The antagonistic relationship between modern science, understood as materialism, and religion, or spiritualism, existing in the West during the nineteenth and twentieth centuries, provided a challenging background to the contemporary Indian thinkers. Some of them passively accepted this dichotomy; some were ignorant of it; some either accepted materialism or spiritualism; and some thinkers tried to negotiate this antagonism between matter and spirit. A long braid of thinkers beginning from Bankimchandra Chattopadhyaya to Swami Vivekananda, Sri Aurobindo and S Radhakrishnan attempted to make some significant changes though working within the Oriental categories rightly explicated by Edward Said. Inserting into this dichotomy their political programme of making a case for Indian independence, they maintained that materialism (available in plenty in the West) is important but it alone cannot suffice. Spirit (the spiritualism that is available in the East, particular in India) needs to be added to it. Some aspects of this formulation fall outside the Saidian formulation. That is, though they worked within the parameters of Orientalism, the modifications they had implemented (some of them at least) fell outside it – particularly their attempt at converting what was dichotomous into continuous. My paper will discuss these various aspects involved in the modificatory nature of this relation. To dispel the impression that all Indian thinkers have embarked on this convergence, I will discuss a counterinstance available in the writings of Krishnachandra Bhattacharyya, who repudiated contemporary Indian philosophers' attempt at making the continuous relation between matter and spirit without necessarily endorsing the antagonistic relation as available in the West.

It is presently 100 years since Schumpeter published his first book. This book is largely about the foundations of analytical economics and it was published when he was 25. Therefore, the following formulations by Stanley Fischer (1987, 235–6) may read as if they describe his book:

Schumpeter's praise, however, was not for himself but for his friend Paul Samuelson. Like Schumpeter, Samuelson finished his PhD thesis at the age of 25. At that age, both of them had ploughed through an enormous literature with an emphasis on the underlying formal structures and analytical tools. They had found widespread confusion and a lack of recognition of the basic unity under the multiform surface of topics and modes of formulation, and they both wanted to overcome confusion and lay the foundations for future research.

After having considered Capitalism and Cycles in the two previous chapters, we now come to the oldest and most fundamental part of Schumpeter's evolutionary trilogy: The Theory of Economic Development. This book is the translation of Entwicklung II, that is, the second edition of Theorie der wirtschaftlichen Entwicklung. Since we have already studied Entwicklung I, the first German edition of the book, in Chapters 4 and 5, it might not be obvious why an extra chapter is needed for treating Development. However, the previous chapters did not include a systematic discussion of the basic evolutionary mechanisms that in all editions of the book are at the centre of Schumpeter's attention. The major reasons for this omittance were that Development is much more focussed on mechanisms than Entwicklung I and that the mechanisms can best be discussed by including the additional treatments of them in Cycles and Capitalism. These additional treatments are very different. Cycles is like Development based on the model of economic evolution that has been called Schumpeter's Mark I model. This model of the capitalist engine depicts the mechanism of innovation as based on the creation of new firms, tion because of the conservatism of established firms. In contrast, some of the core arguments of Capitalism are based on Schumpeter's Mark II model (see Section 7.2). According to this model, established firms innovate and adapt in oligopolistic competition. Thereby, they become core elements of the mechanism of innovation as well as the mechanism of adaptation.

Trances, visions, speaking in many tongues, irrational social behaviour including the discarding of clothes have been widely interpreted by psychoanalysts as a psychopathological condition. However, parapsychologists are increasingly looking at the grey zone that blurs the rigidly held distinctions between psychoses and spirituality. Stanislav Grof, in his remarkable book Beyond the Brain: Birth, Death and Transcendence in Psychotherapy, published in 1985, goes beyond these neat divides between psychiatry and spirituality to take a fresh look at the phenomenon of ‘spiritual emergence’. To quote Grof:

Schumpeterian unfinishedness

It is tempting to end the present book on Schumpeter's evolutionary economics by solving two related tasks. The first task is to provide a systematic summary of Part II's rather complex presentation of his evolutionary trilogy. The second task is to summarise and evaluate the “standard criticisms” (Lange, 1941, 192) that have been raised against the different elements of his work. The combined solution of the two tasks would serve to continue a literature that was initiated immediately after Schumpeter's death. At that time, Richard Clemence and Francis Doody published a small book called the The Schumpeterian System. This book, which is largely based on Cycles, gives a condensed and relatively systematic presentation of Schumpeter's core contributions. His two former students also had the ambition of confronting a situation where

There are a number of reasons for Japan's underwhelming global presence, but the mercantilist economic model—which encourages the Japanese to think about and experience global culture in a one-sided manner—is clearly a central factor. As YUKAWA Masao (at the time, an Associate Director of Mitsubishi) pointed out in his 1999 article “Japan's Enemy is Japan,” when the Japanese talk about kokusaika, or internationalization, they almost always mean internationalization from Japan—outward investments and acquisitions, and tourists going abroad (sotonaru kokusaika), —as opposed to vice-versa (uchinaru kokusaika).

Even internationalization in the “safe” direction, from Japan to the world, has often proven to be a disappointment. Many Japanese managers working outside Japan fall quickly outside their comfort zone, with the result that many Japanese acquisitions and partnerships abroad have proven to be expensive failures. Similarly, there are relatively few Japanese exercising leadership in prominent global organizations and forums. In striking contrast to Germany's highly constructive, conciliatory role in Europe over the last several decades, Japan has done little that could be described as effective— beyond the rhetoric— to build a community in Asia.

Internationalization in the other direction, meanwhile, slows to a trickle. Immigration policy, conducted under the bureaucratic Immigration Bureau motto, “Internationalization in compliance with the rules,” keeps the number of foreign workers low, despite widespread recognition that Japan would benefit from a major expansion on this front.

Japan is a country that has given the world much to admire. In a few decades, Japan rebounded from wartime devastation to the world's second-largest economy, now valued at almost 4 trillion dollars. It did so without much in the way of natural resources or land, with neither the oil of Saudi Arabia nor the vast natural resources of the United States. This achievement is without parallel and stands as an inspiration to developing and developed countries alike. Japan has the longest life expectancy in the world, universal access to healthcare, very high levels of literacy and basic education, and an impressively equitable wealth and income distribution (though there has been a deterioration and growing inequality in Japan recently). Japanese social life functions smoothly, with great masses of people in the most densely populated large nation on earth showing patience and mutual regard, even when in near-asphyxiating proximity to one another. One can walk freely almost anywhere without fear of being mugged, and a lost wallet is very likely to find its way back to its owner. The streets are clean, the city air quality is good and the transportation system is a model of precision and efficiency. Visitors to Japan can be shown extraordinary kindness.

Japan also boasts many world-leading industries; parts of its manufacturing sector are hugely successful, specifically those in the export sector exposed to international competition.

Japan finds itself caught between a rock and a hard place. Its environment is predominantly composed of countries aspiring to be modern nation-states and imbued with quite strong nationalist ideologies. The Japanese concept of national security leads the country to adopt reactive nationalist policies and ideologies. This is also reflected in the very strong, indeed paramount, element of mercantilism on the economic and business fronts. In the areas of trade and investment especially, Japan stands out as a supreme outlier. Consequently, Japan has not made the transition from modern to post-modern state. And also as a consequence, Japan remains not only closed, but almost in a siege mentality, notably, to cite the most egregious example, in respect to immigrants. That's the hard place.

The rock, however, is that Japan's nationalism, modernism and mercantilism contribute powerfully to the nationalist, modernist and mercantilist ethos that prevails in the region. Japan's nationalism, especially in provocations such as the visits to the Yasukuni Shrine or the revision of history textbooks, greatly exacerbates an already highly tense nationalist regional environment. The number of fault lines are numerous, as we have seen, and some of them very deep. There is North Korea; there is a heavy concentration of nuclear armory; there is the situation with Taiwan; there are many tensions and territorial disputes in areas such as the East and South China Seas; there is competition for resources, especially for crude oil.

Japan's policy-makers stubbornly hold to the untenable dogma of mercantilism—the idea that a nation's prosperity depends on the foreign trade surpluses it generates, where exports and outward investments are good, imports impoverish and inward foreign investments are bad. Especially in the context of efforts to resolve the financial crisis and to rebuild the global economic system, there are several problems when the world's second-largest economy adheres to mercantilism. First, it flies in the face of the most basic economic principles like specialization, flexible prices determined by unhindered supply and demand or the primacy of productivity. Mercantilism is a zero-sum approach, long ago discredited, to the wealth and welfare of nations; a pre-Enlightenment, pre-modern mental frame that denies the most basic value generation premises of trade, investment, specialization and comparative advantage. Even as Japan's trade surplus has been dropping rapidly with the global slowdown, many economists would agree with the verdict of Nikolas Müller-Plantenberg from the Universidad Autónoma de Madrid: “Japan's large and sustained current account surpluses are at the root of its current economic problems.”

Second, it is philosophically indefensible, relying as it does on exceptionalism. As Princeton University's Peter Singer points out, most major secular and religious ethical traditions adhere to some version of the Golden Rule principle: act towards others as you would have them act towards you. The Japanese government appeals to this principle in its call for universal intellectual property protection, or in its discourse on poverty in Africa.

Pico Iyer, a British-born journalist of Indian origin who lives in Kyoto, has impressive credentials throughout Asia, including a decades-long friendship with the Dalai Lama. Iyer knows whereof he speaks, therefore, when he says, “the Japanese speak the language of the world, literally and metaphorically, less well than any of their Asian neighbors, with the exception of the North Koreans.” There is plenty of support, both anecdotal and data-driven, for Iyer's observation. In global comparative data on language proficiency compiled by IMD's World Competitiveness Center, Japan's performance is strikingly poor. Japan's mean English proficiency has already fallen below China's: the latter's position has increased by leaps and bounds in the last few years as it has prepared for the Beijing Olympics. In fact Japan's English proficiency, as measured by Test of English as a Foreign Language (TOEFL) scores, has it ranking not only last among Asia-Pacific countries and last among countries with GDP per capita greater than $10,000 (thirty-second out of 32), but in fact last overall among countries surveyed – fifty-second out of 52. There are also cognitive barriers, like shyness. In an international comparative study some years ago, famed Stanford psychologist Phillip Zimbardo found that, “more than any other nationality, the Japanese report feeling shy in virtually all social situations.” As Zimbardo concluded from various cultural observations “Japanese society is the model of a shyness-generating society.”

As Japan rose from the ashes of World War II, liberal intellectuals such as TSURU Shigeto, MARUYAMA Masao and ENDO Shusaku hoped that with its new constitution, Japan would come to represent a new international force for pacifist socialism. However, with the outbreak of the Cold War, the Chinese revolution and the Korean War, the United States had to engage Japan in rapid nation-building. As a result, the initial liberal reforms the American Occupation had instituted were greatly attenuated, and the United States very quickly transformed Japan from its bitterest enemy to its most pampered protégé. As a consequence of shifting its focus to rebuilding the Japanese economy, and its concern for avoiding strong leftist forces in Japan, the United States allowed the postwar Japanese establishment to remain in power and escape fundamental questioning or serious political change. As exemplified by the emperor transitioning from head of state to symbol of the state in the 1946 constitution, postwar Japan developed in a state of amnesia and political quietism. In addition to the emperor never going to trial (Emperor HIROHITO was almost certainly a war criminal), the CIA funneled secret funds to the “Liberal Democratic Party” (LDP, the dominant political party of postwar Japan) to help it defeat more progressive and socialistic political forces.

In the Japan of the second half of the twentieth century, the military battalions were replaced by the kaisha, the corporations. The mission statements of virtually all major Japanese companies included a strong patriotic component. As the late James Abegglen and other specialists have argued, whereas the typical American company would have shareholders as first priority, stakeholders second and the country in third place, in Japan the order was generally reckoned to be country, stakeholders and shareholders.

Since the crisis of the early 1990s, the government–industry nexus has somewhat fractured, Japanese companies have moved a lot of production offshore and the proportion of permanent employees to temporary employees has been significantly reduced. But while there has been an evolution, there has been no revolution. The big Japanese kaisha are emphatically not state-owned enterprises and Japanese capitalism cannot be labeled state capitalism. However, nationalist capitalism would still remain an accurate description. Senior management of the big kaisha still tend to be, pretty overwhelmingly, lifetime employees, and they still tend to introduce themselves by giving the name of their corporation first (e.g., “I am Hitachi's WATANABE”). Just as Japan would benefit from more international trade, imports, higher interest rates and letting the yen find its level, these macro changes ought to be complemented by openings at the firm level: new ways of conceiving of and undertaking work, both for businesspeople at the kaisha, and entrepreneurs outside the kaisha.

Contemporary Japan is a fascinating mix of cultural influences. Japanese language, art, architecture, religion and government are all inconceivable without the influence of Chinese and Korean culture. Japan is the land of the rising sun only because it was so described from the perspective of China to its West; in this sense, an intercultural identity is infused into the very heart of Japanese consciousness. Immigrants from what is now Korea taught Japan's indigenous ancestors how to farm rice. Modern Japanese economic, legal and corporate models have Prussian, American, French and British influences. The Portuguese gave the Japanese bread, or pan. The wildly popular “Japanese” game, sudoku, was first developed by an architect from Indianapolis, Howard Garns, and first popularized by a New Zealander, Wayne Gould. Even the Japanese tea ceremony, so emblematic of Japanese culture, is animated by Zen Buddhism, which originated in India.

As these and countless other examples show, there is no monolithic culture in Japan; it is a richly multicultural society. But we will go a step further, and argue that even the idea of the uniqueness of the Japanese race is pure myth, because the Japanese “race” is largely the result of waves of immigration from Asia. There is much that is potentially liberating for Japan and its neighbors in acknowledging these multicultural and immigration-based features of Japan. But we are getting ahead of ourselves, because the nineteenth century construct of Japan as a unified nation-state, a monoculture and a homogenous race retains deep roots in the Japanese imagination, and serve as anchoring principles for Japanese nationalists to this day.