Since we are encouraged to stay home to avoid new coronavirus infections, I had chances to read more books than usual. Of all books that I read, the book titled ’Rongo and Soroban (Analects of Confucius and the Abacus)’ written by Eiichi Shibusawa who is well known as ‘the father of Japanese capitalism’. (His portrait will appear on the new \10,000 bill that will be issued in 2024.)
Eiichi Shibusawa (1840-1931) is credited with being involved in the founding of almost 500 companies and associations during his lifetime. He was really a great entrepreneur who established Japan’s economic infrastructure which forms the basis of many of the current large-scale companies including Oji Holdings Corporation, Tokio Marine & Nichido Fire Insurance Co., Ltd., Tokyo Electric Power Company Holdings, Inc., Tokyo Gas Co., Ltd., Sapporo Breweries Ltd., and many railway companies. Shibusawa’s real greatness lies not only in his achievement in founding hundreds of companies but also in his intellectual ability. He noticed the problems and contradictions of capitalism more than 100 years ago. A capitalist economy is based on private ownership of capital and means of production, and is stimulated and driven by capitalists’ desire to increase their profits. It is quite normal for a capitalist economy, but it is inclined to go out of control and cause ‘bubble economy’ or the crisis of economy. In order to put the brakes on going overboard, moral restraint is essential. For this purpose, Shibusawa pursued the principles of moral control of people’s emotions in ‘Rongo’. ‘Rongo’ was already the code of conduct in the samurai warrior society in the Edo period. He asserted that “when business and morality are well-balanced, individuals and the state will both become wealthy.”
Shibusawa was born as a farmer’s son in Fukaya City, Saitama Prefecture, in 1840. After obtaining the status of a samurai warrior, he started his career as a government official of the Ministry of Finance at the age of 17. In his 30s, he made up his mind to become a businessman. Shibusawa believed that the state should be governed not only by political circles and the military but also by business circles as seen in the highly-progressed commercial and industrial economy in Europe at that time which supported the strong powers of the states. In order to compete with such European companies, he thought that the Japanese business circles should be strengthened, and he put this idea into practice himself.
In more detail, Shibusawa explains: Business means seeking profits in the sales of products and other commercial transactions. However, if people start placing their own profits first, the state’s assets will be endangered. In other words, if economy is not managed based on moral principles, real economic activities would not last long. The most important thing is that when people work hard in pursuit of their profits and their gained profits are well-balanced with their moral purposes, the state economy will grow healthily. People tend not to work on the tasks that are unbeneficial to them, and sometimes they even interfere with other people’s actions.
Shibusawa pointed out the following three factors as the basic principles of the capitalist economy.
- If business and morality do not accord, the wealth does not last long.
- Competition should be carried out not by interception but for self-enlightenment.
- The task should be performed not for individual person’s benefit but for the benefit of the society as a whole.
After reading Shibusawa’s book, I am most surprised that he studied not only ‘Rongo’ but also many other classical writings in the East and the West. His understanding capacity of ‘Rongo’ is just perfect, and the expressions and quotations he used in his explanations more than 100 years ago do not sound outdated at all.