The Reckoning: Financial Accountability and the Rise and Fall of Nations

by Jacob Soll

Overview

A “brilliant” (Los Angeles Review of Books) history of accounting, showing how financial and political accountability has shaped the rise and fall of nations and empires

Whether building a road or fighting a war, leaders from ancient Mesopotamia to the present have relied on financial accounting to track their state's assets and guide its policies. Basic accounting tools such as auditing and double-entry bookkeeping form the basis of modern capitalism and the nation-state. Yet our appreciation for accounting and its formative role throughout history remains minimal at best-and we remain ignorant at our peril. Poor or risky practices can shake, and even bring down, entire societies.

In The Reckoning, historian and MacArthur "Genius" Award-winner Jacob Soll presents a sweeping history of accounting, drawing on a wealth of examples from over a millennia of human history to reveal how accounting has shaped kingdoms, empires, and entire civilizations. The Medici family of 15th century Florence used the double-entry method to win the loyalty of their clients, but eventually began to misrepresent their accounts, ultimately contributing to the economic decline of the Florentine state itself. In the 17th and 18th centuries, European rulers shunned honest accounting, understanding that accurate bookkeeping would constrain their spending and throw their legitimacy into question. And in fact, when King Louis XVI's director of finances published the crown's accounts in 1781, his revelations provoked a public outcry that helped to fuel the French Revolution. When transparent accounting finally took hold in the 19th Century, the practice helped England establish a global empire. But both inept and willfully misused accounting persist, as the catastrophic Stock Market Crash of 1929 and the Great Recession of 2008 have made all too clear.

A masterwork of economic and political history, and a radically new perspective on the recent past, The Reckoning compels us to see how accounting is an essential instrument of great institutions and nations-and one that, in our increasingly transparent and interconnected world, has never been more vital.

Product Details

ISBN-13:	9780465036639
Publisher:	Basic Books
Publication date:	04/29/2014
Sold by:	Hachette Digital, Inc.
Format:	eBook
Pages:	312
File size:	4 MB

About the Author

Jacob Soll is University Professor and a professor of philosophy, history, and accounting at the University of Southern California. The author of The Information Master and Free Market, Soll is the recipient of many prestigious awards, including the MacArthur “Genius” grant. He lives in Los Angeles.

Table of Contents

Introduction ix

Chapter 1 A Short History of Early Accounting, Politics, and Accountability 1

Chapter 2 For God and Profit: The Books According to Saint Matthew 15

Chapter 3 Medici Magnificence: A Cautionary Tale 29

Chapter 4 The Mathematician, the Courtier, and the Emperor of the World 48

Chapter 5 The Dutch Audit 70

Chapter 6 The Accountant and the Sun King 87

Chapter 7 The First Bailout 101

Chapter 8 "Fame and Profit": Counting on the Wedgwood Vase 117

Chapter 9 Big Debts, Big Numbers, and the French Revolution 132

Chapter 10 "The Price of Liberty" 147

Chapter 11 Railroaded 165

Chapter 12 The Dickens Dilemma 178

Chapter 13 Judgment Day 189

Conclusion 205

Acknowledgments 209

Notes 213

Bibliography 241

Index 263

Editorial Reviews

03/03/2014
Good bookkeeping makes for good government—but not for very long—according to this absorbing history of accounting in the public sphere. Historian and MacArthur fellow Soll (The Information Master) surveys public financial record keeping after the invention of double-entry accounting in 13th-century Tuscany, a breakthrough that made systematic analysis of profit and loss possible. The benefits for well-ordered, responsible government were felt wherever this innovation was embraced: medieval Italian city-states, 17th-century Holland, and 18th-century Britain all became economic and geopolitical powerhouses, he argues, thanks to well-kept government books. But his is even more a story of backsliding and failure, as corruption, spendthrift government, and factional intrigues perennially undermine the discipline of meticulous public accounting—and the state. Soll’s engaging narrative highlights both the political impact of accounting practices—a public audit of Louis XVI’s woeful state finances helped spark the French Revolution—and the advent of a “culture of accountability” as the bourgeois business classes rose to power; he explores the deep-seated religious and philosophical power of balanced-books metaphors in the West, from the Gospel of Matthew to Thoreau’s championing of the simple life. The result is a provocative, illuminating take on history that assigns humdrum accountants a central and dramatic role. Photos. (May)

Publishers Weekly

"Mr. Soll spices his story with big historical personalities.... [He] earns high marks for brevity...as well as for scholarship."—Wall Street Journal

"Soll's book is chock-full of valuable snippets of information."—Global Finance

"The Reckoning demonstrates how financial transparency and accounting—essential for capitalism and our global economy—are linked with political transparence and accountability." —Pittsburgh Tribune-Review

"Fascinating.... A readable romp through a history of accounting."
 —Economia (UK)

"A dazzling book, rigorously researched and demonstrating an extraordinary scholarly range." —Literary Review (UK)

"A brilliant, deceptively brief book.... Soll pulls off the miracle of making his history not a monolith but a mosaic."—Los Angeles Review of Books

"Who would imagine that a history of accounting and double-entry bookkeeping could be so engaging? Yet in this concise, sharply argued book, Jacob Soll deftly examines and explains the remarkable impact that the practice of accounting has had on the rise—and sometimes the fall—of nation states." —Jack Rakove, Pulitzer Prize winning author of Original Meanings

"Who knew accounting was so interesting? Jacob Soll does, and in this masterful history of the men and women who have kept, and sometimes cooked, our books, he will convince you, too. The Reckoning does what the best history should: it piques our interest in accounts of the past so that we may better balance our own."—Darrin M. McMahon, author of Divine Fury

"Every student, teacher and practitioner of business or government should know this history of accounting, from its grounding in theology and philosophy to its central role in the rise of modern commerce, statecraft, and indeed, civilization itself."—Robert Bloomfield, Nicholas H. Noyes Professor of Management and Accounting, Cornell University

"Many have long known, or at least suspected, that CPAs rule the world. The proof is here. The Reckoning is a tale of power, empire, art and culture—and of their half-hidden puppetmasters from the Roman Empire to the Gilded Age."—James K. Galbraith, author of The End of Normal

"The history of accounting and accountability is in Jacob Soll's remarkable book a dramatic story of politics, morality, printing, temptation and the destiny of economic society."—Emma Rothschild, Director of the Joint Center for History and Economics at Harvard University and, author of Economic Sentiments

From the Publisher

2014-03-05
Soll's (History/Univ. of Southern California; The Information Master: Jean-Baptiste Colbert's Secret State Intelligence System, 2009, etc.) double-entry bookkeeping in relation to the political and cultural significance of accounting and the rise and fall of nations and businesses. In his historical analysis, the author examines why modern societies consistently find themselves mired in crises involving not only financial issues, but political accountability as well. Different than entries in a checking account register, double-entry bookkeeping tracks credits and debits in separate columns, thus permitting real-time accounting of the costs and profits associated with particular and aggregated transactions. The author argues that it allows effective management through accountability and auditing. He contends that successful nations have not only been rich in accounting and commercial culture, but have also learned how to build cultural frameworks that have countered the all-too-human tendency to ignore, deceive or falsify. Soll substantiates his thesis by tracing the history of the method from its beginnings, showing how it was used successfully, and then disregarded disastrously, by Florence's de Medici family and, later, France's Louis XVI. The author credits Luca Pacioli's 1494 Treatise as the enduring source that permitted the technique to be adapted for public policy, beginning with the Dutch republic. Some of the founders of the United States, including Robert Morris and Alexander Hamilton, also used the method. Soll stresses the cultural benefits of incorporating accounting into educational curricula during the 19th century, and he explores how standards have been lowered over time, starting with railroad barons' failures to adequately pay to replace aging equipment and ending with the current concept of mark-to-market, in which financial assets are worth what others will pay for them. An intriguing, well-crafted discussion highlighting a major contribution to political and economic well-being, with an obvious moral for today.

Kirkus Reviews