Lessons from Early Capitalism

November 2010

Most of our exposure to the birth of capitalism, at least for those of us with European origins, emanates from Adam Smith’s philosophies and writings, most notably his “invisible hand” metaphor which is so widely manipulated by the market fundamentalists. Smith’s book The Wealth of Nations is considered by many to be “the bible” of modern capitalism and Smith to be the father.

Recently I came across the writing of a very successful Japanese entrepreneur, Kazuo Inamori, the founder of Kyocera Corporation and creator of the Kyoto Prize. In his book A Compass to Fulfillment, he writes, “The elevation of the soul is the purpose, the meaning of our lives. Life is nothing other than the process of refining our true nature as human beings.”

Well this got my attention big time! A very successful businessman stating this for the public record! I wanted more, and read on. Later in the book, he writes about selfless service and offered a different perspective on the foundations of capitalism which I found both refreshing and uplifting. In a section titled “Benefiting Others Is the Starting Point of Business” he writes:

In today’s business word, where survival of the fittest rules, people often suspect that I have ulterior motives when I discuss the importance of altruism, love, and caring for others. But I am not interested in manipulating words to gain some objective. I am only trying to convey what I believe and put it into practice.

History shows that capitalism arose from Christian civilizations, particularly from Puritan ethics. According to the German political scientist and sociologist Max Weber (I864–1920), the first capitalists were pious Protestants who followed a strict moral code that was based on neighborly love. Because they honored hard work and believed in putting the profits from industrial activity toward the betterment of society, the Puritans strove to pursue their profits only through fair means. The ultimate purpose of their business activities was to contribute to society. The Puritan spirit of service to others and the world and their commitment to putting others before themselves thus formed the ethical foundation of early capitalism. In keeping with the Puritan business ethic, early capitalists exercised strict self-discipline and viewed helping others as their duty. As a result, the capitalist economy developed rapidly

Inamori then shares some of his culture’s history which was new to me as a Eurocentric Westerner. He writes:

The Japanese philosopher Ishida Baigan (1685–1744) promoted a business principle that mirrors that of the Puritans. In the middle of the Edo period, Japan began to shift from a feudal peasant-based economy to a merchant-based commercial economy. Under the Japanese class system, however, merchants occupied the bottom rung of the social ladder and profit-driven commercial activity was frowned upon. In opposition of the prevailing view at the time, Baigan argued that there was no need to be ashamed of earning a profit. If it was legitimate for a samurai to receive a stipend, Baigan contended, it was just as legitimate for a merchant to receive profits from selling goods. His words greatly encouraged Japan’s merchants, who were oppressed by social discrimination for their business activities.

Baigan also taught that the methods employed in the pursuit of profit must be based on the principle of fairness. He stressed the importance of following an ethical code in commercial activity, insisting that merchants should do what was right as a human being and refrain from stooping to unethical means to make money. “A true merchant,” he stated, “thinks from the other’s standpoint, not just his own.” Baigan believed that the pursuit of profiting the customer as well as the merchant constituted the very core of business, which led to his claim that a spirit of “profiting self, profiting others” should drive all business activity.

Ishida Baigan’s writing

I find these passages refreshing for it takes me back to the fundamentals of business which is to provide a product or service that serves the community’s needs and earns a fair profit in exchange for one’s work. The work product fills a genuine need in the community. In the vernacular of the WW II industrialist Henry J. Kaiser, “Find a Need and Fill It.”

In the early days of capitalism, there weren’t huge campaigns aimed at convincing people they needed whatever one was selling, whether it was essential or really necessary or not. Even Smith assumed morality and fairness would be foundational in modern economics as evidenced with his “other book” – the one you rarely hear the market fundamentalists mention – The Theory of Moral Sentiments. After all, he was a moral philosopher.

Thanks to Inamori and his references to Baigan, perhaps capitalism can stop appealing so much to the greedy rule-benders and immoral loophole-finders and start appealing more to those who wish to serve society, to make a positive difference in the world while “profiting self, profiting others.”

Many thanks to my dear friend and colleague, Debbe Kennedy of the Global Dialogue Center, for recommending Inamori’s book.

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John Renesch

John is a seasoned businessman-turned-futurist who has published 14 books and hundreds of articles on social and organizational transformation.

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