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Review of Patrick Fridenson and Kikkawa Takeo, eds, Ethical
Capitalism: Shibusawa Eiichi and Business Leadership in Global
Perspective. Toronto: University of Toronto Press, 2017
M. William STEELE*
Keywords: Shibusawa Eiichi, ethical capitalism, gappon shugi, business,
morality

Do we live in an age of unfettered
Capitalism? Is self-interest (a polite term forselfishness) the driver of modern economies?
What would Adam Smith think of Donald
Trump, the naked capitalist? And is Abe
Shinzō’s economic philosophy (so-calledAbenomics ) any better? What wouldShibusawa Eiichi say of him? EthicalCapitalism: Shibusawa Eiichi and Business
Leadership in Global Perspective focuses onalternate renderings of modern capitalism,past, present, and future. It adds to an
on-going debate that has assumed center stage
after the 2008 Lehman Shock: “Is economy
congruent with morality?” Or as Pope Francis
put, how can we “ensure that humanity is served by wealth and not ruled byit.” Shibusawa Eiichi died in 1931 and his economic thinking derived fromConfucianism. Nonetheless, as Patrick Fridenson points out in the preface of
Ethical Capitalism, “Shibusawa still speaks to our contemporary debate.”(xiii)
This volume of eight essays is the product of a three year research projectthat focused on the Confucian-inspired concept of gappon-shugi, Shibusawa’s
answer to faults he found in the sort of capitalism (shihon-shugi) that had
begun to fuel Japan’s commercial and industrial revolution after the Meiji* Professor Emeritus, International Christian University

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Journal of Cultural Interaction in East Asia Vol. 11 2020

Restoration of 1868. Gappon-shugi, beginning with Shibusawa’s advocacy ofjoint stock companies (gappon kaisha), came to imply money making activities that went hand-in-hand with the achievement of public-oriented benefits
and goods. It was a sort of cooperative capitalism; self-interest could beadmitted, but only so long as it was not the primary goal. Hence, the title ofthe book: Ethical Capitalism. The eight essays trace the historical, philosophical, and global context in which Shibusawa and his successors
attempted to establish harmony between morality and economics (dōtoku
keizai gōitsu).
Ethical Capitalism is timely, although in places strangely out of date; the2017 English translation of a book published in Japanese in 2014 (Gurōbaru
shihonshugi no naka no Shibusawa Eiichi, Toyo Keizai Shinpōsha), which inturn was based on a conference held in 2012. Nonetheless, the book still
makes for provocative reading. The Lehman Shock seems today almost
ancient history, but the problem of ethics in business and politics is perhaps
all the more acute. Corporate scandals and corruption are very much in thenews in Japan and throughout the world, making people wonder if “corporatesocial responsibility” is more façade than fact. The question on everyone’slips: how can we (people of the world) guarantee that our political andeconomic leaders live up to an ethical code of conduct? The chapters thatdeal with these issues are by an eminent group of diverse scholars fromJapan, France, the United Kingdom, and the United States; some are Japan
experts, others seek to place Japan (and Shibusawa) in global context; someare historians, other focus on economic issues, policies, and prospects in theworld today; some are interested in economic thought, others in practice.
The first four essays take up Shibusawa’s life and thought, focusing on
his advocacy of joint-stock companies, his Confucian-driven goal to seek
harmony between business and morality, his advocacy of the public good andan entrepreneurship that depends a very “visible hand.” The final four essays
place Shibusawa’s brand of ethical capitalism, gappon-shugi, in historicalcontext and explores how his ideas may continue to offer solutions to theeconomic and environmental crises confronted by the world today.
Chapter One, by Shimada Masakazu, Professor of Japanese BusinessHistory at Bunkyo Gakuin University, traces the early life of Shibusawa
Eiichi and his involvement in Japan’s commercial and industrial take off in
the 1870s and 1880s. Shibusawa was born in 1840, the son on a wealthy
farmer and indigo merchant. Educated in Confucian classics, in the 1850s theyoung man from a small village located about 80 km from Tokyo (now partof Fukaya City in Saitama Prefecture) joined the cause to “restore theemperor and expel the barbarians” (sonnō jōi) but later, in the mid 1860s,
joined the Tokugawa camp in service to Hitotsubashi Yoshinobu, the man

Book Reviews45who would become the fifteenth and last shogun of the Edo period. His eyes
were opened the world in 1867 when he accompanied the shogun’s younger
brother to the World Exhibition in Paris. As financial manager to the retinue,
he was given his first lessons in Western banking and commercial organizations, including the operation of joint-stock companies. He returned to acareer in the new government’s Ministry of Finance, but in 1873 left government service to work in the private sector, first as president of the First
National Bank. As champion of the joint stock company system, over thenext 50 years Shibusawa was involved in the remarkable creation of nearly
500 companies and 600 public organizations.
After examining the various management strategies and technicalities thatearned Shibusawa the reputation as the “supreme leader of Japanese capitalism,” Shimada turns his attention to his economic thought, in particular theevolution of “cooperative capitalism” or gappon-shugi. As early as 1871,
Shibusawa argued that personal profit should not be the goal of the new classof entrepreneurs: “the company must benefit and provide for those involved
but, as a distributor of goods and materials, must also consider the public
good of the entire company.”(30) Fifty years later, in the 1920s, Shibusawa
had come to argue that gappon-shugi, a business philosophy buttressed withConfucian principles as well as references from Adam Smith’s Theory ofMoral Sentiments, offered an alternative to the unrestrained profit seeking that
had come to define the capitalist enterprise. Morality and economy, he argued
were meant to walk hand in hand (dōtoku keizai gōitsu). According toShibusawa, Confucius had been misunderstood: so long as profit served apublic purpose and was righteously earned, it was to be encouraged. “To
make the nation truly prosperous, we must enrich the country, to enrich thecounty, we must make scientific progress and help commerce and industry
thrive; to help commerce and industry thrive, we must establish joint-stock
corporate organizations.” (31) Shibusawa thus emerges as one of the earliest
advocates of a Japanese-style capitalism, meant to be kinder and moresocially responsible that other forms of capitalism that held sway in Europe
and the United States.
The second chapter, by Tanaka Kazuhiro, Professor of Management
Philosophy at Hitotsubashi University, provides further details on
Shibusawa’s attempt to promote harmony between morality and economy. He
analyzed Shibusawa’s later day speeches and writings, mostly composed inhis 70s and 80s, that looked back on his career and on Japan’s industrial andcommercial achievements but also looked forward, with some foreboding, toJapan’s (and the world’s) future. He focused on three works, the 1916 Rongo
to soroban (The Analects and the Abacus), his 1923 speech, Dōtoku keizai
gōitsu setsu (Harmony between Morality and Economics), and his 1925

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Rongo kōgi (Lectures on the Analects). Reversing conventional understandings of the Confucian worldview, Shibusawa argued that freeing people’s
daily lives from financial worries and making them wealthy in fact reflected
the essence of the teachings of the historical Confucius. (42) As such,economy is congruent with morality AND morality is congruent witheconomy. According to Tanaka, Shibusawa’s position was that “ethics pays”:“those who seek profit for others will find it easier to earn profit for themselves.” (48)
Tanaka went on to compare and contrast Shibusawa’s view of the “wealthof nations” with that of Adam Smith. Both regarded self-interest as the best
way to bring prosperity to society at large. At the same time, both supported
self-interest restricted by morality. But whereas Shibusawa saw the pursuit ofpublic welfare as the primarily goal of economic activity, Smith did not.
Shibusawa’s Confucianism led him to expect/demand that economic people begentlemen—and practice benevolence. This led Shibusawa to dismiss theimportance of Smith’s invisible hand. “A society is led to prosperity notunintentionally by the invisible hand, but by a series of efforts of eacheconomic person to improve public welfare.” (52) In his conclusion, Tanaka
implies that this distinction lies at the heart of the functioning (or not) ofglobal capitalism in the world today.
The third chapter by Patrick Fridenson, Professor Emeritus of International
Business History, Ecole des Hautes Estudes en Sciences Solciales (EHESS) inParis, shows how Shibusawa’s attempt to harmonize economics and morality
was equally influenced by contemporary Western economic thought andpractice. Noting that the rapid industrialization of the mid-nineteenth century
depended on flexible boundaries between public and private and the ability toraise large amount of capital for building railroads, factories and modern
armies and navies, he associates Shibusawa with adventuresome entrepreneurs around the world who were ideologically traditional but modern inpractice. Fridensen focuses on the two years (1867-1868) spent by Shibusawain France—precisely the years of the Meiji Restoration. There Shibusawa wasimpressed by the high status enjoyed by merchants and industrial leaders.
And under the tutelage of Paul Fleury-Hérald, banker and merchant and onetime financial advisor to the Tokugawa regime, he learned the importance ofinvestment banks, such as the Crédit Mobilier (founded 1852) and theSociété Générale (founded 1864), and the funding of joint-stock companies.
He also developed an interest in the practical social utopianism of Henri deSaint-Simon that promised a new world of material and spiritual progress.
Fridensen sees Shibusawa’s two years in France, his witness to the modern/industrial transformation of its cities, and his encounter with Saint-Simonian
ideas and managerial practices, as the starting point of his career as anBook Reviews

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industrial banker and later as prophet of the possibility of ethical national andglobal capitalism.
Miyamoto Matao, Professor Emeritus at Osaka University, is the authorof the fourth chapter: “Capitalism by the Visible Hand.” It focuses on
Shibusawa as entrepreneur par excellence in the Meiji period (1868-1912),
representative of a new type of businessman, a jitsugyōsha, one who undertakes a real task (thereby drawing a contrast with Edo period shōnin /merchants). Under his leadership, the joint-stock system spread rapidly
throughout Japan, in essence enabling Japan’s industrial revolution: railways,
textiles, banking, insurance, sugar manufacture, paper manufacturing, electricity, ship building, iron and steel, etc. As is repeated throughout the text,
Shibusawa, as modernizing Japan’s leading zaikaijin (business leader), waspersonally involved in the creation of over 500 joint-stock companies.
Miyamoto explains why and how the joint-stock system proved so effective
in late nineteenth century Japan with a focus on the “visible hand” provided
by creative and skilled business leaders such as Shibusawa.The managementof the Osaka Cotton Spinning Company is presented as a case study todemonstrate Shibusawa’s organizational abilities and his coordinating skills.
Miyamoto concludes that without the personal touch of Shibusawa and that ofother talented business leaders like him (for example, Tanaka Gentarō inKyoto, Okuda Masaki in Nagoya, and Godai Tomoatsu in Osaka), Japan’sindustrial takeoff would have been much delayed.
The fifth chapter is by Janet Hunter, Professor of Economic History atthe London School of Economics and Political Science. She seeks to place
Shibusawa’s views on business morality in the context of broader debates oncommercial morality in the late nineteenth and early twentieth centuries. Thechapter should be read in conjunction with her 2016 book, Deficient inCommercial Morality? (also reviewed in his volume). Drawing upon a varietyof contemporary sources, including newspapers and magazines, Hunter firstoutlines Western (primarily British) Christian-influenced discourse oncommercial morality that emerged in the middle of the nineteenth century andthen focuses on Western attitudes towards commercial morality in Japan.
Interestingly, both in England and in Japan, advocates of commercial
morality feared that dishonest practices (fraud, adulteration of goods, failure
to deliver on time, false labelling, false bills of exchange, etc.) would damage
the stability of British (Japanese) commerce and threaten the reputation of theBritish (the Japanese) as fair traders. Shibusawa was particularly troubled byreports in the press that Japanese businessmen were deficient in commercial
morality, demeaned as “dishonest, tricky and altogether unscrupulous.” (101)
Hunter concludes that Shibusawa’s views on business ethics—his call for
ethical capitalism—evolved in the context of such widespread negative

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assessments of Japan. At the turn of the century, he and other businessleaders understood that Japan’s economic future was at risk. Here we can see
the birth of Shibusawa as advocate of ethical capitalism and the need toprioritize public benefit over individual profit. Hunter skillfully shows how
his Confucian-inspired discourse |(The Analects and the Abacus, 1916) resonated with contemporary Western (Christian-inspired) norms, both responding
to shared concerns and both calling for the moral conduct of business.
The sixth chapter takes up where the previous chapter ended. Kimura
Masato, Director of the Shibusawa Memorial Foundation, asks how
Shibusawa responded to the litany of complaints regarding Japan’s deficiency
in commercial morality. Aside from his writings and lectures, Kimura points
to a number of proactive approaches adopted by Shibusawa not only to raise
the level of Japan’s business morality but to improve Japan’s reputation
overseas. First was the promotion of the Tokyo Higher Commercial School
and other business schools—with commercial morality an essential element inthe curriculum. Second was the creation of boards of mediation and opportunities for foreign merchants to become familiar with Japanese business practices. The problem of mutual ignorance had to be ameliorated. Third, aspresident of the Tokyo Chamber of Commerce, Shibusawa engaged ineconomic diplomacy and sent delegations of Japanese businessmen overseas
while inviting American businessmen to Japan. Shibusawa himself travelledfrequently to the United States, Europe, China and Korea seeking to improve
relations and build bonds of trust. Finally, his proactive business morality
could be seen in philanthropy. For example, after the 1906 San Francisco
earthquake, Shibusawa was instrumental in organizing organize Japanesebusiness leaders to raise money for the quake victims. As a result, Japan’s
total donations ($250,000) was far greater than that of other countries.
Kimura concludes that these non-economic activities should be seen as partof Shibusawa’s gappon-shugi with the ultimate goal to create a people whocare for the whole world and not just about their own country. And in turn,
ethical capitalism would ultimately improve the global environment forJapanese commercial activities.
The final two chapters examine the legacy of Shibusawa’s gappon-shugi.
In chapter seven, Geoffrey Jones, Professor of Business History at Harvard
Business School, places Shibusawa life and thought into a long tradition, eastand west, in which private wealth was used for public good. Alongside theCarnegies, Rockefellers, and Bajajas of the world, Shibusawa can be counted
as a prophet of corporate social responsibility. Likewise, in chapter eight,Kikkawa Takeo, Professor of Business History at Tokyo University ofScience, seeks to clarify the significance of gappon-shui in the context of what
has been termed the “crisis of capitalism.” According to Kikkawa, theBook Reviews

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Lehman Shock of 2008 placed global capital at a crossroads. He argues that
Shibusawa’s gappon-shugi can provide a blueprint for creation of a newJapanese management system in which seniority is replaced by merit andself-serving management replaced by strict attention to ethical decision
making and adherence to stated goals of corporate social and environmental
responsibility. Kikkawa concludes: “If these gappon-shugi characteristics canbe systematized, it might be possible to create a new view of capitalism.”(193)
This returns us to the question posed in our first paragraph: “Is economy
congruent with morality?” How realistic is it to follow Shibusawa’s simple
maxim: “Public interests first, private profits second.”? Can gappon-shugi
provide an antidote to policies of deregulation that drive the stock market
higher and higher? Can gappon-shugi help to promote the UN Sustainable
Development Goals? Given the high profile of Shibusawa today among
Japan’s political, economic, and social elite (his portrait will grace Japan’s
10,000 yen note from 2024), is Japanese corporate society somehow more
ethical, more transparent, more free of corruption than that of other countries? Perhaps this is asking too much—but, to be sure, any push to make oureconomies, our societies, and our politics somehow more congruent withmorality is welcome. This book on Shibusawa’s advocacy of ethical capitalism many not solve the “crisis of capitalism” that confronts us today, but it
reminds us of past ideals, confronts us with present-day realities, and inspires
us to re-think economic priorities in order to construct a more equitableworld. We can do worse than obey Shibusawa’s commandments: “Do not lie.”“Do not give priority to your own benefit.” (129)
One final bibliographic note: Two recent books on Shibusawa and his
legacy will be of interest to English readers of Ethical Capitalism. Shimada
Masakazu, author of chapter 1, published a comprehensive biography: The
Entrepreneur Who Built Modern Japan: Shibusawa Eiichi (translated by PaulNarum), Japan Library, 2017. His chapter 5 provides details on Shibusawa’ssocial and public enterprises. Another book that both complements andcomplicates Ethical Capitalism is John H. Sagers, Confucian Capitalism:
Shibusawa Eiichi, Business Ethics, and Economic Development in Meiji
Japan (Palgrave Macmillan, 2018). For his more critical approach, I draw
reader’s attention especially to Chapter 7, “Confucian Capitalism and theSearch for Economic Prosperity and Social Harmony in Early TwentiethCentury Japan” and Chapter 8, “Purposeful Preservation of Shibusawa
Eiichi’s Legacy.”