(Those who) possessed in highest degree the attributes (of the Dao) did not (seek) to show them, and therefore they possessed them (in fullest measure). (Those who) possessed in a lower degree those attributes (sought how) not to lose them, and therefore they did not possess them (in fullest measure)
(Those who) possessed in the highest degree those attributes did nothing (with a purpose), and had no need to do anything. (Those who) possessed them in a lower degree were (always) doing, and had need to be so doing.
(Those who) possessed the highest benevolence were (always seeking) to carry it out, and had no need to be doing so. (Those who) possessed the highest righteousness were (always seeking) to carry it out, and had need to be so doing.
(Those who) possessed the highest (sense of) propriety were (always seeking) to show it, and when men did not respond to it, they bared the arm and marched up to them.
Thus it was that when the Dao was lost, its attributes appeared; when its attributes were lost, benevolence appeared; when benevolence was lost, righteousness appeared; and when righteousness was lost, the proprieties appeared.
Now propriety is the attenuated form of leal-heartedness and good faith, and is also the commencement of disorder; swift apprehension is (only) a flower of the Dao, and is the beginning of stupidity.
Thus it is that the Great man abides by what is solid, and eschews what is flimsy; dwells with the fruit and not with the flower. It is thus that he puts away the one and makes choice of the other.
Interpretation:
One of the longest chapters in the Tao te Ching, Chapter 38 is also one of the easiest to interpret.
Here the author makes the observation that those who understand the Dao often do not show it and, conversely, those who seek to demonstrate their daoism, (or any other virtue) do not fully understand the way. The first stanza states exactly that.
The second stanza can be described as wu wei. Those who are masters at the dao do not need to act in order to be so. It is simply their nature to be acting in accordance with the way.
The third stanza can be seen at a statement on the true nature of caring. Consider the person who helps another person but the person receiving the help does not respond with praise for the helper. If the helper is solely motivated by the urge to help another person, they do not need praise. If they seek glorification for their good deed, they are at least partly motivated by ego and self seeking.
The master taoist is the same. he or she never seeks praise for being a master taoist. It is simply who they are.
The fourth stanza contrasts the previous two stanza with person who is self serving. If they do not receive the praise they believe they deserve, they will become angry.
The fifth stanza refers to a time when the Tao simply was. In this time there would have been no conditions or states described as the Tao. The Tao simply was. The following is a progression that can be seen as a very human descent from a state of grace, to one of rules, to one of meaningless ritual.
The fifth stanza states bluntly that moving away from natural alignment with the Dao is not wise.
Finally, the author reminds us that the Taoist sticks to what is real and practical and stays away from needless flash and showiness.
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