to become a lowly horse carriage driver in order to gain wealth.”

In other words, if Confucius was certain of becoming wealthy, he was willing to become a lowly carriage driver, but without that assurance, he would rather choose to do as he liked. His views on wealth were far more neutral than what traditional Confucianists believe.

Said Shibusawa, “I am afraid that many Confucianists (who conduct empty discussions instead of putting Confucius’ teachings into practice) will be shocked by my interpretation. However, this is the truth; this is what Confucius himself said.”

Shibusawa also quoted another Confucian saying from the chapter “Li Ren (里仁)”: “

Riches and honours are what men desire. If it cannot be obtained in the proper way, they should not be held.

Poverty and meanness are what men dislike. If it cannot be avoided in the proper way, they should not be avoided.”

Shibusawa believed that, in this quote, Confucius was not denouncing the wealthy, but encouraging one to run their businesses and become wealthy in an ethical manner. If one cannot obtain wealth honestly and righteously, one should remain content in poverty and virtuosity.

From the phrase “If [poverty] cannot be avoided in the proper way, they should not be avoided”, I understand that one cannot escape poverty if one does not obtain wealth through ethical means. In other words, Confucius is not denouncing wealth. Otherwise, why would he encourage his disciples to become ministers and governors, and to run the country efficiently and raise it from poverty? If the people are poor, how can the country be peaceful and prosperous, and how can they be considered good governors? Isn’t that contradictory?

In examining Confucius’ words, it is clear that Confucius has never held anything against wealth, nor did he belittle the rich. Instead, he wanted the rich to utilise their wealth in an upright way and obtain their wealth by ethical means. This also means managing one’s business with high moral values.

These are the gems of wisdom that Shibusawa gained from reading Confucius’ original writings.

The Original Purpose of Confucius’ Teachings

The principles of Confucianism are vast and profound, but many Confucian intellectuals have lost sight of Confucius’ original intent for spreading his teachings – so that people can apply these ethics in their everyday lives.

Confucius dedicated his life to education, because he hoped to nurture gentlemen and talented officials who could help administer the country and businesses well, so that its civilians could enjoy peace and prosperity. He was driven by the turmoil he witnessed during the Spring and Autumn Warring Period, where progressive erosion and disregard of traditional moral values led to political chaos and widespread suffering.

Confucius’ ideas and principles are covered in The Analects, one of the central texts of Confucianism. However, many of today’s Confucian scholars have forgotten Confucius’ original objectives. Instead, they pride themselves in how many classical writings they have researched, or how many theories they have memorised, as a mark of how well-versed they are in Confucianism.

To date, the study of Confucianism has evolved into empty theoretical discussions and “critical analyses” of the writings, where superficial derivations are made and warring factions are formed.

In so doing, the original purpose of Confucianism is lost to later generations of learners.

Confucius’ originally intended his teachings to help guide people to be good, to become benevolent and righteous. Like Shibusawa, when studying Confucianism, we should study the core Confucian texts, and then utilise supplementary texts to enhance our understanding.

As the ancient Chinese style of writing is not easy to understand, the supporting texts can serve as useful references. However, these supporting texts are still interpretations of the original, and should not be considered the authoritative truth.

By adopting Shibusawa Eiichi’s learning approach, we will gain far more wisdom from the teachings of our ancient forefathers.

Shibusawa capitalist economy after the Meiji Restoration Period.(wikipedia)
Shibusawa capitalist economy after the Meiji Restoration Period.(wikipedia)
A portrait of Confucius by the Ming dynasty artist Qiu Ying (c. 1494–1552). (Wikipedia)
A portrait of Confucius by the Ming dynasty artist Qiu Ying (c. 1494–1552). (Wikipedia)

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