The Economic Value of Confucianism

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Home > Articles > The Economic Value of Confucianism

 The Economic Value of Confucianism

Sheh Seow Wah | Today's Manager
December 30, 1899

Confucius’ doctrine of moderation focusses on the middle way of human thought and action. His wisdom provides insights to live harmoniously while remaining economically buoyant.

CHINESE culture belongs to one of the four oldest civilisations. The fact that Chinese culture and civilisation has evolved for over 5,000 years and remains relevant today shows that Chinese cultural values have been able to withstand the test of time and space. Confucian teachings have been regarded as a moral option that regulates the average Chinese mindset and behaviour regardless of their religious background. Besides, they also serve as a practical guide to regulate the conduct of behaviour (through virtues and rites) of the lives of millions of people in China, Japan, and newly industrialised countries (NICs) of East Asia such as South Korea, Taiwan, Hong Kong, and Singapore. All these countries can be classified under the influence of Confucianism—commonly known as the ‘chopstick’ culture.

Government Economics Policies
The influence of Confucianism has significantly impacted political leadership styles. In fact, for countries under the influence of Confucianism, the government often acts as a role-model for the people to emulate. In attempting to explain Confucian government macro-economic policies, it may be useful to examine some of the key government macro-economic policies implemented by countries under the influence of Confucianism as per Table 1 by using the four factors of production: natural resources, labour resources, capital resources, and entrepreneurship as a framework.

Proposed Confucian Economic Development Model In a Confucian society, one of the important catalysts in sustaining and perpetuating a healthy economy with social and political stability is having the “right culture”. The key principle of Confucianism is the ‘Doctrine of Moderation (中庸)’ that emphasises the middle path in human thoughts and actions. In The Analects (11, 15) for instance, Confucius says that to go too far is the same as not going far enough.

Table 1: Confucian Government Macro-economic Policies 

Resources ​Government Macro-economic Policies in Confucian Societies

Natural resources
  • ​Focus on productivity that strongly emphasises the efficient use of all natural resources,
  • Productivity growth must be ahead of wage increment,
  • Emphasise continuous increase in productivity through automation, skilled labour, healthy employee-employer relationships, and good management, and
  • In the long-run, it will increase the competitiveness of the economy in terms of the efficient use of all natural resources.

​Labour resources
  • ​Emphasise education and training by allocating a larger budget for this purpose,
  • Setting up of more schools and higher learning institutions to continuously increase the literacy rate of the people,
  • Implement compulsory education (up to primary or secondary level) for all citizens,
  • Provide tax relief (in the forms of allowances or tax rebates) for education or training expenses to individual and corporate tax payers, and
  • This will in the long-run provide a pool of skilled and knowledgeable workers to support the economic needs, growth, and development of the country.

​Capital resources
  • ​Emphasise national savings by establishing a compulsory savings system such as the Central Provident Fund (CPF) implemented by the Singapore government, where all employees are required to set aside 20 per cent of their salaries and contribute to the CPF for retirement,
  • Improve the confidence of the public in the financial system and its institutions. Governments have to regulate the financial industry appropriately and closely. This will increase the confidence of the general public to save,
  • Governments must spend wisely by continuously creating budget surpluses thus increasing government reserves,
  • Governments have to continuously fight corruption and emphasise the benefits of having a clean government. Moral character and integrity of the government cannot be compromised,
  • Governments should make a continuous effort to attract foreign direct investment (FDI) and increase export competitiveness. Resulting in accumulated foreign reserves over the long-run, and
  • This will increase the level of funds available for investment at relatively lower interest rates (cost) to support economic growth and development.

  • ​Encourage a spirit of entrepreneurship by providing incentives (such as tax holidays or rebates) and support for new business set-ups,
  • Reduce bureaucracy or red-tape in the setting up of new businesses. Singapore and Hong Kong are rated among the best places to conduct businesses by several international bodies,
  • Provide more support (technical and financial) for business expansion domestically or globally, especially for small- and medium-enterprises,
  • Emphasise research and development (R&D) by implementing laws to protect new inventions, thereby increasing innovation and creativity within the country, and
  • This will increase the competitiveness of the economy through the development and production of high quality products and services.

Economic development and prosperity requires a blending and balancing of a right work culture with entrepreneurship within a politically and socially-stable and harmonious society. Thus, a tentative Confucian Economic Development model is presented in Diagram 1. This article is not written solely to promote Confucianism as the right culture and answer for everything. It is almost impossible to put forward a model that can provide an answer to this dynamic, ever-changing, and complex world. If there is one, it would have over-simplified the intricacies in understanding the world economy.

The world today is much more sophisticated and intricate to understand and manage as compared to one century ago. Nothing is certain except uncertainty itself. The importance of having a free economic system cannot be denied or reversed. However, to ensure that it operates reliably requires some form of control or regulation through government policies and an effective and relevant culture to circumscribe the modus operandi of the economic system and activities.


The model can be briefly explained in the following manner:
Political Order

  • Good government supported by high moral values and integrity, resulting in low levels of corruption,
  • Benevolent government that always puts the interest of the people first, and
  • Rule by a code of behaviour instead of explicit laws. The legal system only serves as complementary.

Work Ethic/Culture

  • Diligence (work hard to support their families),
  • Frugality in the use of resources leading to cost-consciousness is a norm,
  • Self-cultivation through continuous learning and moral-discipline brings about responsible, dedicated, and upright employees, and
  • Respect for authority reduces industrial conflicts.

Entrepreneurial Drive

  • Confucian entrepreneurs work enthusiastically,
  • Confucian entrepreneurs are very efficient in using limited resources. Thus, cost-consciousness is a core value of the corporation, and
  • Confucian entrepreneurs strongly endorse high morality and business ethics.

Social Harmony

  • Everybody treats each other with kindness, courtesy, and compassion—emphasising the value of humanism and benevolence,
  • Righteousness and trust are the basis of all human relationships, and
  • Group-mindedness brings about solidarity—unity resulting from common interests and feelings.

For mankind to live in harmony in the 21st century and beyond, it is important to practise the “Principle of Moderation (中庸)” espoused by Confucius. It focusses on the middle way of human thought and action, avoiding the practice of extremes.



​Dr Sheh Seow Wah is an Adjunct Research Fellow at the University of South Australia. He is the author of The Strategic Way: Lessons from the Chinese Strategic Thinkers, Chinese Leadership: Moving from Classical to Contemporary, and Wise Leadership: Timeless Wisdom from the Ancient Chinese.


Copyright © 2015 Singapore Institute of Management

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Today's Manager Issue 1, 2015

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