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Capitalism and Confucianism: Was Weber Right?

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  • Baomin Dong

Abstract

Max Weber claimed that capitalism failed to develop in imperial China due to the incompatibility between Confucianism and modern capitalism. To examine Weber’s China thesis, I investigate the causal relationship between capital and the degree of Confucian influence in Chinese localities. Since formal banking sector and civil law were both absent in imperial China, I use county level data on money business and historical keju statistics to represent capital formation and local Confucian influence respectively. In particular, I use 1914 county level numbers of money business (Qianye) as historical local intensity of informal finance, to regress contemporary county level amount of capital of micro-credit companies to examine the persistence of informal finance. Using the number of issues discussed by local commercial chambers to instrument historical finance, I find that the persistence is significant and strong. I also investigate if Confucianism determined informal institution. To implement, I use the numbers of Jinshi as a proxy of Confucian tradition to instrument dispute resolution institution, and find Confucian influence is conducive to the development of informal institution, which in turn, facilitated the development of informal finance.

Suggested Citation

  • Baomin Dong, 2023. "Capitalism and Confucianism: Was Weber Right?," Journal of Economic Issues, Taylor & Francis Journals, vol. 57(1), pages 103-122, January.
    • Handle: RePEc:mes:jeciss:v:57:y:2023:i:1:p:103-122
    DOI: 10.1080/00213624.2023.2154539
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