Is the Confucian ethic a hindrance to economic development in China?

Abstract

Opinions differ among academics concerning the relationship between the Confucian ethic and China’s economic development. This research reveals that the Confucian ethic originated from the practical demand for guaranteeing the smooth operation of households. Later, it developed into a coordinator between the government and individuals, thus bringing about the institutional compromise between the family system and bureaucracy, which is the foundation of the market system specific to China. In the future, the successful development of a market economy will be largely dependent on whether an institutional equilibrium between the government and market forces can be reached, and this will be strongly related to the Confucian ethic. This paper holds that Confucianism involves inherent conflicts between the macro and the micro level. At the macro level, Confucianism sets very high standards for wealth and morals, but at the micro level it pays little attention to how to create wealth. Accordingly, for the ongoing market reform, it is rational to continue introducing Protestant ethics-oriented Western systems since they are more advantageous in terms of increasing wealth accumulation. However, this process lacks stability and inclusiveness and is thus prone to the separation of wealth from morals. This is exactly where Confucianism should step in. This paper concludes that the long separation of wealth accumulation from the Chinese cultural traditions has become the biggest obstacle to China’s economic growth. In the face of intensified social and economic conflicts, the only appropriate option is to revive tradition and root the reform in China’s own cultural soil.

Keywords:

• Confucian ethic
• institutional compromise
• endogenous market function
• economic development
• cultural logic

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 See Yu (1985, 257–291) on the evolution of the Confucian ethic and its logic since the Tang dynasty.

2 Interestingly, Mencius, also a grand master of Confucianism, strongly condemned the ranking management system of the family and instead promoted egalitarianism and philanthropism (Kurguiere 1998, 693).

3 In comparison, the Greek tradition since Aristotle has insisted that individuals should be brought up in families during childhood and leave home for the public life during adulthood. In a civil society, the conflict between the family life and the public life is fundamental, thus defining the boundary between the individual sphere and the public sphere in the Western society (Hall and Ames 1999, 100).

4 Chapter 2 of The Analects of Confucius says, ‘When asked why he is not occupied with state affairs, Confucius answered, “The Book of History says about filial duty that respect for parents and fraternity towards brothers are family affairs. If these are practiced in the state towards the old and the young, it is a state affair. Thus engaged in family affairs, am I not occupied with state affairs too?”’ In his Rectified Meanings of the Analects, Liu Baonan says, ‘The way of taking part in government is no different than knowing one’s ethical responsibilities. He who is a good son to his parents and friendly to his brothers can exert an influence upon government’ (as cited in Li 2004, 71).

5 Daxue, one of the Confucian classics, says, ‘The ancients who wished to manifest illustrious virtue throughout the world first ordered well their own states. Wishing to order well their own states, they first regulated their own families. Wishing to regulate their own families, they first cultivated their own selves’.

6 As opposed to the Confucian ideas, the Greek philosopher Plato believes that the family organisation is not the value source of social virtues. Schwartz (1985) summarises the reasons: the family is a particular private entity in a city-state aiming to improve personal economic welfare; instead of guiding people’s interests to broader public affairs, it confines people’s minds to concerns about the humble happiness and sadness of family members.

7 He Huaihong argues that the significance of Confucius is that, since he lived in a pivotal time in history, as a great synthesiser he created a synthesis which permanently endures (He 1996).

8 He Huaihong gives a detailed and systematic illustration of the hereditary society and its disintegration since Spring and Autumn Period (He 1996).

9 For details, please refer to Historical Records: A Brief Record of the First Emperor of the Qin Dynasty, written by Sima Qian, a renowned Chinese historian of the early Han dynasty.

10 In the Chinese history, there were many other experiments like this. For example, the one carried out during the Wei dynasty, known as an attempt to implement the system of feudal lords, led to social disorder for the subsequent three and a half centuries. Another example is a similar attempt in the early years of the Ming dynasty, which eventually resulted in the imbalance in the national governance structure.

11 According to Hsu (1998, 222–226), in both the Han and Tang dynasties, the ratio of nobles to civilians in the intermediate class was 1:2, indicating that such a segmentation meant a power balance among the various social groups and an institutional equilibrium. Thus, this 1:2 ratio can be viewed as the ‘golden section’ in the Chinese social structure. It also indicates that any deviation from that ratio can result in an imbalance. A bias towards the nobles will cause an over-centralisation of power and thus dictatorship. Similarly, a bias towards the civilians will lead to a scattered power distribution and thus disorder.

12 Wu Kuo-cheng further points out that a close study of historical records will reveal that, in more than 20 dynasties in the Chinese history, whoever intended to impose a dictatorship would meet strong public opposition. The theoretical justification of the opposition usually came from works by Confucius, and of course, also from works by the Duke of Zhou (Wu 2000, 487).

13 According to Wu (2000, 488), in 1974, some people in power, in order to impose their personal ideas on the public, launched nationwide anti-Confucius and pro-Qin Shihuang campaigns.

14 According to Townsend and Womack (1986, 139), Chinese families were, and still are, social units stronger than their Western counterparts.

15 According to Jacques (2009, 10–11), there has been a consensus among the Western countries that China will eventually become a country of a Western style, whether as a result of modernisation or as a precondition for modernisation or as a mixture of both. But, seeing from the perspectives of history and culture, Jacques believes that China will never turn into a country of that style. Instead, it will maintain its own distinct characteristics. He also emphasises that modernisation is invariably the product of combined forces (including market, technique, history and culture) working together. And each individual country has its own specific environment and conditions (Jacques 2010, 12). Actually, this is an echo of a similar idea proposed by Macfarlane (1978) in the late 1970s, when he mentioned the uniqueness of the origin of British individualism. According to Macfarlane, it would be a catastrophe to equate the peasant societies in the Third World with the case in England, which are totally different in terms of wealth, as well as, social political and psychological environments. It took at least six centuries for the latter to transform itself from a non-industrial yet basically capitalist society to an urban-industrial society. If a contemporary country tries to make the same achievement in one generation, it will experience extreme hardships. Moreover, it must be understood that to absorb the Western industrial technique involves not only material or economic products but also a whole set of values and rights related to individualism, household structures, and geographical and social mobility modes, which are ancient and long-lasting, and vary from country to country. For those wishing to reshape the mode of China’s economic and financial development through a transplanting of the Western system, hopefully this statement will wake them up.

16 Yan Yunxiang offers a valuable case study; though his study targets the rural society since the 1950s, it carries a general significance. The study ends with an examination of the relationship between the state, households and individuals, maintaining that in the past five decades, the state has played the most important role in household evolution and pushed forward the transformation of personal life, thus giving rise to the recent rapid development of self-centred individualism. These individuals tend to neglect their moral responsibility for society and other people in their pursuit of maximum personal interest (Yan 2006, 239). Obviously, this phenomenon is largely the product of household revolution promoted by the state (Yan 2006, 251). And by means of collectivisation and the Great Leap Forward, the government attempted to promote collectivism so that peasants would shift the object of their loyalty from family to community and then to the nation. To achieve this purpose, the government has destroyed the old hierarchical system and household structure. Farmers have been changed into atomic citizens. However, following the ending of collectivisation and the withdrawal of the state from many aspects of social life, people have observed the decline of socialist moral values. So in the post-collectivisation era, there has emerged a moral and ideological vacuum in rural areas. On the other hand, farmers have been swept into the wave of a commodity economy. Living in such an environment, they have quickly accepted the late-capitalist values, which are characterised by the global consumption. Such being the case, they have gradually lost their sense of duty and responsibility toward both community and other individuals either in the public sphere or in the private sphere (Yan 2006, 257–261).

17 In academia, there is already a call for proper communication between Confucianism and the modern society. This is regarded as a crucial step for the establishment of future social values and the basic cultural dignity for China (Ye 2010). Actually, the same is true with economic and financial reforms in China.

18 Macfarlane (1978) proudly mentions that in comparison to China, India and most of the Western European countries, England is unique not only in the continuity of its history but also in the fact that it sets individuals at the centre of economic, ethical and political systems.

19 According to Ge Zhaoguang, in the Tang and Song dynasties, the relationship among imperial power (standing for the state), gentry (standing for the society) and individuals demonstrated two developmental trends. On the one hand, ‘accompanying the rapid expansion of the legal system, moral ethics and civilised ideas was the strengthened control of the state over the society; on the other hand, with the end of the era of the hereditary system, the gentry class rose up and gradually became the intermediary force between the state and individuals. Specifically, through the channel of taking state exams first and then official posts, the gentry class became local leaders. In their dealings with the state, the gentry not only promoted the legal system, moral ethics and civilised ideas on behalf of the state, but also played the function of countering the limitless expansion of the state power and resisting its direct rule over individuals on behalf of the public’. To sum up, ‘the state, gentry, politics and culture reached an agreement in support of the expansion of traditional morality and the rite system’. And ‘that is why some of the Confucian ideas could be established as firm ethical principles; and the lifestyle on such a basis was not only acknowledged but also spread out to every region’ (Ge 2000, 381–385).

20 Based on the criterion of whether information is coded, abstract and diffusive, Boisot (1995) divides transaction structures into four types, which are market, bureaucracy, family clan and fief. According to him, in the given culture spaces, America corresponds to the market type, France the bureaucracy type, Britain and Japan the family-clan type and China the fief type.

21 At the time when the bureaucratic system was established in Europe, the mechanism of property protection was already in place to protect individual rights. In other words, ever since the Western society stepped onto the road to marketisation through the stage of bureaucracy, the legal system (as a substitute for individual bargaining power) has been standing alongside the bureaucratic system. Behind it have been properly protected individual rights.

22 Yang (2002) conducts an authoritative and systematic survey of the literature both in China and abroad on the issue of Chinese township enterprises.

23 According to Li (1998), the most profound change in Chinese rural areas since the reform is that the family or family clan is returning to function as a natural unit of production in the economy. In a sense, township enterprises are the derivative of family enterprises. The success of township enterprises has somewhat reflected the role of China’s family-oriented culture, credibility and internal cohesion in the growth of enterprises.

24 Chen (1995) reveals the balance sheet of a township enterprise. Through it, we can get a clear view of the process of how local governments and the rural society, with each starting from their own perspective of interests, reached a compromise about an institutional arrangement of township enterprises. Based on this study, Wang (2009, 115) maintains that the township enterprise is a social governance mechanism reflecting the pursuits of local governments and rural communities for employment, income and fiscal revenue. In contrast, Pan (2003, 379) highlights the intermediary role played by local governments in the growth of township enterprises. According to him, the success of township enterprises owes much to political and social reasons. Politically, it can be traced back to the organisational structure of the socialist country at the local level and the socialist collective tradition in rural areas since the 1950s. Socially, it can be traced to the blood and geographical ties in rural communities.

25 According to Aoki, Murdock, and Okuno-Fujiwara (1998, 34), in the neoclassical economic model, the government is taken as a neutral arbitrator that has the potential capability to intervene in the market process to correct various market failures. Obviously, this hypothesis is not helpful to us in understanding the actual process of economic development.

26 Hsu Cho-yun put forward the proposition of a golden section as early as 1992 (Hsu 1998).

27 Lee (2010) made a thought-provoking speech after comparing the economic performance of the Japanese mode and that of the Chinese mode. According to the speech, though the Japanese mode is widely known to be government-oriented, the private sector can usually get three-fourths of the national resources. In contrast, in the Chinese mode, the function of the government is raised to an unprecedentedly high level. Though state-owned enterprises (SOEs) only account for between one-fourth and one-third of the national output, they get over 75% of the national funds. With so much wealth under the control of about 120,000 SOEs (and countless subsidiary companies), the result is that such a situation benefits a small handful of insiders with good connections and of high status, at the cost of the overwhelming majority of people. Undoubtedly, it can be inferred that the proportion of resource allocation between the upper class and the lower class will remain a fundamental problem in the process of China’s economic reform and development.

28 It is worth noting that moral teachings are an institutional requirement for a market system where the government is endogenous. In comparison with the mainstream assumption of morals being endogenous, the Confucian economic system holds the idea that morals, being exogenous, need to prepay a higher moral cost. Theoretically, the Confucian market system requires a higher moral threshold. Of course, due to the existence of the space for morally opportunistic behaviours and its related gains, the potential cost of supervision and correction in this system will also be higher. Generally, when the operation of the mainstream market economy deviates from its normal course, it can depend on business cycles for adjustment and rectification. However, with regard to the Confucian market economy, once the moral consciousness of a market entity (especially the government) collapses, the economic operation as a whole would fall into a disaster. It is in this sense that the success rate for the latter will be lower. In spite of this, once the latter moves onto the normal track, under the influence of the Confucian ethic, the cost of market transactions will be lower and the growth will be more sustainable and spectacular.

29 According to Tschen (1942), the emergence of the new class during the Tang dynasty owed much to the gradual destruction of the old ruling class of the Guanlong Group; the rise of this new class took place in the decades from Empress Wu Zetian to Emperor Tang Xuanzong, known as the prime years of the Tang dynasty. Afterwards, the royals began to belong to a class different from that of the literati officials and military generals.

30 Qian Mu makes many comments on the institutional evolution during both the Han and Tang dynasties. For example, with regard to the economic system and its performance during the Tang dynasty, he comments that the main purpose of an economic policy was to avoid poverty among folks. The highlights of the tax system, called zuyongdiao zhi (the tripartite tax system), were not only light taxes but also a focus on production. Specifically, at the beginning, no tax was levied on commercial activities. Poor people would have land granted to them by the government so that they could later lead a life above standard. In comparison with the Han dynasty, the Tang dynasty paid more attention to the lower class and applied state planning in relevant fields. As to the upper class, the laissez-faire principle was adopted to allow free development. That is to say, a person was allowed to be rich, but was not allowed to be poor. This is somewhat similar to the contemporary free economy in the West (Qian 1955/2005). The reason behind this obviously pertains to the balanced power structure, which provided a fitting and orderly institutional space.

31 In the framework of the ‘effective’ institutional ‘combination’ initiated by Zhang (2005), the private sector and the government sector are used to replace the concepts of disorder and dictatorship in Djankov et al. (2003). The replacement makes relevant discussions more objective and rational. In contrast to the private sector and the government sector, the concepts of disorder and dictatorship contain elements of value judgment. In fact, disorder is the outcome of excecssive access by the private sector, and dictatorship is the outcome of excessive access by the government sector. They are two corner solutions for determining the effective institutional combination. Whenever an institutional equilibrium is in place, it means the access of both the private sector and the government sector is just appropriate, indicating the existence of a tangency solution.

32 According to Olson (1965), unless members in a group are very few, or unless they are forced to act in accordance with their common interests, rational individuals seeking to realise their self-interests will not conduct themselves in a way to achieve the common interests of a community. By telling the story of a beehive, Mandeville stresses that individual desires such as greed and extravagance will lead to the production of considerable public wealth. Once the desires disappear, the society would be severely damaged, if not disintegrated, meaning that social benefits derive from individual benefits (as cited in Skousen 2001).

33 Sheng Hong views the Olson paradox as the second theorem in economics (and the Smith theorem as the first). According to Sheng, the effective operation of a society depends on the combination of a tangible system (such as a power system) and an intangible system (such as morality). As a self-disciplinary system, and also as a set of social ideologies and consensuses, morality is helpful in saving forced costs and establishing constitutional principles for the tangible system. Thanks to morality, the issue of the second theorem is addressed and the society can exist (Jiang and Sheng 2004).

34 According to the literature on the religious history, Neo-Zen was set up by Hui Neng (638–713), the sixth Patriarch of Zen in China. Before its establishment, according to Fung (2005), the traditional account of the origin of the Zen school is that Buddha, in addition to his scriptures, had an esoteric teaching that was transmitted independently of written texts. He transmitted this teaching personally to one of his disciples, who in turn transmitted it to his own disciples. In this way, it was handed down until it reached Bodhidharma. Bodhidharma came to China some time between the years 520 and 526, where he became the first Patriarch of the Zen school. Bodhidharma transmitted the esoteric teaching to Hui Ke, who was the second Patriarch. Later, a major split in the school occurred, caused by the two chief disciples of the fifth Patriarch, Hong Ren. One of them, Shen Xiu, became the founder of the Northern School; the other, Hui Neng, founded the Southern School. The Southern School soon surpassed the Northern in popularity, so Hui Neng came to be recognised as the sixth Patriarch.

35 In the history of Zen, the Baizhang Zen Monastic Regulations and Buddhist monasticism were created by Baizhang Huaihai (749–814), according to which Buddhists should live from their labour, which is different from the requirement of the Zen Buddhists in India.

36 In Classified Recorded Sayings of the Master Zhu Xi (vol. 13), there is such a dialogue: ‘(Question:) “With regard to diet, what is the heavenly principle and what is the human desire?” (Answer:) “The desire for food to keep alive is the heavenly principle; the desire for pleasant taste and smell is the human desire’”. From this, it can be seen Zhu Xi divides human desires into two types. One is the justified desire in accordance with heavenly principles, the other is the excessive desire against heavenly principles (as cited in Yu 1985, 268–269). The former should be carefully treated while the latter should be restrained. Seen from the perspective of economic ethics, the theory of eradicating human desires promoted by Zhu Xi is somewhat equivalent to Confucius’ ‘rarely talking about profit’, except that Zhu Xi’s wording is harsher.

37 Fung Yu-Lan has a thorough understanding of the ‘intuitive knowledge’. According to him, from our first reaction to things, we know naturally and spontaneously that the right is right and the wrong is wrong. This is the manifestation of our original nature, and Wang Yangming uses the term ‘intuitive knowledge’ (literally, ‘good knowledge’) to define it. All we need to do is simply follow this knowledge and go unhesitatingly forward. If we try to find excuses for not immediately following it, we are then adding something to, or reducing something from, the intuitive knowledge, and are thus losing the highest good. The act of looking for excuses is rationalisation out of selfishness (Fung 2005, 284).

38 According to Yu Ying-shih, ‘the theory of Wang Yangming to Neo-Confucianism is like the Neo-Zen school to Buddhism. It was not until the rise of the Neo-Zen school that Buddhism began to really take root in China. Similarly, it was not until the emergence of the theory of Wang Yangming that the socialisation of Neo-Confucianism was completed. With doctrines that are easy to practice and with its ascetic spirit, Neo-Zen penetrated deep into the bottom of the society and completed the shift of Buddhism to the worldly life. Despite having attracted the educated class from the Zen school, Neo-Confucianism failed to thoroughly reverse its alienation from the lower class. This was later achieved by Wang Yangming, who put to an end the manipulation of folk beliefs by Buddhism and “Taoism” (Yu 1985, 290). Actually, with the principle of ‘intuitive knowledge’, Wang Yangming wanted to achieve more. He wanted to reestablish the orthodox; he maintained that the idea of intuitive knowledge was the essence of truth upheld by ancient sages, and thus a better reflection of the Confucian ethic (as cited in Ge 2000, 421–422).

39 Yu (1985, 320, 330) makes a systematic refutation of such views.

40 As shown by Merton (1938/1993, 112–126), there is a close interrelation between Protestantism and the development of science and technology. Statistics show that outstanding scientists are dominantly Protestants. According to one research by Candolle as cited by Mertion, in Europe (excluding France) during 1666–1883, Catholics and Protestants accounted for 107 million and 68 million, respectively. But among the foreign scientists appointed as communication academicians by the Paris Academy of Science, there were only 18 Catholics but 80 Protestants. Merton explains that Protestantism was the major content in education during this period. Qualities in Protestantism such as utilitarianism, interest in the secular life, orderly and consistent behaviours, thorough empiricism, the promotion of research, responsibility and even anti-tradition are all in conformity with the values required by science. As opposed to this belief, however, Barro and McCleary (2003) draw a different conclusion in their quantitative research on the relationship between religion and economic growth, arguing that those qualities would bring an obviously negative influence on economic growth.

41 According to Chow (2002), modern economists have not reached an agreement on whether the Confucian tradition so deeply-rooted in the Chinese culture plays a positive or negative role in economic development. However, they are in agreement about its significance. As regards the positive side, the Confucian advocacy of maintaining high moral standards and honouring one’s commitments is conducive to commercial transactions, since it provides the social order necessary for the smooth operation of a market economy by encouraging kinship relations and mutual trust among friends, which constitute the foundation of loyalty in the business world.

42 Yu Ying-shih makes a wonderfully sharp criticism about the issue. According to him, the discussions of early capitalist development over the past three decades in China are problematic from a historical perspective; the efforts have ended up in vain, because a wrong question is asked. (Yu 1985, 216).

43 Please see Yu (1985, 336–337; 1986, 223–324) for discussions about the influence of China’s bureaucracy on its economy.

44 Chow (2002) argues in his systematic criticism of the Chinese market economy that an important element that seems unable to be changed in the Chinese market economy is the existence of those bureaucratic agencies which can restrict prosperity enjoyed by private enterprises. In his opinion, in political and bureaucratic systems of the Chinese mainland, it is difficult for big enterprises to gain a foothold. It is also difficult, if not impossible, for private entrepreneurs to set up successful big and transnational companies, like Microsoft, or smaller-sized ones like those in China’s Hong Kong and Taiwan. In the Chinese mainland, a large number of potential world-class entrepreneurs hope they can fulfil their self-worth and make contributions to modernisation of the economy, yet their hands are tied by political and bureaucratic regulations.

45 Early in the mid-19th century, contradictory ideas in books by Smith were already noticed by German philosophers. In The Theory of Moral Sentiments, Smith maintains that ‘sympathy’ is a major impetus to social progress, while in An Inquiry into the Nature and Causes of the Wealth of Nations, he regards private interests as the major impetus. That is to say, he adheres to altruism in ethics but egoism in economics. Thus has arisen the ‘Adam Smith problem’ (please refer to Skousen 2001).

46 As recorded in Chapter 13 of the Analects, when the Master went to the state of Wei, Ran You drove for him. The Master said, ‘What a teeming population!’ Ran You said, ‘When the population is teeming, what further benefit can one add?’ ‘Improve their circumstances’. ‘When their circumstances have been improved, what further benefit can one add?’ ‘Train them’.

47 In Chapter 7 of the Analects, it is recorded that the Master said, ‘In the eating of coarse rice and drinking of water, and the using of one’s elbow for a pillow, joy is to be found. Wealth and rank attained through immoral means have as much to do with me as passing clouds’.

48 According to Toynbee, the reason for speaking highly of China is not about the remarkable achievements it has made in a relatively short period of the modern history, but about its outstanding performances and well-preserved virtues throughout the history; the Chinese people have consistently followed those virtues regardless of whether their country is in decline or in chaos. From this, Toynbee infers that what will get the world united will be China instead of any Western European or Western Europeanised country; China shoulders the mission of bringing political unity and peace to the whole world (Toynbee and IKeda 1974/1985, 287–289).

49 There has long been a distinction between the folk version and the official version of Confucius. Unlike the latter, whose teachings are practised through the study of the classical literature, the teachings of the former are experimental and based on daily life experiences. In this circumstance, what people learn from the folk-version Confucianism is about the Confucian moral code and conscience, which can easily transform into principles of justice. In peasant uprisings, where Confucianism was often used as a cultural weapon, it was actually a case of the sensible Confucius against the rigidly idolised official Confucius. This has given rise to a familiar phenomenon in history: various interest groups have tended to attach different interpretations to Confucianism for their prospective benefits, trying to replace one side of Confucius with another. It is interesting to note that the bureaucratic version of Confucius will be revived once the folks establish their own political systems (Huang 1988, 282–284).

50 Historically, in the pre-Qin period, the Confucian school (including Confucius himself) focussed more on the majority. After the Qin dynasty, the focus gradually shifted to be biased toward the minority. However, since the mid-Ming dynasty, marked by the principle of ‘intuitive knowledge’ proposed by Wang Yangming, the focus began to return to the majority. The reason for the shift, according to Yu Ying-shih, is that it was eventually known in the Confucian school that common people are willing to spare no effort to maximise their profit, which is more reliable than idling around and waiting for the favours granted by sainted emperors (Yu 2004a, 130–136).

51 Interestingly, in Europe there have been quite a few scholars in favour of the Confucian spirit. Among them are G. W. Leibniz, a German philosopher who thinks highly of Confucianism, and his follower C. Wolff, who goes even further to argue that Confucianism can make up for the disadvantage of Christianity (as cited in Shi 2010, 58–59).

52 This notion was initiated by Feng Guifen (Feng 1861/2002, 57), developed by Zheng Guanying (Zheng 1892/1982, 276), and completed by Shen Yugui (Shen 1896/1985, 63). Later, thanks to the promotional efforts by Zhang Zhidong (Zhang 1898/2002, 22), it successfully grew into a well-known idea.

53 In Daxue, eight steps are proposed as follows: ‘The ancients who wished to manifest illustrious virtue throughout the world, first ordered well their own states. Wishing to order well their own states, they first regulated their own families. Wishing to regulate their own families, they first cultivated their own selves. Wishing to cultivate their own selves, they first rectified their own minds. Wishing to rectify their own minds, they first sought absolute sincerity in their thoughts. Wishing for absolute sincerity in their thoughts, they first extended their knowledge. This extension of knowledge consists of the investigation of things. Things being investigated, knowledge became complete. Their knowledge being complete, their thoughts were sincere. Their thoughts being sincere, their hearts were then rectified. Their hearts being rectified, their persons were cultivated. Their persons being cultivated, their families were regulated. Their families being regulated, their states were rightly governed. Their states being rightly governed, the whole kingdom was made tranquil and happy’.

54 According to Chen (1911/2009, 139–141), two organisations are emphasised by Confucius. One is the largest, that is the world; the other is the smallest, i.e. the family. The world economy is a special topic of Confucius, therefore, the economic system discussed by Confucius is not nationalist, but cosmopolitan.

55 The contemporary Neo-Confucianist, Mou Zongsan, comments that the pursuit of cultivating one’s character and regulating one’s family will not lead directly to the good government of one’s state and the peace of the world (as cited in Huang 1988). Actually, what should be held responsible for this is the absence of ‘enriching the people’, i.e. economic growth and wealth accumulation. In China, the Confucian culture had always been in harmony with the backward mode of production, thus resulting in the present institutional dilemma concerning Confucianism and the mode of production.

56 In talking about his trip to China in 1914, Shibusawa Eiichi held that, back then, there were some outstandingly insightful individuals with a noble character, yet the general nation as a whole was wrapped in egoism and a lack of collectivism and care about the country (Shibusawa 2009, 139). We can see that this was the very reason of China’s weakness and poverty in the modern times. What was pointed out by Shibusawa Eiichi more than 100 years ago is still enlightening, even for the present ongoing reform.

57 Please refer to Wang (1999, 215–226) for a literature review on the economic implications of the Confucian culture.

58 After reviewing the effects of particularism in both Japan and China, Zhang Jie argues that ‘The introduction of particularism into places where universalism already exists leads to reduced transaction costs and enhanced cooperation, exchange and efficiency. Indeed, in Japan, particularism provides for its social and economic structure many small credibility systems conducive to reducing supervision costs and organisation costs. Among these systems, there are market rules and laws to get them linked so that they can further develop into bigger systems conducive to increased competition, better resource allocation and faster information transmission. The mutual inclusiveness between universalism and particularism might have been the real secret to the rise of Japan. In Japan, in China, however, though we have numerous well-developed small credibility systems, they cannot grow into bigger systems due to the absence of institutional arrangements like property rights, markets and laws. In a situation where there is no universalism, particularism is more likely to degrade into relationalism, leading to increased transaction costs and obstacles to the expansion of the cooperative order’ (Zhang 1998a).

59 Based on the trust structure, Zheng Yefu raises a similar view, arguing that modernisation is not necessarily a process in which particularism gives way to universalism (Zheng 1995).

Additional information

Funding

This research is sponsored by the National Social Science Fund of China [Grant No. 07AJY015].