T he Q uarterly J ournal of A ustrian E conomics

Volume 22 | No. 1 | 91–99 | Spring 2019 www.qjae.org

Book Review

Confucian Capitalism: Shibusawa

Eiichi, Business Ethics, and Economic
Development in Meiji Japan
John H. Sagers
Cham, Switzerland: Palgrave Macmillan, 2018, xvi + 245 pp.

Jason Morgan*

S hibusawa Eiichi (1840–1931) is one of the most respected figures

in modern Japanese history. Often referred to as the “father of
Japanese capitalism,” Shibusawa rose from humble origins—he
was the son of a small-scale indigo farmer and spent his boyhood
helping in the family fields and with keeping the books—to become
the most powerful business magnate in Japan. He was involved in
the founding of hundreds of corporations (many of which are still in
operation today), sat on the boards of countless organizations and
firms, and was in the Ministry of Finance before being appointed
president of the First National Bank of Japan. He was also a
devoted philanthropist. The founder and supporter of hospitals,
schools, charities, and social service programs, Shibusawa is today

*
J ason Morgan ([email protected]) is an associate professor at Reitaku
University in Chiba, Japan.

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92 Quart J Austrian Econ (2019) 22.1:91–99

remembered mostly for being an “ethical capitalist,” or, more

specifically, a “Confucian capitalist.”
Why “Confucian”? From the time he was a boy, Shibusawa, at the
behest of his Confucianist father, studied the Chinese classics every
day with a scholar in a nearby village, eventually committing much
of the Confucian corpus to memory. Later eschewing neo-Confu-
cianism and its metaphysical innovations, Shibusawa was most
fond of the Analects, one of the original Confucian texts compiled by
Confucius’ followers after his death. Unlike the neo-Confucianists,
Confucius had a generally positive view of trade and business,
and Shibusawa agreed that commerce ethically practiced could be
beneficial for society as a whole. This Confucian grounding was
the motif of Shibusawa’s entire career. In his business dealings
and charitable activities alike, Shibusawa cited the Analects, and
Confucius’ social-mindedness in general, as the guiding principles
of his public activities.
So why the renewed interest in a long-deceased Japanese indus-
trialist with a fondness for Spring-and-Autumn Period Chinese
philosophy? In the wake of the 2008 financial meltdown and
subsequent acceleration of the boom-bust cycle, many in academia
and beyond have increased their calls for the taming, if not outright
abolition, of capitalism. In Confucian Capitalism: Shibusawa Eiichi,
Business Ethics, and Economic Development in Meiji Japan, John H.
Sagers—whose other works include Origins of Japanese Wealth and
Power: Reconciling Confucianism and Capitalism, 1830–1885—wants to
revisit his earlier thinking about Japan, Inc. (the close relationship
between government and business that was the secret of Japan’s
success until the end of the bubble economy in the early 1990s) in
order to emphasize that “the system [Shibusawa helped build] now
needs to be dismantled.” (viii–ix) As Sagers puts it:

Shibusawa’s Confucian capitalism was essentially an ideological

strategy to create both ethical guidelines and a positive new identity for
the commercial classes. First, Shibusawa called himself a business leader
or ‘person of practical affairs’ jitsugyoka, which he defined in contrast
to several characters of Japanese society: the government official, the
military leader, the politician, the scholar, and the old-fashioned
merchant. Where government and military officials defended the nation
and carried out policies, jitsugyoka produced valuable goods and services
that contributed to the people’s well-being. Unlike the newly emerging
Book Review: Confucian Capitalism: Shibusawa Eiichi, Business Ethics… 93

politicians, jitsugyoka did not pander to public opinion and pursue

narrow self-interest. Unlike scholars, jitsugyoka were not concerned
with abstractions, but focused on practical affairs. Unlike Tokugawa-era
merchants who were greedy for gain for their households, jitsugyoka
worked for the good of the whole nation. Furthermore, his Confucianism
allowed him to define himself in contrast to foreign and domestic liberals
who called for Japan’s wholesale Westernization. (113–14)

Critical of “corruption in high places and an economy mired

for decades in seemingly inescapable stagnation” (217), Sagers
argues that corporations must practice greater corporate social
responsibility (CSR) (4) and posits Shibusawa as the model for his
proposed reforms.
Divided into eight chapters, Sagers’ book is a thematic biography
of a famous figure in which the theme largely eclipses the
biography. Only two of the chapter titles—the introduction and
the conclusion—contain the name “Shibusawa Eiichi.” All the rest
zoom out to take in the social and economic changes taking place
before and during Shibusawa’s long life. Protectionism, business
networks, stock exchanges, central banks, labor unions, the gold
standard, war financing, infrastructure, bureaucratic involvement
in corporate governance, and the influence of technologies and
ideas from America and Europe are just some of the big topics
Sagers tackles here. This is an ambitious book, and one worth
reading if only for the scope of the hundred years or so of modern
Japanese history it takes into account.
And yet, as in old Japanese maps, there is a cloud bank obscuring
some of what Sagers purports to examine. Indeed, this book, for all
of the valuable information it offers the reader, suffers not so much
from peripheral blurring as from macular degeneration. There is a big
blind spot right in the middle of the book’s field of vision. Namely,
one wonders what Sagers means by the term “capitalism.” Sagers
uses the word in the title of his book and on page after page in his
text, but in the end we never quite know how he understands it.
The closest we get is when Sagers quotes historian of capitalism
Joyce Appleby in defining capitalism as a “relentless revolution.”
Awkwardly, Sagers then has Shibusawa “answer” Appleby (from
more than one hundred years before Appleby wrote her volume)
that Confucianism was the key to maintaining old societal values
94 Quart J Austrian Econ (2019) 22.1:91–99

while advancing business in a given polity. (22)1 But is this purported

dichotomy between capitalist and society—framed by Appleby,
endorsed by Sagers, and apparently confirmed and then overcome
by Shibusawa Eiichi—real? Did Shibusawa “answer” Appleby’s
challenge by pursuing a kind of “Confucian capitalism” that took
the edge off the Northern European variety? Is the “capitalism” of
which Sagers and Appleby write capitalism at all?
Elsewhere in the same book that Sagers quotes above, Appleby writes:

There can be no capitalism, as distinguished from select capitalist

practices, without a culture of capitalism, and there is no culture of
capitalism until the principal forms of traditional society have been
challenged and overcome. (119)

Is Shibusawa Eiichi the exception to the Appleby Rule, then? Was

Confucianism really the skeleton key that allowed Shibusawa to
unlock the business potential of a traditional society while leaving
its traditions largely in place? And is the thing, “capitalism,” that
Sagers argues needs reforming really capitalism at all?
The notion of a “Confucian capitalism” is plausible if the premise
that “capitalism” is a destructive force, a “relentless revolution”
continuously clear-cutting social practices in the quest for more and
more money, can be shown to apply in all cases. But if capitalism
is not really that at all—that is, if capitalism is just human nature,
one of the ways in which human beings attempt to survive and
thrive—then “Confucian capitalism” as a heuristic device loses
much of its analytic power.
Indeed, if we widen our scope a bit further we can see that
the use of the term “capitalist” can be, and has been, applied so
willy-nilly to so many different things that it breaks down and is
virtually meaningless. Shibusawa Eiichi used technologies such as
the joint-stock corporation and the stock exchange to distribute risk
and raise money for his various plans. But the Chinese do this, too,
and in a way that out-capitalists the very representatives of capi-
talism themselves. If the Chinese do not have an Applebian “culture
of capitalism,” then surely the set phrase can have no ideological

1
Citing Joyce Appleby (2010, 7).
Book Review: Confucian Capitalism: Shibusawa Eiichi, Business Ethics… 95

purchase, and must be rejected. And if that definition falls, then so,
too, does Sagers’ thesis, that some kind of philosophical harness,
such as Confucianism, is needed to promote virtue among the
industrialist class.
Unfortunately for Sagers, Confucius’ homeland is a buzzing,
blooming capitalist Tilt-a-Whirl. As Kai-fu Lee points out in AI
Superpowers: China, Silicon Valley, and the New World Order (2018),
Stanford-based entrepreneurs once laughed at Chinese startups
as cheap knockoffs, but now admit that they cannot keep up with
the competitiveness of the Chinese market. American companies
routinely fail in China, according to Lee, because they do not take
the time to study Chinese culture. If capitalism really does destroy
local practices, then China should be indistinguishable from Palo
Alto. But as anyone who has ever been to China can attest, China
is very much not the Bay Area. In other words, “capitalism” has
not destroyed anything. It has amplified existing cultural norms
and enriched great swaths of humanity. Is this the thing that Sagers
thinks needs reforming?
What about elsewhere? In Debt: The First 5000 Years, David
Graeber reminds us that commerce, and the intricate financial
practices and social networks that make commerce possible, have
long been a central feature of the Islamic world. This may not
qualify as Appleby’s “culture of capitalism,” but it hardly matters,
because business in the dar al Islam is still firmly rooted in the
religious and cultural practices of the region. Whatever capitalism
is, it has been very polite to its Muslim hosts—so culturally quiet,
in fact, that one hardly notices it’s there. In Africa, too, despite the
Orientalist fantasy of the eternally childlike native, men and women
prefer to prosper, to thrive materially while improving their social
standing. Cheats and con artists always try to turn a quick profit
at the expense of morality, but such people are readily sifted out
of the market everywhere. (It is only when government intervenes
to protect scofflaws, as it does in the United States for the robber
barons in Goldman Sachs, that “capitalism” can be said to inflict
harm on local societies.) Getting rich, testing schemes, doing good
by doing well—these are not somehow proprietary to the West. So,
one is left wondering, if “capitalism” is a universal, then how is it
modified by Confucianism?
96 Quart J Austrian Econ (2019) 22.1:91–99

Indeed, even the “Confucian” aspect of Shibusawa’s thought was

more complicated than might first appear. For example, in arguing
in favor of protectionism after initially supporting English-style
liberal trade policies for Japan, Shibusawa cited Adam Smith’s
Theory of Moral Sentiments in advocating a business approach
oriented to society as a whole, and not beholden solely to the entre-
preneur. (138) Adam Smith as reining in “capitalism”? (It might be
time to bring in the fainting couch for Mr. Krugman.)
And when Sagers chides Shibusawa for his too-cozy relationship
with government bureaucrats and the managerial state, one wonders
if this, too, can really be called capitalism. Sagers himself uses what
is arguably the correct term—“crony capitalism”—to describe this
inherently corrupt arrangement. Drawing on the work of Morikawa
Hidemasa, an earlier Shibusawa scholar, Sagers writes:

Morikawa […] noted that Shibusawa Eiichi’s name always comes up

when it is fashionable to criticize big business as in the case of the 1970s
Lockheed scandal or the oil shock and scholars like Tsuchiya [Takao]
say that today’s managers need to look again at Shibusawa Eiichi’s
thinking to solve contemporary problems. But for Morikawa, the system
of crony capitalism known as ‘Japan, Inc.’ (Nihon Kabushiki Gaisha) that
Shibusawa helped create was the root of Japan’s problems. (220)2

But is “Japan, Inc.” capitalist in any real sense of the term?

Shibusawa himself floated back and forth between finance and
government (he was the recipient of a coveted amakudari golden
parachute from the Finance Ministry into the “private” sector in 1873
[90]), and used his connections transecting the osmotic membrane
between economy and state to enrich himself enormously. It is
highly debatable, then, that Shibusawa Eiichi was a capitalist at all,
unless “capitalist” also means “crony capitalist,” in which case it
means nothing at all. If the state picks winners and losers and uses
the implied threat of fines and incarceration to enforce bureaucratic
fancy, then perhaps Sagers’ and others’ critiques of such a system as
a fault of “capitalism” are greatly misplaced.
Lastly, on whether Confucianism is the best leaven for the
purported excesses of “capitalism,” even though it is beyond doubt

2
Citing Morikawa Hidemasa (1976, 72–73).
Book Review: Confucian Capitalism: Shibusawa Eiichi, Business Ethics… 97

that Shibusawa’s Confucian beliefs inspired him to pour enormous

amounts of money into social welfare programs, it can hardly be
said that the Analects is the only book to have spurred the wealthy to
part with some of their gains for the sake of the commonweal. The
Islamic merchants Graeber mentions grounded their business ethics
solidly in the Quran, for example, and Christian and Jewish busi-
nessmen and -women have done incalculable good for humankind
through charitable giving that, quite frankly, puts the Confucianists
to shame. Jacob Schiff, Richard DeVos, Howard Ahmanson, Jr.,
Julius Rosenwald—these tycoons stooped to embrace the forgotten
and destitute because the God of Jacob and Abraham, or the Son
of Man, said it was good to do so. Even today, Judeo-Christian
America remains the most charitable nation on earth. Given all
this, one question that might be posed to advocates of Confucian
capitalism is, “Why did you pass up capitalism of the Torah, the
Hadith, and the New Testament?”
However, these questions for broadening the scope of Sagers’
investigation should not be interpreted as detracting from his
work. He has clearly scoured the archives in search of material, and
his book is an important stepping-off point for debates about this
important topic. At the very least, Sagers is correct in his assessment
that Japan, Inc.’s days are probably over. As the recession in Japan
racks up birthdays and the government continues to shoot arrows
from its Keynesian quiver at the indifferent beast, it must be clear
to all candid observers that further intervention in the economy
is not the answer to capitalism’s woes. Sagers’ book is a valuable
contribution to the deliberations about where to go once—and may
the day come quickly—the bureaucrats in Japan and elsewhere
grow tired of failure and adopt a more Daoist approach by doing
precisely nothing to “help” capitalism recover. It may very well be
that a “Confucian capitalism,” wherein philanthropy is couched in
Confucian practices, is a viable solution to the two lost decades (and
counting). Whatever the eventual outcome, Sagers’ work is very
useful in thinking through the answers to the pressing questions
Japan faces as crony capitalism dies a very drawn-out death.
For those considering buying and reading Sagers’ book, though,
a word about style. Sagers is to be commended for his research,
but many of his paragraphs felt like pachinko runs, and there is
a cubism to Sagers’ argumentation that frequently mystified your
98 Quart J Austrian Econ (2019) 22.1:91–99

humble correspondent, even after multiple tries at comprehension.

The syntax of this book is not for the faint of heart. Sagers darts
about from topic to topic, and grasping at the meaning of a given
passage can be a bit like trying to catch eels in a pond.
And then there is the glossing trouble. Sagers uses a lot of
Japanese terms, which is a good thing, but he glosses them, well,
diversely. For example, on the very same page (75), Sagers glosses
shokusan fukyo (Sagers must mean shokusan kōgyō (殖産興業)) as
“promoting production and building wealth and strength” and
then, about two dozen lines later, as “promoting production for a
wealthy country.” On page 62, Sagers gives the exact same phrase
as “promote production, encourage industry.” Which is it? Other
terms are similarly kaleidoscopic, but gapponshugi wins the prize.
Gapponshugi is a Shibusawa neologism referring to the ‘pooling of
monetary capital, managerial talent, and labor to serve the public
interest.’3 Sagers glosses this term repeatedly, and with substantial
variation. Sometimes it is just ‘pooled resources,’ but elsewhere
Sagers adds a political valence: “resources united to build enter-
prises that served the nation.” (69; see similar gloss on 97) Important
terms like these should be made consistent, especially when much
of the argument hangs upon how they are translated.
As Shibusawa himself might have said, though, if you want
something, you’ll have to work for it. This dictum applies in full
force for anyone who is about to wade through the tall grass of this
often challenging book. Confucian Capitalism is a welcome return to
the life and philosophy of one of the greatest Japanese magnates
of the past two hundred years. It is also an opportunity to set the
record straight on whether Shibusawa Eiichi—or Japan, Inc.—was,
or is, “capitalist” at all.

REFERENCES
Appleby, Joyce. 2010. The Relentless Revolution: A History of Capitalism, 1st
ed. New York: W.W. Norton.

Graeber, David. 2012. Debt: The First 5000 Years. New York: Melville House.

3
45, citing Shimada Masakazu (2011, 30–34).
Book Review: Confucian Capitalism: Shibusawa Eiichi, Business Ethics… 99

Hidemasa, Morikawa. 1976. “Shibusawa Eiichi: Nihon Kabushiki Gaisha

no sōritsusha,” in Nihon Keieishi Kōza, ed. Nihon no kigyō to kokka.
Tokyo: Nihon Keizai Shimbunsha.

Lee, Kai-fu. 2018. AI Superpowers: China, Silicon Valley, and the New World
Order. Boston: Houghton Mifflin Harcourt.

Masakazu, Shimada. 2011. Shibusawa Eiichi: Shakai Kigyōka no Senkusha.

Tokyo: Iwanami Shinsho.