Confucianism and Modern Economics: Connections, Parallels, and Contradictions

The economy is by nature the most urgent among all fields and human activities; it is the key to the existence of civilization and its material foundation. Although it exists separately since ancient times, as a branch of science, it has hundreds of years; the fundamental problem of discrepancies between the material needs of society on the one hand and industrial opportunity to meet them on the other still has not been solved on the world scale. The search for sustainable models of economic organization of human society is its global scientific and practical priority. The search for new factors of economic growth and an attempt to embed them in the overall economic mechanism of the global economy is the leading edge of modern economic science. As for the most economically developed countries, which clearly show a fairly stable and positive macroeconomic dynamics, Confucianism as the main doctrine has been defining the fundamentals of life for thousands of years. Confucianism is not only ethical and moral, philosophical and religious system but also one of the most common principles of modern economy of market type. Confucianism is common in countries like China, Japan, Korea, Singapore, and Vietnam. It is significant that in the global economic world ranking, formed on the basis of GDP, that is calculated at purchasing power parity, China and Japan are on the second and respectively third place, behind the USA. Singapore is also on the fifth place among most developed countries. This paper aims to explain the Confucian conception of the market and show how Confucian economy converged and diverged from modern economics.

Two objective and irrefutable arguments may indicate that Confucianism should be regarded as a crucial determinant of social and economic progress of Chinese society. Firstly, the history of Confucianism is perhaps the oldest among the most popular of all world religions. Secondly, almost the entire period of its genesis, Confucianism had the status of state religion. Today, there is a need to take Confucianism not only as part of the spiritual heritage of mankind but the actual, very practical, and affordable means of survival in today's complex world. Confucian worldview concept set out in a very large number of sources, with the help of which, sinologists explore various aspects of life of both ancient and modern Chinese society and reconstruct the essence of the teachings and forms of their practical implications.


Confucianism in general clearly reveals its attitude to quite pragmatic concepts that have economic nature, such as wealth, poverty, competition, demand, profit, economic policy, and so on. One of the most versatile economic problems, reflected in Confucianism, is a dual problem of wealth and poverty. Moreover, compared to other economic categories, it is the most vividly revealed and subjected to a detailed analysis in various sources of canonical Confucianism. Conversations and Judgments refers to a particular social relevance and polarity of these two economic categories. Confucianism does not reject wealth in principle, but only gives it a variation in the interpretation: wealth, acquired dishonestly, is the evil, but being acquired fairly, is a personal economic priority. Wealth is defined as an important personal financial priority.

From the modern viewpoint, Confucian way to combat poverty looks like an utopian, revolutionary, and communist idea, fully dissonant with the fundamental principles of a market economy: the rulers need to ensure uniformity in the distribution of wealth. According to the Confucians, this model will help to solve the problem of poverty, increase the overall social harmony, peace, and prosperity. When the ruler accumulates all wealth, people diverge from him, and when wealth is distributed among people, they gather around the ruler. In other words, the excessive concentration of wealth in the hands of the ruling elite was regarded as a factor of real political and economic instability at the time of Confucius, and vice versa - a more even distribution of wealth contributed to the economic stability.

Confucianism made incredibly fast strides from the category of morality to the political economy. Morality is a category, which in Confucian installation becomes quite uncommon in the economic content. Moral ruler employs intelligent and honest officials. The latter, in turn, provide the country and people with the economic prosperity and peace. Success or failure depends on the policy of political elite; choice of wise people to manage the affairs of the country depends on the morality of the king. He must know how to manage people, how to rule the world and the state.

Two fundamental components of the design of modern capitalist economy are democracy and freedom in society, and the competitive mechanism of interaction. So what is the way that Confucian worldview concept solves the institutional problem of economics and what alternatives it offers? The first Confucian alternative is the will of heaven. A strange and illogical, from the viewpoint of a modern European or American, symbiosis between capitalist and communist economy in modern China is largely attributed to Confucianism. Adoration of rulers is promoted by Confucius and his followers. Indestructible and completely undemocratic model of government was based on the unique divine and therefore stable component of the state mechanism. The emperor or ruler was the earthly incarnation of the divine. In the early Confucianism, the concept of the so-called Mandate of Heaven or Mandate to Rule was formulated. It is a permission for the earthly imperial rule, which heaven gives to the most deserving of all people. Cultivated for millennia philosophy of relationships between people and institutions of state power left an imprint in today's Chinese mentality of society. Although Confucianism is not a formal state ideology of the Chinese society for about a hundred years, it certainly has a strong effects even today. The peculiar shade of Mandate of Heaven gradually transformed from one government institutions to others, giving them political immunity and guarantee of the inviolability of credibility first to imperial dynasty, and now, to the Communist Party of China.

The second Confucian alternative is inequality without competition. Inequality is a manifestation of the natural and immutable order. To the followers of Confucianism, competition seems absurd and contrary to the natural cosmic harmony. Successes and failures of people are primarily a result of purposeful divine intervention. Admittedly, the competition is basically a form of aggressive and antisocial interaction of economic relations. Confucianism justifies its model of economic interaction, which significantly differs from the traditional for market economy model. The works of Confucianism refer to the so-called "principle of the golden mean". "Golden mean" is humanized answer to the questions of Confucianism about the ways and mechanisms of interaction of economic relations. The middle is harmony and a major principle for the world.

Speaking about the Confucian conception of the market, it differs from the traditional conception. "Victory through effective competition" is the slogan of competitive market doctrine. Instead, Confucianism offers its own recipe of interaction that gives economic relations special social pliability: "Victory through adaptability". A noble man acts according to his position without causing jealousy from those around him. Being among the rich and famous, he must act as it should be among the wealthy people; being among the poor, he needs to act according to their position. Applied aspects of Confucian ideology of "golden mean"are manifested through the propaganda of modesty, moderation, and austerity. That is why, the idea of “golden mean" does not correspond with the philosophy of market leadership, competitiveness, and career ambitions, without which the mechanism of capitalist economy can not work. Sense of proportion and moderation in the people's requests is a kind of counterweight to the cult of consumption, characteristic of the capitalist economy models. The concept of "golden mean" smooths the rough edges of the traditional market model of economic organization of society, reduces polarization of economic interests and business ambitions due to the traditional competitive interaction. Courage, loyalty, and teamwork have become the alternative foundation of modern economies, that experience the significant influence of Confucianism; their effectiveness is stimulated by a declaration of solidary social and economic goals and priorities, not competition. Religious and cultural conformism, that grows with the denial of the principle of competition and competitiveness, at the same time becomes a unique competitive advantage of Confucian economy itself. And this is the essence of Confucian second alternative.

Confucian economic structure of society reveals many paradoxes in terms of modern capitalist logic. For example, in modern sense, the direct source of wealth is economic profit or income, which people have to receive to enrich themselves. Confucianism largely opposes these interrelated economic categories, thus violating motivated by economic logic connections and constructions, typical for the market economy. However, antidemocratic, antisocial, and unfair, from modern point of view, system showed its viability for thousands of years of economic history of China; it was a real factor of the socio-economic stability of the society. Another economic paradox of Confucian economy also deserves special attention. This is a very obvious discrepancy between the philosophy of "golden mean", that cultivates moderation restraint in people's attitude to the material things in everyday life, and generally tolerant or even a positive attitude to the problem of wealth, acquired in an honest way. Another Confucian paradox is a combination of moral and ethical aspects of human behavior with the ability to regulate the economic system and restore balance. The paradox is that the economic balance is considered as direct, autonomous, and programmed consequence of the morality.

The four economic “Asian tigers” (Singapore, Taiwan, South Korea, and Hong Kong) now actually shaped the modern conception of Confucianism, which combines classical Confucian morality with modern rational utilitarian economics. It is not a secret that the current model of market economy has many negative characteristics. One of these marginal manifestations of the capitalist economy is the so-called consumerism. The cult of consumption is defined by physiological needs, exploitation of human passions, emotions, and vices, forming a new subculture of endless process of buying for buying. Economy of moderation and restraint, cultivated by economic philosophy of Confucianism, is opposed to consumerism.

To sum up, Confucian economy has both convergences and divergences with modern economics. The modern view on the system of economic ideas of Confucius and his followers allows to perceive him as a philosopher who professed the principles that lie on the basis of modern free market economy type. The above leads to the assumption that Confucian economic structure, taking much of what can be called a market ideology, and at the same time rejects the internal mechanism of this system. However, despite the formal separation of state and religion in China, Confucianism perfectly bypass state norms and barriers, and thus remains philosophical foundation of economic life of Chinese subcivilization. For thousands of years, Confucianism has managed to remain an extremely important factor in the dynamic economic development of China and other countries. Confucianism, in addition to its philosophical and ethical, social and cultural meaning, organizes economic experience of humanity. It acts as the theoretical platform for the economy of communist capitalism and connects strict Chinese communism and free market economy.

Feb 6, 2020 in Economics
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