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Critical Perspectives on Accounting 23 (2012) 511–555
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Critical Perspectives on Accounting
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Americanism and financial accounting theory – Part 1: Was America
born capitalist?
Rob Bryer *
Warwick Business School, University of Warwick, Coventry CV4 7 AL, United Kingdom
A R T I C L E I N F O
Article history:
Received 9 February 2012
Received in revised form 6 April 2012
Accepted 4 August 2012
Mots clés:
Critique
Intérêt public
Social
Palabras clave:
Crı́tica
Interés Público
Social
Keywords:
Critical
Public interest
Social
Accounting history
Capitalism
A B S T R A C T
This paper (Part 1), and two related papers (Part 2: The ‘modern business enterprise’,
America’s transition to capitalism, and the genesis of management accounting; and Part 3:
Adam Smith, the rise and fall of socialism, and Irving Fisher’s theory of accounting),
explore historical links between American ideology and Irving Fisher’s theory of
accounting. They explain Fisher’s theory as the product of America’s exceptional transition
to capitalism and the ideological consequences. Part 1 uses Marx’s theories of the
transition in England, of colonisation, and of ideology, to construct an accounting history
model of America’s transition to capitalism that identifies the dominant social relations of
production and calculative mentalities, and uses them to predict the accounting signatures
and political ideologies we should observe if the theories are correct. Parts 1 and 2 test the
model. Part 3 explores the ideological consequences of America’s transition, for America
and financial accounting. Scholars generally assume that America was ‘born capitalist’;
historians argue it became capitalist sometime from the late 18th to early 19th centuries.
The model, however, identifies early farmers as ‘simple commodity producers’ who, it
predicts, kept only single entry accounts of debt, and had a ‘producer’ ideology of ‘equality’
and ‘freedom’. It identifies planters and manufacturers as ‘semi-capitalists’ – part
merchant capitalist and part simple commodity producer – who it predicts calculated
‘profit’ as consumable surplus, pursued the ‘simple rate of profit’, controlled only prime
costs, and had an ideology of ‘individualism’ that combined the producers’ ideology with
the merchants’ ‘laissez-faire’. Part 1 re-examines evidence from accounts to around the
mid-19th century, which confirms that farmers were not capitalists and that even the
most advanced merchants, manufacturers and planters were semi-capitalists. Part 2
searches for capitalists in the second half of the 19th century. It re-examines evidence from
the accounts of the Boston Associates who historians have seen as ‘proto-industrial
capitalists’; from the railroads heralded by Chandler as the beginning of ‘managerial
capitalism’; and from ‘entrepreneurial capitalists’ like Andrew Carnegie who created the
large corporations that conquered America from the 1880s. Their financial accounts and
cost management systems reveal the same semi-capitalist mentality found in the early
19th century. Re-examination of the ‘costing renaissance’ in the 1890s and evidence from
the DuPont Powder Company and General Motors from 1900 to 1920, suggests that only
from around 1900, after escalating conflict between ‘capital and labour’, did the capitalist
mentality appear in new management accounting systems focused on ‘return on
investment’. Part 3 shows that the accounting evidence closely correlates with the history
of American political ideology. It argues that Adam Smith’s Wealth of Nations dominated
American politics until the late 19th century because it theorised a nation of simple
* Tel.: +44 (0) 2476 522450; fax: +44 (0) 2476 150376.
E-mail address: rob.bryer@wbs.ac.uk.
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commodity producers and semi-capitalists. It explains the delay in America’s transition
compared to Britain’s, and the decline in the popularity of laissez-faire from the 1880s, as
consequences of this exceptional starting point. ‘Big business’ capitalism created an
ideological problem for America’s ruling elite, particularly the threat of socialism from
around 1900 to 1920. Part 3 argues that Fisher’s neoclassical theory of ‘capital’ and
‘income’, designed as a critique of Marx, responded to this problem and played an
important role in undermining middle class support for socialism. Fisher said he based his
theory on accounting practice, particularly double entry bookkeeping, but Part 3 shows he
did not use or understand it, which divorced his accounting from reality. American
history’s legacy to the world, the papers therefore conclude, is a pathological theory of
financial accounting.
� 2012 Elsevier Ltd. All rights reserved.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555512
It has become more widely accepted that to understand the roles of accounting in organisations and society we must
‘‘reflect upon the social, political and economic context in which accounting operates’’ (Cooper and Sherer, 1984, p. 225;
Hopwood, 2005). Some bold pioneers of this approach argued for a ‘‘political economy of accounting’’, insisting that ‘‘the
study of accounting should recognise power and conflict in society, and consequently should focus on the effects of
accounting reports on the distribution of income, wealth and power’’ (Burchell et al., 1980; Cooper and Sherer, 1984, p. 218;
Tinker, 1980). Some even suggested an important social function could ‘‘include mystification and legitimation’’, ‘‘an
ideological function’’; that ‘‘accounting theories . . . are the product of the society in which they operate and cannot be
regarded . . . as neutral; they serve specific interests’’ (Cooper and Sherer, 1984, pp. 218, 223; Tinker et al., 1982). We know
much more about accounting in context than we did 30 years ago (Hopwood, 2005, p. 585), but we still know little about
accounting theory as ideology, particularly the origins and ideological functions of American financial accounting theory
(hereafter, accounting theory).1 This paper (Part 1), and two related papers (Part 2: The ‘modern business enterprise’,
America’s transition to capitalism, and the genesis of management accounting; and Part 3: Adam Smith, the rise and fall of
socialism, and Irving Fisher’s theory of accounting), address that gap. They seek to explain why ‘‘A restless tension still
pervades much of the dialogue concerning the application of economic ideas to accounting practices’’; why ‘‘The world needs
to be told what profit ought to be even though it apparently is orchestrated in the name of it’’ (Hopwood, 1992, pp. 129, 130).
Why, according to Bob Herz when head of the Financial Accounting Standards Board (FASB), it has resulted in ‘‘a body of
official accounting literature that is hard to understand, difficult to use [,] . . . [i]n one word . . . nuts’’ (Herz, 2005, p. 5), clearly
‘‘a strange situation for one of the most important discourses of present-day global capitalism’’ (Macintosh, 2009, p. 4). To
address these questions, to ‘‘bring such strangeness into the light’’ (Macintosh, 2009, p. 5), the papers assemble a
genealogical history of American accounting theory. It is ‘strange’, they conclude, because the economic ideas that tell the
world what profit ought to be come from the seminal work of Irving Fisher, whose theory of accounting was the ideological
product of America’s exceptional history.
Commentators and scholars generally agree that America has an exceptional culture, particularly its self-defining
ideology of ‘Americanism’, the ‘American Creed’ of ‘‘liberty, egalitarianism, individualism, populism, and laissez-faire’’(Lipset, 1996, p. 18). A large literature assumes or supports ‘American exceptionalism’ (see Foner, 1984; Lipset, 1996;
Wilentz, 1984a), but fundamental questions remain. What are its causes? Was American history exceptional? If it was, how
did it produce Americanism? Why, unlike Europe, did socialism fail to take root in American politics? Why in America has
‘‘the rule of capital . . . remained more powerfully installed and less politically contested than in any other advanced capitalist
society’’ (Davis, 1980, p. 6)? What are the consequences of Americanism? Is it a ‘‘double-edged sword’’? Some see it as the
foundation of America’s economic success, but others stress its ‘‘dark side’’, its exceptionally high crime rate, high income
inequality, poor social welfare, low political participation rates, high levels of mental illness, etc. (Lipset, 1996). To this list, I
will add pathological accounting, America’s exceptional theory of accounting.
Scholars of American exceptionalism use different approaches, but two things unite them. First, their failure to define in
what sense America is the ‘business society’ par excellence (Cochran, 1967). Cochran, for example, who raises the problem,
defines ‘business’ as the ‘‘intellectual constructs and activities by which men seek to manipulate the factors of production for
pecuniary return’’ (1967, p. 6), but he defines neither ‘intellectual constructs’ nor ‘pecuniary return’. The papers use
accounting to define them, as Marx and Weber did, as the capitalist mentality (Bryer, 2000a). Second, scholars generally
assume that American history, particularly the collapse of socialism from around 1920, shows that Marx’s theory of
capitalism is wrong. The papers re-examine accounting evidence from colonial times to the 1920s to test it by exploring the
history of American capitalism. They argue that by understanding what was exceptional about America’s transition to
capitalism we can understand what is exceptional about Americanism, and its consequences, for America and accounting.
Neither Marx nor Engels wrote a detailed history of America, but scholars criticise their prediction of its ‘inevitable’
transition to socialism (e.g., Lipset, 1996, p. 33; Runkle, 1964). Marx, Engels, and many others, recognised the obstacles to
socialism in America, particularly its workers’ exceptionally high standard of living – what Sombart (1906) called its ‘shoals
1 I use ‘America’ and ‘Americans’ throughout to mean the USA and its inhabitants because this is what they call their country and themselves.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 513
of roast beef and apple pie’ – its exceptional racial mix, democracy, devotion to disestablished religion, etc. They certainly
argued that working class movements ‘‘thoroughly versed in theory’’ would bring socialism to America, and from there it
would conquer the world (Engels, 1993, p. 553; Marx, 1996, p. 9; Runkle, 1964, p. 135). However, they did not say this would
‘inevitably’ result from ‘economic forces’; that the economic development of capitalism to its highest level there would
inexorably lead to class-consciousness and socialism. Another reading of Marx’s theory is that the ‘economic base’ of society,
its ‘mode of production’, the way owners of the means of production extract surplus, is based on a shared calculative
mentality elaborated and reinforced through a ‘superstructure’ of ideology, institutions, culture, etc. (Bryer, 2000a). Because
the ‘base’ and the ‘superstructure’ are ideas or social practices, the base does not ‘determine’ the superstructure (Avineri,
1971, p. 157; Giddens, 1971, p. 43); both are products of class conflict. The papers explain the ideological defeat of socialism
in America as the outcome of exceptional class conflict caused by its exceptional transition to capitalism.
The exceptionalism literature highlights Americanism as an ‘ideology’ but offers conflicting explanations of its origins and
functions. The dispute is between ‘structuralists’, such as Laslett (1974), who argue that America has an exceptional ideology
because it has exceptional ‘social structures’, a high level of economic well-being, diverse racial mix, etc., and the ‘ideologists’
such as Bell (1960) who see these structures as ‘conditions’ not ‘causes’, and argue that ideology is primary. On this issue, the
papers side with the ideologists (for example, Lipset, 1996), but avoid the weakness of their approach, which is to define
ideology by its appearance as the ‘values’ of ‘liberty’, ‘egalitarianism’, etc., and not by reference to whatever it was that
produced them (Laslett, 1974, p. 112). The papers support Marx’s view that ‘class’, defined by an individual’s relationship to
the means of production, is the most important ‘social structure’ that determines ideology. However, they avoid the
reductionism of the ‘classical’ Marxist notion of ideology as simply the distortion of reality, only a functional false
consciousness that distorts the truth in favour of ruling-class interests (Armstrong, 2005, p. 7; Rose, 1977, p. 47). They use
Ricoeur’s (1986) reconciliation of the ideas of ideology as ‘distortion’ with ideology as ‘social representation’ (Chiapello,
2003, p. 156), his elaboration of Marx’s comment in the German Ideology that ideology is a ‘‘language of real life’’ (1976a, p.
36, see Taylor, 1986, p. xiii) that integrates individuals within social structures by legitimating a mode of production as
unalterable reality. To avoid reductionism, ‘‘We must integrate [the] concept of ideology as distortion into a framework that
recognises the symbolic structure of social life’’ (Ricoeur, 1986, p. 8). We must integrate distortion with praxis, with self-
conscious productive activity based on socially defined ‘‘symbolic structures of action’’, with a ‘‘discourse of praxis’’, or
‘‘language of real life’’ (Ricoeur, 1986, p. 12). Ideology has an organising and integrating role, a ‘‘real constitutive role . . . in
social existence’’, and a potentially distorting role in the ‘‘legitimation of leadership’’, Weber’s ‘‘problem of authority,
domination, and power, the problem of the hierarchization of social life’’ (Ricoeur, 1986, p. 12). A ruling class needs ideology
‘‘because no system of leadership, even the most brutal, rules only by force, by domination’’; it must ‘‘summons not only our
physical submission but also our consent and cooperation’’ (Ricoeur, 1986, p. 13). Ideology provides it with a discourse of
praxis distorted in its interests, but this is a dangerous game because distortion can introduce pathology. At one extreme,
‘‘Ideology moves beyond mere integration to distortion and pathology as it tries to bridge the tension between authority and
domination’’ (Ricoeur, 1986, p. 14), but at the other are languages of real life. As a symbolic discourse of praxis there are ‘‘a
range of possibilities preserved by Marx’s analysis, a range extending from the language of real life to radical distortion . . .
[and] the concept of ideology covers this full range’’ (Ricoeur, 1986, p. 79).
Students of ideology have focused on religion, education, and politics, but Ricoeur’s formulation allows us to study any
language as a possibly integrating and distorting ideology, including accounting. Although a cliché, accounting is ‘the
language of business’, of ‘capital’, ‘profit or loss’, ‘assets’, ‘liabilities’, ‘revenues’, ‘expenses’, etc., a language of real life that
provides symbolic structures for social action, a language for the discourse of praxis in business. Applied to accounting,
Marx’s theory of value produces a language of the ‘circuit of capital’, ‘constant and variable capital’, ‘fixed and fluid capital’,
‘productive capital’, ‘capital of circulation’, ‘socially necessary labour time’, ‘value’, and ‘surplus value’, etc. (Bryer, 1994b,
1998, 1999a,b). By the mid-19th century, British capitalists had produced a language of the ‘principles’ of accounts, of
‘historical cost’, ‘realization’, ‘costs attach’,‘matching’, etc., which Marx summarised as ‘‘cost price’’ and ‘‘profit’’, a language
he said was ideological because it obscured the origin of profit in exploited labour, because it ‘‘inverted’’ reality (1998, p. 49).
Capitalist accounting, he argued, was an ‘‘ideological phenomenon’’ that produced a ‘‘false consciousness’’, ‘‘mystifying’’
social reality (Burchell et al., 1980, p. 19, fn. 7). In the German Ideology he used the metaphor of the camera obscura inverting
the image on the retina to explain what he meant by distortion. Althusser (1970) objected, criticising the ‘early Marx’ for his
Hegelian idealism, arguing that ‘‘since an inverted image is always the same’’, inverting Hegel’s notion of ideology remained
within his framework, belonged ‘‘to the same ideological world as the original’’ (Ricoeur, 1986, pp. 78, 79). However, if Marx
was not stuck within idealism, but had explained capitalist ideology as an inverted representation of social reality, because
an ‘inverted [reality] is always the same’ reality, capitalist accounting as a legitimating distortion retains its integrative,
organising function as a language of real life. Accounting ‘‘conceal[s] real determinations’’, is a distortion, but of ‘‘reality as
praxis’’, of the ‘‘life-process’’ (Rose, 1977, pp. 28, 37; Ricoeur, 1986, pp. 5, 78). Accounting’s ‘principles’ therefore lie at the
heart of Marx’s theory of capitalist ideology because they provide a language that integrates and sustains but simultaneously
distorts the social reality of exploited labour.
If the language of capitalist accounting provides the foundation of capitalist ideology, other languages of accounting
should underlie other ideologies. Accounting history therefore provides a joint test of Marx’s theory of ideology and his
theory of the transition to capitalism, a theory of changing ways of extracting surplus value reflected in distinctive modes of
accounting, signatures of different calculative mentalities and forms of accountability (Bryer, 2000a, pp. 137–143) that
should articulate as different languages of real life, as different ideologies. In short, according to this reading, Marx’s theory is
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555514
that class conflict produces new social relations of production, a new calculative mentality, and accounts with a new
language of real life, which produces a new political ideology.2 If the language of accounts provides the ‘economic base’ of the
dominant political ideology, we should be able to predict that ideology from the dominant mode of accounting, and predict
changes in political ideology from changes in accounting during the transition to capitalism.
For many scholars, particularly ‘liberal-market’ historians, the transition to capitalism is a non-issue because they assume
America was ‘born capitalist’ (Wood, 1999, p. 37). Using mainly evidence from farmers’ accounts, some liberal-market
historians, particularly Rothenberg (1981, 1983, 1992), and an important minority of ‘moral-economy’ (or ‘social’) historians
(Clark, 1979, 1991; Gordon et al., 1982; Henretta, 1978; Kulikoff, 1989, 1992; Merrill, 1976, 1995), agree that that America
became capitalist sometime between the late 18th and early 19th centuries. However, despite this consensus, after extensive
debate historians still ‘‘have a difficult time making precise just what social relations the word, capitalism, refers to, not to
mention how to characterize its development across the four centuries of American history’’ (Appleby, 2001, p. 1). This
remains a ‘‘vexed question’’ (Appleby, 2001), Part 1 argues, because the liberal-market historians’ definition of capitalism as
free markets is an unhelpful tautology, and because the moral-economy historians do not understand accounts. To avoid
these problems, the papers use Marx’s definition of capitalism as the mode of production where ‘free’ capital employs ‘free’
wage labour, where the dominant calculative mentality is the ‘rate of profit’, conventionally defined in accounting as the
return on investment (ROI).3 Part 1 uses Marx’s theories of the transition to capitalism in England, of colonisation, and of
ideology, to build an accounting history model, a sequence of social relations and mentalities that predict the accounting
signatures and political ideologies we should observe in American history. Parts 1 and 2 present accounting evidence that
supports the model. Part 3 presents historical evidence that supports the predicted correlation between the mentalities
revealed by accounts and the history of American political ideology.
According to Marx, transitions from one mode of production to another are the product of class conflict. Many have
argued that the primary cause of socialism’s failure to secure a permanent place in American politics, unlike Europe, and why
it was relatively devoid of class conflict until the 1880s, was the weakness of its ‘working class’. Some think the causes were
‘structural’, the ‘safety valve’ of western land, lack of feudal traditions, relative affluence, racism, divided by mass
immigration, segmentation, etc. (Laslett and Lipset, 1974; Foner, 1984). Others argue that the exceptional aggression of its
ruling class from the 1880s inflicted cumulative bloody defeats on workers that left them apathetic and disorganised with a
‘‘qualitatively different level of class consciousness, and intra-class cohesion’’ (Davis, 1980, p. 7). These explanations fail to
recognise that what was really exceptional about American ‘class conflict’ was that America was a society dominated by
what Marx called ‘simple commodity producers’ until the 1880s, where the majority of farmers owned the means of
production (mainly land), and its merchants, manufacturers, and planters, were ‘semi-capitalists’, part merchant capitalists
and part simple commodity producers. Part 1 re-examines evidence from farmers’ accounts from the late 18th to the mid-
19th centuries, which shows they were not capitalists in Marx’s sense. It re-examines evidence from the accounts of
merchants, planters, and manufacturers over the same period, and from the McLane Report of 1833, which shows they were
typically semi-capitalists. Part 2 goes in search of America’s transition in the second half of the 19th century. It re-examines
evidence from the Boston textile mills to the 1860s, from the railroads that Chandler claimed created ‘managerial capitalism’
and the first ‘modern business enterprises’, and from ‘entrepreneurial capitalists’ like Andrew Carnegie who created the large
corporations that transformed America from the 1880s. Their financial accounts and cost management systems continued to
evince the semi-capitalist mentality. To find the capitalist mentality, Part 2 re-examines evidence from the ‘costing
renaissance’ from the 1890s, from the DuPont Powder Company from 1903 to the 1920s, and from General Motors in the
1920s. This shows that only from around 1900, after 20 years of escalating conflict between ‘capital and labour’ over control
of production, and a large increase in immigrant labour, does the capitalist mentality appear in new systems of management
accounting based on ROI.
Class conflict was relatively absent before the 1880s, Part 3 argues, because America remained a society of simple
commodity producers and semi-capitalists that broadly coalesced around what became the political ideologies of ‘free labor’
and ‘laissez-faire’.4 An accounting analysis of Adam Smith’s Wealth of Nations shows that despite becoming the ‘Bible of the
liberal bourgeoisie’, his theory of price elaborated the mentalities of the simple commodity producer and semi-capitalist. For
many Americans, Adam Smith had provided a ready-made post-Revolutionary handbook of political economy that
accurately described their pre-capitalist mentalities, providing a broadly agreed framework for political ideology from the
Revolutionary War (1775–1783) to the 1880s. Part 3 explains the history of American political ideology as theconsequence
of its starting point. Before the 1880s, it argues, America was a society of farmers and artisans, simple commodity producers
with an ideology of ‘equality’ and ‘freedom’ based on an ‘independent producer’ labour theory of value, and of semi-capitalist
merchants, manufacturers, and planters, also with a ‘producer’ ideology, but of ‘individualism’, of the ‘workingman’, or ‘self-
made man’, when combined with the merchant’s ‘laissez-faire’. Political leaders of the simple commodity producers
(idealised by Thomas Jefferson) and semi-capitalists (idealised by Andrew Jackson) agreed with Adam Smith’s analysis of
2 Class conflict is the ‘prime mover’, the dominant cause of the transition, but these elements are interrelated in any real historical process (Bryer, 2005,
pp.28–29).
3 In Marx’s theory, ‘free’ capital loses the identity of its owner, and ‘free’ labour is dependent on wages (Bryer, 2000b). The appendix to Part 2 derives the
ROI from Marx’s circuit of capital.
4 Part 3 shows that during the 19th century ‘free labor’ meant property-owning workers, not to be confused with Marx’s definition, those dependent on
wage labour.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 515
‘capitalism’, and until the late 19th century with his criticisms of British capitalism’s monopolising mercantile and monied
interest. This consensus collapsed from the 1880s when ‘big business’ – giant corporations that dominated markets – swept
America, and many Americans strongly resisted the destruction of their social relations, economic status, and security, and
challenged its owners’ aggressive rendition of Smith’s laissez-faire as ‘survival-of-the-fittest’.
The eruption of ‘class war’ from the late 1870s in the midst of America’s first major recession coincided with the
appearance of ‘entrepreneurial capitalists’ who set about its corporate reconstruction (Sklar, 1988), a process that continued
to around 1920. In the 1890s, a widely based ‘Populist’ movement coalesced with a bruised and angry labour movement into
the ‘socialist menace’ of the first two decades of the 20th century, scornful of the big employers’ ‘free market’, ‘survival of the
fittest’ ideology. Big business created an ideological problem for the ruling elite because it contradicted the ‘individualist’,
laissez-faire ideology of small employers and the ‘independent producer’ ideology of farmers and workers. At the same time,
big business and its dependence on government appeared to confirm the socialists’ prediction of the inevitability of
collectively controlled production, and the socialists agreed with the producers’ labour theory of value. Rather than a weak
‘working class’, Part 3 argues, the independent producer, ‘free labor’, ideology strengthened American farmers and workers
when coupled with socialism, and not just workers resisted big business. Many small employers bitterly opposed it, which
left America’s employers ideologically divided. Conflict erupted because a strong farmer-labour-populist movement
triggered a violent reaction from the ruling elite whose free market ideology had lost its legitimacy. By the end of the 19th
century, workers had suffered bloody and legal defeats and farmers and small businesses remained oppressed big business.
Their leaders turned to politics and significant numbers to socialism, but a unified and confident coalition of government, big
business, and the American middle-classes, had destroyed socialism as an effective political force by 1920.5 It is clear that
‘‘the ballast of capital’s hegemony in American history has been the repeated, autonomous mobilizations of the mass middle
strata in defense of petty accumulation and entrepreneurial opportunity’’ (Davis, 1986, p. viii). However, most explanations
of the defeat of socialism assume the ideological success of the American ruling class, its ideological recruitment of the
middle classes to big business capitalism by the 1920s. How did it do this?
The problem facing America’s elite was to justify replacing a society dominated by simple commodity producers and
semi-capitalists with a society dominated by big business and Wall Street to a hostile and in parts increasingly radical public.
To meet this challenge, around the turn of the century the elite responded with a social movement of its own. In the
‘Progressive Era’, from around 1890 to 1920, business leaders, politicians, academics, and intellectuals, came together in
various institutions, but prominently in the ‘National Civic Federation’, to counter the socialist threat by formulating and
propagating a new ideology of ‘corporate liberalism’ (Weinstein, 1968; Sklar, 1988). Developed through the progressive
politics of Theodore Roosevelt (1901–1909), William Taft (1909–1913), and particularly Woodrow Wilson (1913–1921)
(Sklar, 1988; Dawley, 1991), corporate liberalism reinterpreted the individual’s liberty of freedom of contract to mean the
legal liberty for corporations to regulate markets so long as the methods and results were ‘reasonable’. That is, so long as
market regulation was ‘socially responsible’, did not prevent future competition, and prices and the returns on capital were
‘fair’. However, corporate liberalism left unanswered the socialists’ fundamental criticism of capitalism, which was that no
profit was ‘fair’, that capitalism was inherently ‘socially irresponsible’. How did the elite answer these criticisms?
The exceptionalism literature ignores the intellectual attack on Marx launched in Europe and America in the late 19th
century and its contribution to the ideological defeat of socialism. It therefore overlooks the seminal contribution of a young
American economics superstar at Yale, Irving Fisher (1867–1947), in justifying profit as ‘fair’ and big business as ‘socially
responsible’. Worker and farmer unrest, the growth and activity of unions, populist politics, and the spectre of socialism,
encouraged scholars to ‘‘disprove Marx, or destroy his arguments about the origins of profits in exploitation, [that] became
almost an intellectual crusade over all Europe and North America’’ (Desai, 2002, p. 61). The ‘disproof’ was the development of
neo-classical economics in which Irving Fisher played the key role in America. Fisher’s unique contribution was his theory of
accounting, which Part 3 shows he designed as a critique of Marx and American socialism to legitimate big business and the
capital market by, it argues, transforming simple commodity producers into semi-capitalists and reconciling them with
money capitalists. It explores the hypothesis that Fisher’s theory made an important contribution to the creation of an
ideologically dominant ruling class, unified with the middle classes by the 1920s, and an ideologically disarmed working
class. By then American labour leaders, politicians, and the middle classes, had abandoned socialism, and Fisher was famous.
Part 3 shows that Fisher radically rewrote the language of accounting, which many Americans learned. Another exceptional
feature of America was its early university level education in accounting that taught ‘accounting theory’ (Chatfield, 1977, p.
153), in the English speaking world a uniquely American subject dominated by Fisher (Bryer, 2011).
This is an unashamed ‘interest’ explanation of American accounting theory and ideology: that consciously or
unconsciously Fisher distorted the meaning of accounts because this was in the ideological interests of the bourgeoisie. It is
true that scholars often ‘‘take for granted what it means to say that an interest is ‘expressed by something else’. How do
interests become expressed though?’’ (Ricoeur, 1986, p. 257). A focus on accounting addresses this question because its
language articulates a calculative mentality, expresses economic interests through the way it quantifies and presents
‘economic reality’. This allows us to tackle ‘‘one of the greatest challenges of a Marxist history of ideas to make more plausible
the connections between a system ofinterests and a system of thought’’ (Ricoeur, 1986, p. 94). The system of interests
examined here is the economic interest of the bourgeoisie as a collective, what Marx called ‘total social capital’, the ‘capital
5 We will see that the American ‘middle classes’ included small employers, independent farmers, and white collar workers (Mills, 1951).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555516
market’, in the maximization of ROI. The system of thought that expresses these interests is accounting theory. This
explanation of Fisher’s theory is also an unapologetic ‘strain theory’, that ideology is a functional response to ‘‘the chronic
malintegration of society’’ (Geertz, 1973, p. 203). The papers argue that American history had produced workers and middle
classes with ideologies that threatened its bourgeoisie, who responded with exceptional violence and the counter ideology of
corporate liberalism underpinned, Part 3 argues, by Fisher’s theory of accounting. To answer the questions of ‘fairness’ and
‘social responsibility’ left by corporate liberalism required, it argues, a radically new theory of accounting that did not just
‘invert’ the capitalist reality represented in accounts, but radically distorted it. It concludes that Fisher produced a new
language of ‘income’ and ‘capital’ that went beyond ‘inversion’, introduced a pathological distortion that turned accounting
into a ‘‘disease of communication’’ (Ricoeur, 1986, p. 228).
Fisher said he based his theory on business practice, particularly double entry bookkeeping (DEB), but Part 3 shows he did
not use or understand it. Instead of the accountants’ integrated, cost-based, balance sheets and profit or loss accounts
produced from transactions using DEB, Fisher gave us ‘income’ and ‘outgo’ accounts and single entry ‘fair value’ balance
sheets. Divorcing accounting from transactions opened the possibility of pathology, that it could function as a ‘‘general
device by which the process of real life is obscured’’ (Ricoeur, 1986, p. 5). This conclusion has important implications because
‘‘the main currents of twentieth century accounting thought can be viewed as the ‘legacy’ of Irving Fisher’’ (Mouck, 1995, p.
47). He made ‘‘the fundamental contribution to the subject’’, was ‘‘the founder of modern income theory’’ (Whittington,
1977, p. 201). His work influenced leading American accounting theorists during the 1920s (Bryer, 2011), and through them
and later theorists his work underlies the US Financial Accounting Standard Board’s conceptual framework. The papers
therefore call on critical scholars to explore the hypothesis that the legacy of America’s exceptional transition to capitalism,
to America and the world, is Fisher’s pathological theory of accounting.6
1. Was America born capitalist?
If, as the Party claimed in Orwell’s Nineteen Eighty-Four, ‘‘He who controls the past controls the future’’, the answer to the
question ‘‘Was America born capitalist’’ (Wood, 1999, p. 36) is ideologically significant because if it was there was never a
serious alternative to the ‘free market capitalism’ it has today. ‘‘Of course, from almost the beginning of professional
historical scholarship in the late-19th century, many American historians assumed that nearly all early American farmers,
especially those in New England, were incipient capitalists, eager to make money and get land and get ahead’’ (Wood, 1999,
pp. 36–37). These professors were ‘‘liberal’’ or ‘‘market’’ historians for whom the ‘‘origins of capitalism in America have never
been an issue: America has always been capitalistic’’ (Wood, 1999, p. 37).7 Not just liberal-market history professors
assumed this. Sociologist Mills, for example, saw in early America ‘‘men . . . who . . . were ready and eager to realize the drive
to capitalism . . . [:] society began here almost de novo as a capitalist order’’ (1951, p. 4). We will see many other examples.
Not until the 1970s did ‘moral-economy’ (or ‘social’) historians seriously question this assumption (Wood, 1999, p. 37),
arguing that farmers were embedded in ‘‘precapitalist rural communities’’, ‘‘primarily collective arrangements for the
economic and social security of all members’’ (Rothenberg, 1992, p. 29).8
In response, Rothenberg (1981) showed that the prices of barter transactions recorded in Massachusetts farmers’
accounts converged to market prices from the mid-18th century. This, she argued, contradicted the moral-economy
historians’ claim that farmers did not have a market-oriented mentalité, and supported the liberal-market historians’
assumption that ‘capitalism’, profit-maximizing responsiveness to markets, appeared during the American Revolution.
Rothenberg’s findings initiated a ‘‘heated debate’’, but one which quickly led to a new consensus (Lamoreaux, 2003, p. 438).
Moral-economy historians ‘‘embraced’’ her conclusion because it confirmed that there was a transition from a pre-capitalist
society, and ‘‘as evidence for the timing of the transition to capitalism, effectively ending the debate’’ (Lamoreaux, 2003, p.
438). Most American historians ‘‘now agree that there was such a transition in the American countryside during the late
eighteenth and early nineteenth centuries and that it was associated with the social and political upheaval of the American
Revolution’’ (Lamoreaux, 2003, p. 438; Wood, 1993, p. 248). However, leaving aside whether Rothenberg’s evidence is
valid, and whether the timing is accurate, this is not a fruitful consensus because ‘‘it glosses over the substantial
disagreements that remain about the process of transformation itself’’ (Lamoreaux, 2003, p. 438). These revolve around the
question ‘‘what is capitalism’’ (Gilje, 1996, pp. 160–161), which the majority define as a free-market economy. A few
Marxists define it as a mode of production based on free wage labour, but an important minority of social or moral economy
historians explicitly or implicitly define it using Weber’s sociological categories of ‘economic action’ or ‘economic culture’
(Wood, 1999, p. 36).
Defining capitalism as a ‘market economy’ remains the conventional wisdom, but is an unhelpful tautology because it
identifies ‘capitalism’ with the existence of markets, and identifies ‘capitalists’ as anyone who is ‘successful’ in them
6 Testing this hypothesis is beyond the scope of the papers. Bryer (2011) supports it through an analysis of Fisher’s influence on accounting theory during
the 1920s and its role in producing the stock market crash of 1929. Testing it by examining the accounting origins of the ‘credit crunch’ crisis that began in
America in 2007 could prove illuminating.
7 Not probing this assumption was ideological because, as Bourdieu says, ‘‘complicitous silence’’ is a feature of ‘‘the most successful ideologies’’,
particularly those promulgated by academics (1977, p. 188).
8 As the ‘moral-economy’ model of precapitalist societies derives from the ‘‘marriage of cultural anthropology and Marxism’’ (Rothenberg, 1992, p. 30),
some historians prefer the title ‘social’.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 517
(Merrill, 1995, p. 317), whereas the problem is to explain when and how ‘capitalists’ redefined what ‘success’ meant.
Adopting the market definition erases the possibility that there was ever any serious opposition to capitalism, that
anything other than market success ever existed (Merrill, 1995, p. 317). By starting from the idea of economic culture,
therefore, moral-economy historians (notably, Michael Merrill, James Henretta, and Christopher Clark) made an important
contribution during the late 1970s, publishing influential articles challenging ‘‘the notion ‘that Americans had been
‘capitalists’ since the first colonial settlements’ . . .’’ (Lamoreaux, 2003, p. 437). They argued that farmers’ accounts (and
other evidence) show that their ‘‘world views or mentalités’’ differed from those of ‘capitalist’ merchants and
manufacturers; that their ‘‘economic behavior in thelate eighteenth and early nineteenth centuries was not compatible
with conventional notions of capitalist exchange’’ (Lamoreaux, 2003, p. 437). In farmers’ accounts, they found barter rather
than monetary transactions, and commodity debts, which did not circulate as a means of exchange like financial debts and
on which farmers did not usually charge interest. This and other evidence, they argued, showed that farmers ‘‘made
decisions that put family and community before profit, and that their goal was to achieve a competence, rather than to
accumulate capital’’ (Lamoreaux, 2003, p. 437).9
Focusing on differences between farmers’ mentalities and ‘conventional notions of capitalist exchange’ was an advance,
and re-examining their accounts will support the conclusion that they were not capitalists. However, the moral-economy
historians’ analysis was unconvincing (Wood, 1999, p. 40). The key question they failed to ask was whether the worldviews
and accounts of farmers really were ‘‘fundamentally different’’ from those of merchants and manufacturers (Lamoreaux,
2003, pp. 439, 461).10 According to Weber, to know this we need evidence of the difference ‘adequate at the level of meaning’,
that is, their motive for producing them. As he said, ‘‘A motive is a complex of subjective meaning which seems to the actor
himself or to the observer an adequate ground for the action in question. . . . An example of adequacy of meaning in this sense
is what is, according to our current norms of calculation or thinking, the correct solution of an arithmetical problem’’ (Weber,
1978, p. 11). When we observe someone adding 2 + 2 or ‘‘engaged in balancing a ledger or making a scientific experiment’’,
‘‘we understand what makes him do this at precisely this moment and in these circumstances’’; ‘‘we understand in terms of
motive the meaning an actor attaches’’ to their actions (Weber, 1978, p. 8). If we see someone engaged in an action whose
‘complex of meaning’ we understand, we can hypothesise the actor’s motive, its subjective meaning. For the scientific
sociologist it is therefore ‘‘necessary to know what a ‘king’, an ‘official’, an ‘entrepreneur’, a ‘procurer’, or a ‘magician’ does,
that is, what kind of typical action . . . before it is possible to undertake the analysis itself’’ (Weber, 1978, p. 18). To analyse the
motives of accountants it is therefore necessary to understand in advance what one does – within what complex of meaning
they balance the ledger – which Weber failed to do (Bryer, 2000a, pp. 145–149), and so have social and moral-economy
historians. Those who searched in farmers’ accounts for Marx’s distinction between producing for ‘use-value’ and ‘exchange’,
a distinction also emphasised by Weber, revealed the problem because operationalising it depends on a definition of
‘exchange’ adequate at the level of meaning, the absence of which invited Wood’s excoriating criticism that their attribution
of motives required belief in their ability to read minds:
9 A ‘c
10 Lam
farmers
of them
very di
‘‘When the social or moral economy historians come to examine the actual behavior of the New England farmers, they
keep falling back on this distinction . . . between producing for use and producing for exchange . . . to explain why the
farmers were not really market oriented – in effect relying on their ability to decipher the motives of these rural folk.
What seems to be the farmers’ profit seeking or land speculation the moral economy historians dismiss as merely the
farmers’ looking after the needs of their families. No matter how sharp or avaricious the farmers might be – and even
the moral economy historians admit that they could indeed be sharp and avaricious – these characteristics apparently
did not turn them into entrepreneurs; as Henretta says, ‘there was no determined pursuit of profit’ . . .’’ (Wood, 1999, p.
40).
We can read motives from accounts only if we understand their social function, if we have an ‘‘explanatory . . .
rational understanding of [their] motivation’’, which as Weber says we must seek in the ‘‘more inclusive context of
meaning’’ (1978, p. 8) given by the rules and methods the accountants followed when they wrote them. As no one has
done this, ‘‘When and how . . . the American economy acquire[d] its capitalist character’’ (Lamoreaux, 2003, p. 437)
remain open questions. To begin to address them, what follows builds on earlier work that formulated and tested Marx’s
theory of the transition to capitalism in England as an accounting history (Bryer, 2000a,b), applying it with appropriate
modifications to America. The following section explains the theory and uses it and evidence of the social relations of
production to predict the accounts and political ideologies we should find during America’s transition. The remainder of
the paper tests the predictions against evidence from farmers, merchants, planters and manufacturers’ accounts from
the late 18th century to the mid-19th century. It concludes, contrary to the conventional wisdom and the current
consensus, there is no evidence of the capitalist mentality. America was not ‘born capitalist’, and it had not become
capitalist by the mid-19th century.
ompetence’ was a reliable, independent source of income sufficient to meet consumption needs including retirement (Laurie, 1989, p. 57).
oreaux assumes that finding no fundamental differences between merchants, manufacturers, and farmers’ accounts, undermines the argument that
were not capitalists, because ‘‘merchants and manufacturers . . . were capitalists’’ (2003, p. 439). However, we will see it does not because (a) none
were capitalist, and (b) some inland merchants’ accounts, and many overseas merchants, manufacturers, and larger slaveowners’ accounts, were
fferent from farmers’ accounts.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555518
2. Marx’s theory of the transition to capitalism in England: lessons for America
As for ‘‘most Marxists, an understanding of capitalism begins with free [wage] labor’’ (Kulikoff, 1992, p. 6), its scarcity from
colonial times apparently justifies the conclusion that although America ‘‘was born as a child of emergent British capitalism . . .
its parentage did not immediately stamp it as capitalist itself’’ (Gordon et al., 1982, pp. 13, 54). As it remained a nation of largely
self-sufficient households even in 1820 (Levine et al., 1989, p. 224), according to this measure capitalism evidently came slowly.
Up to the mid-19th century, agriculture predominated and farmers generally used little wage labour. Even in the last decades of
the 19th century, free wage labour accounted for only around half of the American labour force (Gordon et al., 1982, p. 53). For
the major commercial crops of cotton, rice, and tobacco, to the late 17th century southern plantation owners used mainly
indentured labour from Europe, and then African slave labour. For Marxists, therefore, early farmers and planters are evidently
not capitalists because they ‘‘do not appropriate surplus labor from a landless agricultural proletariat’’ (Weiss, 1983, p. 477).
Independent producers (usually families) engaged in craft and artisan production. In the cities, family businesses dominated
commerce and trade. However, some free wage labour existed in the major ports, some in manufacturing, particularly the
‘sweated’ trades in New York, and from the 1820s in city construction and building roads, canals, ships and railroads (Gordon
et al., 1982, pp. 54–55, Wilentz, 1984b, pp. 119–129). If we measure capitalism by free wage labour, it follows that ‘‘at the
beginning of the 19th century the capitalist organization of production – that is to say, production carried on for profit by means
of wage labor – constituted an insignificant proportion of the total economic life of the nation’’ (Gordon et al., 1982, p. 54).
However, it also follows that capitalism existed, even though it was ‘insignificant’. As we shall see, the accounting evidence
contradicts this conclusion. Thereason, according to Marx’s theory, is that free wage labour is a necessary but not sufficient
condition for capitalism, which also requires ‘free’ capital (Bryer, 1994b, 2000a). The weakness of using free wage labour as the
sole metric of capitalism is, therefore, its assumption that ‘capitalists’ existed, which is a version of the markets definition:
capitalism is a market for wage labour and capitalists are those who succeed in it.
To break from Adam Smith’s view that capitalism resulted from markets, from the pursuit of individual interests
(Brenner, 1977), Marx defined a ‘mode of production’ as the typical way owners of the means of production extract surplus,
the ‘social relations of production’, that determine the form of the ‘labour process’, the way owners control workers in
production to generate surplus. These social relations are the ‘economic base’ of a society: ‘‘The specific economic form in
which unpaid surplus labour is pumped out of the direct producers determines the relationship of rulers and ruled as it
grows directly out of production itself and, in turn, reacts upon on it as a determining element’’ (Marx, 1998, pp. 777–778). In
the method of extraction, ‘‘we find the innermost secret, the hidden basis of the entire social edifice’’; ‘‘Upon this . . . is
founded the . . . economic community . . . [and] its specific political form’’ (Marx, 1998, p. 778), including its ideology.
Studying a society’s typical methods of accounting should therefore provide a mental signature of its mode of production, the
calculative mentality that animates its method of extracting surplus, which should reflect its social relations of production
and determine its political ideology. English accounting history broadly supports Marx’s analyses of the different methods of
extraction practiced by feudal and capitalist modes of production: feudal lords produced charge and discharge accounts
measuring ‘labour rent’ and capitalists produce profit or loss accounts and balance sheets measuring the ‘rate of profit’
(Bryer, 1994b, 2000a,b, 2004, 2005, 2006a,b). An accounting translation of his history of the English transition suggests a
two-step model: from feudalism to a transitional form of ‘semi-capitalism’, to ‘capitalism’. Each mode of production has a
distinctive accounting signature, labour process, and control principle:
Feudal
 Semi-capitalist
 Capitalist
Accounting signature
 Consumable surplus
Consumable surplus
Opening capital
Profit
Capital employed
Labour process
 Direct appropriation
 Formal subordination
 Real subordination
Control principle
 Coercion
 Action controls
 Results control
According to Marx, ‘capital’ existed before the capitalist mode of production as ‘money capital’, lending money (M) for
more (M0), and as ‘merchant capital’, M–C–M0, buying commodities (C) cheap (M) and selling dear (M0). The merchant and
money capitalists’ notion of ‘profit’ was the surplus available for consumption (M–M0), which they shared with feudal lords
for whom the general form of surplus was directly appropriated labour in the form of commodities. The feudal control
principle was coercive supervision, the legal use of physical force, a basis it shared with slavery.
Enclosures from the late 15th century began the generation of new social relations of production, a new mentality, and
control principle that drove the transition to capitalism in England. The mentality appeared in farming during the 17th
century and spread in the late 17th century as many more peasants became ‘free’ wage labourers and now faced ‘free’
merchant capitalists (Bryer, 1994b, 2000a,b; 2004; 2006c). During the 16th and early 17 centuries, English farmers were
typically only ‘semi-capitalists’ who pursued what Marx called the ‘formal subordination’ of labour. They were capitalists
because they exploited free (landless) workers, but remained feudal because they continued to pursue feudal surplus by
controlling the labour process through direct (but, legally non-coercive) supervision using traditional methods of production
controlled by the workers. However, from the mid-16th century with the development of capital pooled for investment in
trade, what Marx called ‘social capital’, merchant capital in England broke ‘free’ from the idiosyncrasies of its owner, and
eventually from feudal domination. A rate of profit mentality appeared with the first joint stock companies as landed and
mercantile interests pooled their wealth in international piracy and trade. To share their surpluses ‘fairly’ these merchants
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 519
calculated the ‘feudal rate of return’, the consumable surplus divided by the initial capital advanced, began to think of their
returns as a rate of interest, just like the money capitalist. Class conflict between merchant capitalists and feudal merchants
culminated in the ‘bourgeois revolution’ of the mid-17th century when overseas capital overthrew feudal control and the
rate of profit became the dominant economic ethic. Capital from trade flowed back to the land bringing with it the rate of
profit mentality. Combining the semi-capitalist farmers’ mentality seeking feudal surplus from free labour in production
with the merchants’ semi-capitalist mentality seeking the feudal rate of return produced the capitalist mentality (Bryer,
2000a,b). From agriculture, the capitalist mentality spread into manufactures, which produced the British industrial
revolution (Bryer, 2005, 2006b).
The capitalist’s mentality expanded the merchant capitalists’ circuit of capital, M–C–M0 into M–C . . . P . . . C0–M0, replacing the
purchase of commodities (C) with a process of production (P) of other commodities or services and selling them to realise surplus
value (C0–M0). Whereas semi-capitalists pursued the feudal rate of return, capitalists pursue the ‘rate of profit’ (r), the ‘ratio of
surplus-value to total capital’, which made their mentality revolutionary, leading to continuous technical innovation and
increased labour productivity because underlying it, according to Marx’s theory of value, are important ratios they seek to
control11:
r ¼ s
K
h i
¼ s
v
h i v
vþ c
� �
vþ c
K
h i
The rate of profit is the product of the ‘rate of exploitation’ (s/v), the ‘value composition of capital’ (v/[v + c]), and the
‘rate of turnover of capital’ ([v + c]/K) (Foley, 1986, p. 92). This mentality produced a new labour process based on a new
control principle. Rather than supervise workers who controlled production, capitalists took control of the whole
process of producing and realising surplus value on their capital, the ‘valorisation process’ (Marx, 1976b, p. 252),
through the ‘real subordination’ of labour. Taking control of the valorisation process meant capitalists could maximize
the rate of profit by increasing constant capital (particularly fixed capital) to expand output to increase the turnover of
capital and increase labour productivity to maximise the rate of exploitation s/v, to generate an excess rate of profit over
the general rate. When capitalists dominate the labour process the form of accountability changes: the ‘‘relationship
[with workers] becomes more complicated . . . and apparently more mysterious, with the emergence of the specifically
capitalist mode of production. Here we find it is not only such things – the products of labour, both use-values and
exchange values – that rise up on their hind legs and face the worker and confront him as ‘Capital’ . . .’’ (Marx, 1976b, p.
1054), but also ‘capital’ itself. How do capitalists ‘confront’ labour, control it as ‘capital’? What Marx says suggests a key
role for accounts in holding workers (including managers) accountable for capital, for the valorisation process (Bryer,
1999a, 2006a).12
The real subordination of labour in England took an extended period of class conflict leading to a revolution in social
relations and in the principle of control, a revolutionary change, Marx emphasised, from physical to economicaccountability,
operationalised here as a revolutionary shift in emphasis from ‘action’ to ‘results’ control (Anthony, 1965). Principals (e.g.,
lords or capitalists) have three ways of controlling their agents (e.g., peasants or free wageworkers), each having different
aims and methods. One is to select an appropriately skilled and dedicated worker, use ‘personnel controls’, but as this is often
difficult or impossible, principals must also use ‘action’ and/or ‘results’ controls:
1
c
p
b
in
1
b
1 In Marx’s formula
irculation’ (fixed cap
roduction, materials,
ack than advanced, i.e
itially advanced.
2 In Marx’s theory, ‘m
ut a worker in the sen
Personnel controls
(and the accounting equivalent) s = surplus valu
ital, inventories, debtors, money capital, etc.)
fixed asset depreciation, etc.) (Bryer, 1994a, 199
., surplus value, whereas (say) materials are ‘con
anagers’ are workers who specialise in exploit
se of capitalist, i.e., an exploiter of the labour o
Action controls
e (gross operating profit); K = total capital, bot
; v = variable capital (production wages); c = co
9a). Production wages are ‘variable capital’ bec
stant capital’ because for these expenditures the
ing others. ‘‘The industrial capitalist is a worker
f others . . . which he can shift to a manager for m
Results controls
Aim
 Dedicated, uncontrolled behaviour
 Control of observed behaviour
 Control of unobserved behaviour
Methods
 Qualifications
 Supervision
 Targets
Tests
 Physical constraint (e.g., buildings)
 Accounts
Judgement
 Punishments and rewards
When principals can accurately predict the outcomes of specified actions they can supervise or monitor work, use ‘action
controls’, directly control the agent’s actions or behaviour. However, as supervisory costs are high or because the relationship
between actions and outcomes is uncertain or unobservable, principals must often leave it to agents to make decisions about
what work to do. Without supervision, principals can observe only outcomes or results and must therefore use ‘results
controls’, that is, set targets, demand accounts, and hand out punishments and rewards according to the performance they
reveal. Holding unobservable or ‘free’ agents ‘to account’ by requiring a reckoning and explanation of performance motivates
them to achieve targets because they know the principal will judge it against the target (for example, against a required
h ‘productive capital’ and ‘capital of
nstant capital (non-labour cost of
ause the capitalist gets more capital
capitalist gets back only the capital
, compared to the money-capitalist,
oderate pay’’ (Marx, 1998, p. 385).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555520
return on capital), scrutinise explanations of the results, and punish and reward performance. This is a common meaning of
the English word ‘control’ – the ability to ‘call to account, reprove (a person)’ (Onions, 1973, p. 416). Producing and explaining
accounts constrains the free agent’s choice of behaviours (plans, decisions, actions, and inactions) because to achieve the
principal’s target agents must engage in planning and take any necessary corrective actions. Accounting is therefore vital for
controlling free agents because, by reporting results, it shapes their decisions, requiring them to be in the principal’s
interests. Today, for example, management regularly calculates the costs and revenues from different courses of action and
uses forecast accounts and cash flows to guide it towards the most profitable. When management uses accounts to make
decisions we can therefore understand its calculations as ways of anticipating and planning to achieve target results to
discharge its accountability. Accounts are therefore also useful to free agents, but to discharge their accountability by
demonstrating performance against the target or, if not, persuading the principal that their plans and actions were
reasonable.
According to Marx’s theory, the history of control should mirror the transition to capitalism (Bryer, 2000a). We should
observe a change, from an emphasis on coercive action control under feudalism, to non-coercive action control under semi-
capitalism, to economic results control under capitalism. To observe the transition in America we must therefore look for
employers seeking the real subordination of labour by holding managers and workers accountable for capital and its results,
for the rate of profit. Accountants define the rate of profit as ROI, net profit after depreciation, before interest, tax, and
dividends, divided by capital employed (total assets). Underlying it is the widely used ‘DuPont’ formula, r ¼ ð p=SÞ � ðS=TCÞ.13
From Marx’s perspective, this formula describes the two interrelated phases of the circuit of capital: the creation of value in
production (S/TC), the ‘turnover’ of capital, and its realisation on the market to earn a profit on sales (p/S) to produce a rate of
profit (r). Corporations today use it to devolve control of capital to managers and hold them and workers accountable for the
results. Therefore, to observe how far accountability for capital extends within the labour process we must study its
management accounts, those that provide information for planning, decision-making and control, which allow management
to formulate, rank, and choose plans, and judge and control results, in terms of their impact on ROI. Where we find full
absorption costing, standard costs, capital budgeting, flexible budgets tracking ROI, etc., reaching down within the
organisation to the shop floor, we have evidence of the real subordination of labour to capital, of its accountability for capital
in production, of capitalism in its most advanced form (Bryer, 2005, 2006a). This is the most advanced form because real
subordination means (a) that workers lose control of production to capitalists, become subject to indirect (de facto) real
subordination, supervision (action control) by a capitalist, or by a manager who is accountable for capital, for results, and (b)
manager and worker accountability for capital, their direct (de jure) real subordination. We will see in Part 2 that direct real
subordination starts with top management, with the ‘separation’ of ownership from control, but how far it extends down an
organisation is matter for investigation.
Marx studied the transition to capitalism in England, but stressed it would take other routes elsewhere: ‘‘In England alone,
which we take as our example, has it the classic form’’ (Marx, 1996, p. 707). He attacked critics who ‘‘absolutely must
metamorphose my historical sketch of the genesis of capital in Western Europe into a historical–philosophical theory of the
general path every people is fated to tread, whatever the historical circumstances in which it finds itself’’ (Marx, quoted in Klehr,
1973, p. 314). What follows applies Marx’s ‘historical sketch’, with appropriate adjustments, to the transition in America.
2.1. Marx on America
Marx never wrote a detailed history of America, but he stressed its unique historical circumstances. In Grundrisse (written
in 1858) he noted that America was a
13 In t
the app
Marx’s
as c + v
‘‘. . . country where bourgeois society did not develop on the foundation of the feudal system, but developed rather
from itself; where this society appears not as the surviving result of a centuries-old movement, but rather as the
starting-point of a new movement; where the state, in contrast to all earlier national formations, was from the
beginning subordinate to bourgeois society, to its production, and never could make the pretence of being an end-in-
itself; where, finally, bourgeois society itself, linking up the productive forces of an old world with the enormous
natural terrain of a new one, has developed to hitherto unheard-of dimensions and with unheard-of freedom of
movement, has far outstripped all previous work in the conquest of the forces of nature, and where, finally, even the
antitheses of bourgeois societyitself appear only as vanishing moments’’ (Marx, 1973, p. 884).
America’s path was different because it grew from ‘‘bourgeois society’’, from a capitalist ‘‘starting point’’, not from the
‘‘feudal system’’. Marx did not say American society was bourgeois, a capitalist society at its beginning. Unlike in England
where many landlords, farmers and manufacturers were capitalists (Bryer, 2004, 2005, 2006b,c), American ‘bourgeois
society’ was small, consisting mainly of northeastern merchants, bankers, and a few southern aristocrats supported by slave
plantations. With a plentiful supply of land, in 1790 some 90% of the population lived on farms, and 80% were still there in
his formula, r = ROI, p = profit before interest, tax and dividends, S = sales, and TC = total capital employed. Part 2 analyses its ‘invention’ and role in
earance of the capitalist mentality and social relations in the DuPont Company formed in 1903. The appendix to Part 2 derives the formula from
circuit of capital, but the affinity between them is clear. Marx defined ‘turnover’ as the cost of production, c + v, whereas the DuPont formula defines it
+ s, as sales. If we add s to c + v in Marx’s formula it reduces to r = s/[c + v + s]� [v + c + s]/K.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 521
1860 (Hacker, 1942, p. 118; Laurie, 1989, p. 16).14 The dominant mode of production was what Marx called ‘simple
commodity production’, a system where producers owned the means of production. This is the foundation of his
‘colonisation theory’, that ‘‘capitalism was anathema to most Americans, who lived off their own labor and did not exploit
another man’s’’ (Klehr, 1973, p. 323). Klehr argues that this theory is inconsistent with another ‘pure bourgeois’ theory
accepted by Marx and emphasised by Engels, that capitalism advanced more rapidly and securely in America than in Europe
because the ‘‘worker, like everyone and everything else in America, had been bitten by the capitalist bug and had become
infected with bourgeois ideology’’ (Klehr, 1973, p. 323). In short, they also believed that America was a ‘‘capitalist country
from its birth’’; it ‘‘was the beau ideal of the entire country’’ (Klehr, 1973, pp. 329, 323, emphases added). However, Engels was
merely repeating Marx when in 1892 he argued, ‘‘feudalism was unknown and society at the very beginning started from a
bourgeois basis’’ (quoted by Klehr, 1973, p. 322, emphasis added; see also: Feur, 1959, p. 63). In other words, internal
contradictions within feudalism did not drive the transition to capitalism in America, but the bourgeoisie who grew from
strength to strength and ultimately imposed it, as we will see.
From the publication of the American Constitution in 1789, the American state was subordinate to the bourgeoisie. It was
‘‘large-propertied men’’, the ‘‘high born and affluent’’ who wrote it to ensure the state’s ‘‘agencies were vested [with] those
powers necessary to assure the unhindered progress of commerce, manufacturing, land speculation, and finance’’, that
‘‘democracy . . . was . . . curbed’’ (Hacker, 1942, pp. 186–187). Overshadowed by the industrial revolution in Britain, endowed
with huge natural resources and wide economic and political freedoms, the American bourgeoisie began the transformation of
an ‘empty continent’ into what would become an exceptionally pure and self-confident capitalist society in which they would
be exceptionally powerful. History supports Marx’s speculation that its major ‘antitheses’, of slavery, organised labour, a hostile
public, and socialism, would appear only as ‘vanishing moments’. The bourgeoisie abolished slavery after the Civil War, roundly
defeated labour and socialism after a period of unprecedented social unrest from the late 1870s to the early 1920s, and
contained resurgent organised labour in the 1930s and 1940s, since when the American working class has been quiescent
(Gordon et al., 1982, p. 2), and its bourgeoisie has grown ever more powerful. To tell this story, what follows uses Marx’s theories
to predict American accounting history and political ideology, and then tests these predictions against the evidence.
2.2. An accounting history of the transition to capitalism in America
The table below summarises the overlapping phases of the transition suggested by the history of America’s social
relations of production from the late 18th century to around 1920. Each phase has a distinctive calculative mentality
expressed in Marx’s notation as a circuit of commodities and money, predicted accounting signatures, and an ideology
composed of a theory of political economy and political philosophy:
1
w
h
1
Z
Social relations of production
4 This does not mean that 90% of A
ere slaves, two were either serva
owever, the ‘‘independent yeoma
5 Edward Gibbon Wakefield (17
ealand. He wrote England and Am
Calculative mentality
mericans were freehold
nts or tenant farmers, a
n farmer occupied an im
96–1862) was an early
erica. A Comparison of th
Accounting signatures
ers. ‘‘For every five freeholders, there were fi
nd one held an urban occupation in trade
portant place in this roster’’ (Dawley, 197
19th century British politician who promo
e Social and Political State of Both Nations (
Ideology
Simple commodity production
 C–M–C0
 Single entry, personal indebtedness
 Labour theory of value; Jeffersonian democracy
Semi-capitalism
 M–C–C0p
 DEB, simple rate of profit (SRP),
cost management
Laissez-faire; Jacksonian democracy
Capitalism
 M–K–K [1 + r]
 DEB, ROI, product costs, standard costs,
flexible budgets
Neoclassical economics; Corporate liberalism
C, commodities; M, money; C0 , different commodities; p, commodity price(s); DEB, double entry bookkeeping; simple rate of return (SRP), C0p/M; K, capital
employed; r, general rate of profit; ROI, return on investment (capital employed).
2.3. Simple commodity production
In the final chapter of Volume 1 of Capital Marx criticises Edward Wakefield’s ‘‘colonisation theory’’ and provides his
own.15 Discovering that owning the means of production does not ‘‘stamp a man a capitalist if there be wanting the
correlative – the wage worker’’ (Marx, 1996, p. 753), Wakefield called for ‘‘systematic colonisation’’, that is, slavery. This,
Marx pointed out, blatantly contradicted his espousal of Adam Smith’s theory that capitalism, the division of society into the
owners of capital and workers, arose ‘‘spontaneously’’. ‘‘But – but – ‘In the Northern States of the American Union, it may be
doubted whether so many as a tenth of the people would fall under the description of hired labourers . . .. In England . . . the
labouring class compose the bulk of the people’ . . .’’ (Marx, 1996, p. 754, quoting Wakefield, 1833). America was a ‘‘free
colony’’, even in the 1860s when Marx was writing, where ‘‘the bulk of the soil is still public property, and every settler on it
therefore can turn part of it into his private property and individual means of production’’ (1996, p. 755). The ‘‘wage worker
of today is tomorrow an independent peasant, or artisan, working for himself. He vanishes from the labour market, but not
into the workhouse’’; wageworkers are transformed ‘‘into independent producers, who work for themselves instead of for
capital’’ (Marx, 1996, p. 757). They engage in the ‘‘simplest form of the circulation of commodities . . . C–M–C, the
ve adult males that fit some other description: two
or manufacturing’’ (Dawley, 1976, p. 11). Clearly,
6, p. 11).
ted the colonisation of South Australia and New
1833).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555522
transformation of commodities into money, and the change of money back again into commodities; selling in order to buy’’
(Marx, 1996, p. 158). This is Marx’s model of all pre-capitalist modes of production, a ‘‘corrected reflection’’, as Engels (1980,
p. 475) called it, of a very varied history. It applied to ‘‘certain sectors of the economic world of the middle ages’’ (Dobb, 1925,p. 44), and to feudal and ancient societies wherever money developed. Without money, the circuit reduced to C–C0, which
applied to ancient forms of slavery, self-sufficiency, feudal commodity rents, taxes, tribute, barter, etc.
The motives of the simple commodity producer and the capitalist are fundamentally different, and so therefore are their
calculative mentalities, accounts, and ideologies. The simple commodity producer owns the means of production and uses
them to produce commodities for consumption or for exchange for other commodities, directly by barter or through the
medium of money, for consumption. ‘‘The circuit C–M–C starts with one commodity, and finishes with another, which falls
out of circulation and into consumption. Consumption, the satisfaction of wants, in one word, use-value, is its end and aim’’
(Marx, 1996, p. 160). Whereas the capitalist’s aim is endless accumulation through production for profit, the simple
commodity producers’ aim is production for consumption (Marx, 1996, pp. 157, 160–162), and they are therefore indifferent
to ‘profit’ or ‘capital’. The reason, ‘‘To put it the capitalist way’’ (Marx, 1998, p. 174), is that each producer possessing the same
skill who works the same socially necessary labour time gets the same total income (consumption), that is, the same total
value added, ‘wages’ plus ‘profit’. By contrast, the capitalist owns the means of production and employs free wageworkers to
produce commodities (or services) for exchange for money to earn the highest rate of profit (Marx, 1996, p. 408). If, therefore,
as in America, we ‘‘suppose . . . the labourers themselves are in possession of their respective means of production and
exchange their commodities with one another . . . [i]n that case these commodities would not be products of capital . . . [and]
a difference in the rates of profit would therefore be immaterial’’ (Marx, 1998, pp. 174–175). It follows that whereas capitalist
ideology values the ‘freedom’ of capital and labour, proselytizes free markets or ‘laissez-faire’, Marx’s theory predicts that
simple commodity producers valued ‘equality’ and individual ‘freedom’, proselytized a labour theory of value. ‘Equality’
because all labour of the same quality produces the same value added, and individual ‘freedom’ because owning the means of
production the producer can freely chose to work and consume the full value of his or her labour. Holding managers and
workers accountable for capital leads capitalists to signature their mentality in their accounts, but independent yeomen,
accountable only to themselves and their families, concerned with sustainable consumption, should not produce profit or
loss accounts and balance sheets, but only accounts of indebtedness with outsiders, which they did. Simple commodity
producers should display their mentality precisely by not counting their ‘capital’ or measuring ‘profit or loss’. Part 3 argues
that simple commodity production is the foundation of ‘Jeffersonian Democracy’, the political ideology of a democracy of
small property owners committed to a labour theory of value.
2.4. Semi-capitalism
Unlike in England, because capitalist farmers, landlords, and plentiful supplies of free wage labour did not exist in
America, manufactures typically began there as simple commodity producers. Marx’s theory predicts that they became
semi-capitalists as they employed workers and formed partnerships and companies. English feudal farmers, feudal
merchants putting out, and capitalist manufacturers, all employed free wageworkers, but American manufacturers generally
employed simple commodity producers. Up to the 1860s, the typical ‘‘worker was not a proletarian wage laborer . . .. He [sic]
labored in his own shop or in a rural mill . . . [and] in conjunction with his cottage or his labor in the mill he also ran a small
subsistence farm as a rule’’ (Hacker, 1942, p. 252; Laurie, 1989, p. 16). As late as 1860, there were more wageworkers in
farmhouses and small workshops than factories (Laurie, 1989, p. 16). American manufacturers remained partly simple
commodity producers, often immersing themselves in production as worker-owners, so ‘‘their relations with employees
were not necessarily based on capitalist economic criteria. The companies were small; they were often controlled by people
who themselves worked and were intimately involved with workers and the work process’’ (Clawson, 1980, p. 144).
However, when simple commodity producers employed wage labour, the relationship became exploitative and they became
semi-capitalists. Because their labour was unfree, ‘hired’ workers or ‘hands’ who resisted factory life, Marx’s theory predicts
that employers focused on supervision and physical action controls (the factory, the dormitory), and invested in labour
saving machinery, which they did. Owning the means of production but only supervising workers who controlled its use,
because their aim was consumption, the model predicts that they made little use of cost accounting beyond monitoring
prime costs, used only results control for work, and calculated their ‘income’ as receipts minus expenditures, the consumable
surplus of commodities (C0p) measured in money, which they did. By capitalist standards, ‘‘Their accounts and controls were
in a primitive [sic] state’’ (Clawson, 1980, p. 144), but they show that indirect, economic control did not extend far into the
labour process.
When American manufacturers employed a social capital, Marx’s theory predicts they had an ‘advanced’ (more nearly
capitalist) semi-capitalist mentality, shared the merchant capitalists’ aim of a ‘rate of profit’, which they defined and
accounted for as the consumable surplus divided by the original capital (M), called here the ‘simple rate of profit’ (SRP),
which they did.16 The theory also predicts an association between social capital, such as a partnership or joint stock
company, calculating a rate of profit, and double entry bookkeeping (DEB) (Bryer, 1993a,b, 2000b), but the evidence is less
16 Bryer (2000a,b) calls this the ‘feudal rate of return’ because the English transition was from feudalism. As America made the transition from simple
commodity production, ‘simple rate of profit’ is more descriptive.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 523
clear. However, whatever the bookkeeping method, a key difference between ROI and the SRP is their treatment of
production overheads. Semi-capitalists should write off all such expenditures as reductions in consumable surplus,
including the renewal of fixed assets, as losses, but capitalists should distinguish between ‘productive’ and ‘non-productive’
overheads and add productive overheads to the cost of production (Bryer, 2006a). Given the importance of fixed capital and
other production overheads in determining the rate of profit, depreciation accounting and overhead allocation are critical
signatures that identify the capitalist mentality because, according to Marx’s theory, they show the accountant tracking the
circulation of capital through production. The evidence in Part 1 supports the prediction that capitalists did not exist in
manufacturing up to the mid-19th century. As part merchant capitalists and part simple commodity producers, Marx’s
theory predicts an ideology combining both notions of ‘freedom’ and ‘equality’, of the individual and of capital. Part 3 argues
that the semi-capitalist mentality underlay ‘Jacksonian Democracy’ from the 1820s, the era of ‘laissez-faire’ and
‘individualism’, of the ‘producer’ ideology of the ‘workingman’ who could expect to become a ‘self-made man’ as an
employer.
An exceptional feature of America was the South’s ‘peculiar’ institution of slavery until 1865. Were all or a significant
number of slave-owners capitalists, as many historians believe? Because according to Marx’s theory slavery is doubly
antithetical to capitalism – its aim (consumption), and its use of completely unfree labour – it predicts that American slave-
ownerswere not capitalists. Most American slave owners were simple commodity producers who owned and personally
supervised only a few slaves who should share the yeoman’s consumption mentality and not calculate income or capital, but
larger slave owners who used overseers should share the manufacturers’ semi-capitalist mentality.17 They should also
calculate their income as receipts minus expenditures because, like feudal lords, etc., they exploited unfree labour for
consumption and held their overseers accountable for producing a surplus. As the foundation of slavery is physical coercion,
Marx’s theory predicts that American slave owners emphasised action controls, seeking ‘absolute’ control, made reluctant
and limited use of results control for work, and made no use of cost accounting. Only the wealthy elite of planters, those who
participated in social capitals, should display the advanced semi-capitalist mentality by calculating the SRP. Although we
need more research, the evidence supports these predictions.
Rapid accumulation of capital after the Civil War, strong economic growth, the development of a railroad network
creating a national market, high levels of population growth and immigration increasing the supply of wage labour, all
encouraged the spread of factory production. Most historians believe that capitalism was now rampant. On the railroads,
where a large social capital was essential, Chandler influentially argued that ‘managerial capitalism’ appeared from the
mid-19th century which produced the first ‘modern business enterprise’. Manufacturers otherwise remained what he
called ‘‘individual capitalists’’, ‘‘entrepreneurial or family capitalists’’, or ‘‘finance’’ capitalists (Chandler, 1977, p. 9).18
However, according to Marx’s theory, factories and machinery alone did not give manufacturers control of the valorisation
process. Writing in 1867, Marx observed, ‘‘Capitalistic production advances there with giant strides, even though the
lowering of wages and the dependence of the wage-worker are yet far from being brought down to the normal European
level’’ (1996, p. 760, emphasis added), which meant that America did not yet have free wageworkers. He thought the huge
increase in public debt caused by the Civil War had boosted the ‘‘rapid centralisation of capital’’ in the hands of the ‘‘vilest
financial aristocracy’’ (1996, p. 760), implying it had not yet formed a total social capital by separating the ownership and
control of capital. His theory therefore predicts continuing semi-capitalism, and the accounting evidence in Part 2 shows
that none of Chandler’s ‘capitalists’ were capitalists in Marx’s sense, but remained semi-capitalists because their capital
remained unfree, dominated by families or small groups of individuals, and workers remained unfree, wedded to the fading
reality but still powerful ideology of simple commodity production. Part 3 argues that continuing semi-capitalism explains
why in the 1860s and 1870s Radical Republicans developed Jacksonian Democracy into an ideology of ‘free labor’ and
‘laissez-faire’.
Chandler argued, ‘‘In many industries and sectors of the American economy, ‘managerial capitalism’ soon replaced family
or financial capitalism’’ (Chandler, 1977, p. 10, emphasis added) with dispersed stockholders and professional managers, but
Hannah (2007) shows this is wrong. Unlike Europe (particularly Britain) where key sectors (particularly railroads) had social
capitals and professional managers from the 1880s, in America they only began to appear from around 1900, and it only
caught up with Britain by the late 1920s. Only then were the ‘individual’ or ‘entrepreneurial capitalists’ who had dominated
large corporations, who had been accountable only to themselves, their families, and partner stockholders, replaced with
managers accountable to widely scattered stockholders. This lag puzzles Hannah (2007, p. 404). Parts 2 and 3 explain it by
the intense conflict generated by ‘big business’ from the 1880s caused by America’s exceptional starting point, a society
dominated by simple commodity producers and semi-capitalists, and the ideological problem this posed for its ruling elite.
Trade unions appeared in the 1820s, and labour militancy increased during the boom in the 1830s, and again in the
1860s (Clark and Hewitt, 2000, pp. 395-405; Montgomery, 1981). However, unlike in Europe, widespread social unrest and
conflict between ‘capital and labour’ appeared in America only during the ‘big business’ phase from the 1880s. Labour
unrest began to grow in the 1860s as production expanded within larger workshops and factories, which may explain the
common strategy of employers of leaving ‘‘the discipline and control of the workforce, the task of extracting surplus value,
17 ‘Overseers’ were appointed by owners to manage their slave plantations.
18 Many enterprises were not owned by ‘individuals’, but by families, small partnerships or, particularly after the 1860s, closely held joint stock
companies, and individuals were often active in other companies (Montgomery, 1981, p. 8).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555524
to a semi-independent third party’’ (Clawson, 1980, p. 28), to ‘inside contractors’.19 From the 1880s, large manufacturers
appeared who dismantled this system to appropriate the contractors’ profits and impose tighter control over labour by
large investments in machinery, de-skilling workers, hiring supervisors, and installing cost accounting systems and piece
rates. These corporations repeatedly cut wages rates in response to increasing output, and workers responded by industrial
action and restricting output (Clawson, 1980, p. 29), fuelling conflict between ‘capital and labour’ to around 1920, in the
midst of which, around 1900, the accounting evidence suggests America made its transition to capitalism and capitalists
began to pursue the real subordination of labour.
2.5. The transition to capitalism
Marx’s theory predicts that capitalists appear when free capital faces free wage labour, which in America they did
sometime around 1900. Part 2 shows that semi-capitalists, not capitalists, created big businesses, which became capitalist
when accumulation required giant corporations financed by the capital market, which necessitated the ‘separation’ of
ownership from control. It argues that to give capitalists control of the valorisation process required the consolidation of key
industries, revolutionising the process of production with continuous large investments in mechanisation, accountability for
capital through integrated financial and management accounting systems, government-backed violence, and the ideological
defeat of socialism.
Part 3 argues that Adam Smith’s Wealth of Nations provided a broadly agreed political economy, which became the
foundation for a broadly agreed political philosophy because it accurately described a society of simple commodity
producers and semi-capitalists. By 1900 big business dependent on government support had shattered this unity. Farmers
and workers committed to a ‘producer’ ideology of ‘equality’ and ‘fairness’, and many small manufacturers and merchants
committed to ‘free labour’ and ‘laissez-faire’, formed a cross-class alliance that vigorously resisted big business, demanding
federal regulation, many its repression. Socialists embraced this movement even though they welcomed big business, seeing
it as necessary for social and economic progress, by demanding its social control. This produced an inflammable popular
ideology that threatened the ruling elite. Marx’s theory predicts a reformulation of ‘laissez-faire’ by bourgeois economists to
justify the transition to advanced capitalism, to sanctify active government promotion of the universal freedom of capital
and labour. In Europe and America this produced neoclassical economics, but to make the transition in America, predictably,
required exceptional political and ideological change during the ‘Progressive Era’ from around1890 to 1920, the
development of a new ideology of ‘corporate liberalism’ claiming essential harmony between big business and society,
between ‘capital’ and ‘labour’. To make this claim convincing, Part 3 concludes, Fisher’s neoclassical theory of accounting
produced a new language of ‘capital’ and ‘income’ that reconciled simple commodity producers and semi-capitalists with
money capitalists, a language which the middle classes – particularly the new middle class that appeared, worked for, and
ran, big business and America’s political and social institutions – learned and absorbed.
3. Testing the model
The remainder of this paper (Part 1) and Part 2 test the model’s accounting predictions, starting with farmers’ accounts
which contradict the assumption ‘America was born capitalist’, the consensus that the transition occurred around the late
18th to early 19th centuries, and the view that the prime mover was farmers, ‘‘the changing nature of rural society’’ (Wood,
1999, p. 36). This evidence supports those moral economy historians who argue, ‘‘farmers [were] more acted upon’’ than
acting (Lamoreaux, 2003, p. 438) because it shows that there was a fundamental difference in mentalités and accounts
between farmers and overseas merchants, larger planters, and manufacturers. Farmers focused on consumption and
accounted only for debts to outsiders. Merchants, larger slave owners, and manufacturers, also focused on consumption, but
differed by calculating and holding their workers or slaves accountable for the consumable surplus (income). When
merchants, manufacturers or slave owners participated in a social capital – typically a partnership or later a joint stock
company – they also differed by calculating the SRP.
3.1. Yeomen farmers and inland merchants
From around 1750, yeoman farmers ‘‘predominated in much of the country’’ (Kulikoff, 1992, pp. 39–40). Owning the land,
they were independent, but most were not self-sufficient. ‘‘Basic items such as salt, sugar, molasses, coffee, tea, tobacco,
gunpowder, guns, knives, and axes could not be produced at home’’, so they ‘‘participated in commodity markets in order to
sustain familial autonomy’’ (Levine et al., 1989, p. 233; Kulikoff, 1992, p. 34). Farmers typically bartered their surpluses for
credit with a local (‘inland’) merchant who ran a general store, taking commodities in return as required, the merchant
selling the surpluses for inland distribution or export. To manage these relationships, farmers and inland merchants
produced single entry personal accounts of debts (Baxter, 1944, 1956, 2004, 1946; Densmore, 1980; Rothenberg, 1992;
19 Under this system, the employer contracted with an experienced and skilled worker – who hired and fired their own workers, set wages, fixed their own
methods of production – to supply commodities at an agreed price. The contractor used the employer’s buildings, machinery, equipment, and materials, and
sold the entire output to the employer.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 525
Schultz and Hollister, 2004), using ‘‘strikingly similar’’ books with a common bilateral layout and language, but probably not
because they were ‘‘somehow taught the conventions of keeping accounts’’ (Rothenberg, 1992, p. 66).
Farmers were freeholders accountable only for debts to outsiders, and could hold outsiders accountable only for debts to
them. Debts were common because, with metallic money generally scarce and paper money unreliable until the 1850s, most
transactions were on credit requiring repayment in other commodities, so farmers’ and inland merchants’ books are full of
barter transactions (both bilateral and trilateral), managed through a system of ‘‘bookkeeping barter – barter with a time lag’’
(Chatfield, 1977, p. 7). Farmers and merchants ‘‘needed just a record, or at most a balance, never a summary of all accounts.
Ledgers consisted mainly of charges and credits to men’s names. No attempt was made to isolate income, success being
measured in terms of asset increases [sic]. Though known, double entry bookkeeping was rarely used’’ (Chatfield, 1977, p.
7).20 Baxter thought this evidence contradicted Sombart who ‘‘argued that profit calculation, and therefore double-entry, are
essential tools of the successful capitalist’’ (1956, p. 280). Finding single-entry accounts, he argued, supported Yamey’s
(1959) view that DEB was irrelevant to the development of capitalism because ‘‘Unhappily the bookkeeping of the colonial
merchant (who was often a remarkably successful capitalist [sic]) does not lend credence to this flattering view’’ (Baxter,
1956, p. 280; see also, 2004, p. 133). However, this argument is tautological because it assumes a ‘successful’ merchant or
farmer is a ‘capitalist’, whereas the problem is to identify them.
Because most inland merchants, like farmers, had no wageworkers to hold accountable, and no ‘‘outside parties’’, no
partners or stockholders, to whom they were accountable, ‘‘single-entry accounting satisfied the needs of many traders . . .
[who] would have been able to gauge profitability [sic] and inventory levels readily without the need for accounting reports’’
(Baxter, 1956, p. 280; Schultz and Hollister, 2004, p. 143). As simple commodity producers, the notion that ‘‘accounting
records should support the preparation of financial statements’’ was simply ‘‘not relevant for many family businesses [sic]’’
(Schultz and Hollister, 2004, p. 143), whose aim was consumption, a ‘competence’, not profit or a return on capital. The
exception proves the rule. Most of the ‘‘thousands upon thousands of ordinary traders, petty traders, and market farmers,
who . . . were buying and selling all over America’’ (Wood, 1993, p. 249), kept single-entry accounts of debts, but William
Prentis and Company, a leading colonial store in Williamsburg Virginia, had a social capital and employees and, predictably,
it calculated its ‘capital’ and ‘income’.21 A partnership that operated from 1733 until 1779, it had a salaried manager, used
DEB, and accrual accounting for debts, ‘‘a modified cash basis’’ (Coleman et al., 1974, pp. 32, 34–35, 36). The partners
produced a balance sheet for annual or biennial meetings of the subscribers, which they audited and attested to ‘‘acquit and
discharge’’ the manager, and kept careful records of their capital (Coleman et al., 1974, pp. 33–35). The ‘‘annual reports never
included an income statement’’ (Coleman et al., 1974, p. 35), but the company calculated its periodic cash surplus from the
balance sheets. From 1733 to 1742 it distributed its entire surplus; from 1742 to 1765 it retained some surplus; but from
1765 to 1774 reverted to 100% payout (Coleman et al., 1974, pp. 38–40). It carried its fixed assets (storehouses and houses) at
cost, did not charge depreciation, and immediately wrote off renewals of store equipment and all inward transportation
charges (Coleman et al., 1974, p. 37), features consistent with a semi-capitalist consumption mentality. Coleman et al. (1974,
e.g., p. 38) calculated the ‘‘return on owners’ equity’’ for various periods, the SRP, but provide no evidence that the partners
did, that they had an advanced semi-capitalist mentality.
‘‘Neo-Marxists’’ are wrong to ‘‘see . . . social relations embedded in such documents as [farmers’] account books as
evidence of non-commercial exchange’’ (Kulikoff, 1992, p. 16). Farmers certainly engaged in ‘‘intricate exchanges of labour
and goods between kindred and neighbours’’, that is, barter exchanges, but although not ‘‘on the market’’, it is misleading to
say they were ‘‘noncommercial’’ (Kulikoff, 1992, pp. 17, 19). Exchangers typically valued debts in money terms, if only at the
date of settlement, and they bargained about their value (Clark, 1990, pp. 35, 70–71). It is equally misleading to describe
barter debts as ‘‘gift exchanges’’ because creditors did not charge interest (Kulikoff, 1992, p. 20). Even if they had, according
to Marx’s theory charging or paying interest on debts, whichoccurred more as the 19th century proceeded (Henretta, 1991,
p. 260), is evidence of the money capitalists’ mentality. Farmers were ‘commercial’ because they valued their commodities in
a process of ‘commerce’ – in a process of ‘trade’, ‘intercourse’, ‘communication’ and ‘association’ (Onions, Vol. 1, p. 376) – but
this did not make them capitalists. Farmers did not become capitalists because they produced for market exchange, and did
not stay as simple commodity producers because they ‘‘exchanged (and did not sell)’’ (Henretta, 1991, p. xxiii). Farmers did
produce ‘‘surpluses over and above his [sic] own home and farm needs’’ so they could improve and extend their farms, but
this does not mean they ‘‘labored to add to . . . [their] capital plant [sic]’’ (Hacker, 1942, pp. 119, 6). They were not capitalists
because their accounts show that they did not produce as ‘a matter of profit or loss’, the late 19th century addition to the
meanings of ‘commerce’ (Onions, Vol. 1, p. 376).
Market historians assume that ‘‘markets generate their own influences on behavior’’ (Clark, 1990, p. 13), ‘‘insist . . . that
these exchanges are commercial’’, and some, such as Rothenberg (1981), ‘‘document . . . that assertion by comparing prices
found in the account books with the prices on urban markets’’ (Kulikoff, 1992, p. 17). However, closer correlations do not
necessarily mean farmers began producing for profit. According to Marx’s theory, if simple commodity producers exchange
one commodity for another, the value of the commodities depends on agreed estimates of the money value of the socially
20 Chatfield provides no evidence that farmer’s measured ‘success’ by the increase in their ‘assets’. Baxter notes, to the contrary, ‘‘In the great bulk of cases a
trial balance was patently impossible, as most of the impersonal accounts are lacking’’ (1956, p. 279), i.e., farmers did not account for ‘assets’ or therefore for
their increase.
21 Also predictably, factors from Britain who kept stores in Virginia sent back ‘‘accounts to their employer in full double entry’’ (Baxter, 1956, fn. 12, p. 279).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555526
necessary labour required to produce them, for which they could use a market price if there was one. Finding closer
correlations could therefore simply mean that as urban markets developed and spread farmers increasingly used their prices
to measure socially necessary labour time rather than rely on personal estimates and bargaining skill. Producing
commodities to exchange for money, even dependency on the market, does not therefore necessarily make a simple
commodity producer a capitalist, nor does the shift to paying market rather than traditional wages for occasional hired ‘help’.
Market historians insist, ‘‘it is inconceivable that major expansion in market opportunities over an extended period of time
would not also change the way in which farmers think and calculate’’, that they inevitably became ‘‘small businessmen’’
(Wright, 1988, pp. 184, 182). However, farmers produced for ‘use’ just as much when their aim was to exchange the
commodity for another that was more useful, or for money to acquire the same.
Moral-economy historians make the same mistake when they ‘‘start with Marx’s distinction between production for use
(use-value) and production for exchange (exchange value)’’ (Kulikoff, 1992, p. 15), and argue the latter meant production for
profit, ‘over time’. As Clark said, ‘‘farmers’ use of ‘exchange’ should not be regarded simply as evidence of ‘market orientation’
. . .’’ (1990, p. 15). However, he accepted that ‘‘over time, and under circumstances that need to be explored [,] . . . market
involvement [did] help bring about the creation of capitalist relations in the countryside’’, particularly when the farmers
became exposed to the commercial ethics of long-distance trade (Clark, 1990, p. 35). Kulikoff argues, ‘‘the growing
importance of commercial exchange in settled areas of the Northeast during the late eighteenth and early nineteenth
centuries and its immediate development in northern parts of the Midwest suggest that capitalism was generated by
commercial farm families’’ (1992, p. 21). Similarly, in Henretta’s ‘‘view, the relative absence of a market and imported goods
before 1750 (or even 1775) shaped the values and goals of individual farmers’’, even though he accepts there is ‘‘no necessary
dichotomy between family values and market production’’ (1991, pp. xxii, xxiv). Evidence that southern farmers had to
produce cotton for cash to make their mortgage payments, or that northern and western farmers were ‘‘eager players in the
market game, borrowing money not out of desperation but in the hope of making profits [sic] and accumulating wealth’’
(Wright, 1988, pp. 184, 185), does not prove they were capitalists.22 Everyone including farmers speculated in land and
borrowed to do it (Gates, 1964), but whereas ‘speculation’ for ‘profit’, buying cheap to sell dear, is evidence of the merchant
capitalist’s mentality, ‘speculation’ to accumulate wealth is consistent with the simple commodity producer’s mentality, not
the industrial capitalist’s. Nor does evidence of ‘‘an aggressive commercial strategy forced’’ on Ohio farmers through high
land prices mean they were capitalists, nor their seasonal employment of ‘‘hired farm labor’’ who, as ‘help’, ‘‘In the first half of
the nineteenth century . . . often had a social status no different from the farmer’’ (Wright, 1988, pp. 187, 196).
Most historians do not escape the circularity in the ‘‘conventional notion that the expansion of trade, increased
technological innovation, the rise of individualism, and the growth of free labor do excellent service as indexes of capitalist
development’’ (Merrill, 1995, p. 322). To escape we must identify the capitalist mentality and its social relations, understand
capitalism as ‘‘a market economy ruled by, or in the interests of, capitalists’’ (Merrill, 1995, p. 322), and to do this we must
first identify them. For example, Kulikoff might be right that the prime mover from the late 18th century was ‘‘An important
minority of northern farmers, who lived near cities or along rivers, [who] turned to commercial agriculture, sending large
surpluses to market, lending money at interest, and renting land near towns to increase their profits [sic]’’ (1992, p. 42).
Similarly, Henretta could be right that ‘‘a market mentality . . . achieved a prominent position . . . after 1800’’, that farmers
‘‘Ultimately . . . became more conscious of ‘profits’ [sic] and of ‘costs’ . . .’’ (1991, pp. xxviii, 260). However, their accounts, if
they exist, probably say otherwise because most of the early ‘‘account books of [inland] merchants and . . . [yeoman] farmers
are remarkably similar overall’’, particularly their ‘‘crude [sic], single-entry methods’’ (Lamoreaux, 2003, p. 442; Henretta,
1991, p. xxiii). Lamoreaux thinks this means farmers’ accounts tell us little about their ‘‘attitudes’’ or ‘‘economic culture’’;
that our ‘‘observation that farmers’ ‘accounting practices were devoted to keeping track of local debts and credits, not to
calculating profits’, does not in fact tell us much about their attitudes toward making money’’ (Lamoreaux, 2003, p. 445).
If we define capitalism as a market economy and see only or mainly barter debts in the accounts, we cannot say whether
the farmer was a capitalist. However, if we define it as particular social relations of production and a particular calculative
mentality, the absence of profit calculations shows precisely that most inland merchants and farmers were not capitalists.
The fact that northern farmers who sold their surpluses after subsistence and called the cash or store credit their ‘‘surplus’’
shows they were not, that they ‘‘were not agrarian entrepreneurs and that their prime goal was not a simple maximization of
profits’’ (Henretta, 1991, pp. xxiii, xxii) precisely because this ‘surplus’ was not ‘profit’. In the South, ‘‘yeomen. . . often
referred to their market crops as ‘surpluses’ . . .’’ (Oakes, 1990, p. 108). Their accounts show us that ‘making money’, making a
profit, being ‘successful’ in the market, was not part of farmers’ social relations of production or their mentality, which
focused on personal debts, on future positive or negative consumption. For example, Richard Williams of Williamsburg,
Massachusetts, ‘‘conceived ‘loss’ not as an unfavorable balance between incomings and outgoings, but as any need to make
outgoing payment during the normal run of transactions’’ (Clark, 1990, p. 70). Farmers were accountable only to themselves
for their labour and consumption, which is why we do not find bookkeeping records of either. In a money economy, with few
or no credit transactions, the simple commodity producer keeps no accounts, which is the story of American farmers’
disappearing accounts from the mid-19th century, as we shall see.
22 Many farmers bought land from ‘gentlemen’, usually merchants with connections with English capital, who acquired millions of acres of land through
political largesse or speculation and often lent the farmer the money (Kulikoff, 1992, pp. 41, 44).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 527
The simple commodity producer’s mentality does not rule out a large appetite for consumption or reducing labour time
and increasing consumption by using machines. Adopting machinery in farming or manufactures is therefore not
necessarily evidence of the capitalist mentality. By the late 1780s, many Americans agreed with Coxe, a well-known
merchant from Philadelphia, that America needed labour saving machines (Kasson, 1998, p. 12). Coxe argued that whereas
in England machines had degraded, impoverished, and made workers redundant, in America they would multiply the
commodities available and reduce dependence on European imports, ‘‘without taking our people from agriculture’’ (Coxe,
1787, quoted in Kasson, 1998, p. 10). Similarly, having failed to adopt known techniques to improve productivity ‘‘already
in widespread use in England’’, finding American farmers adopting them in a ‘‘rash’’ of innovation during the later 18th and
early 19th centuries (Lamoreaux, 2003, pp. 456–457) to increase output to meet rising demand when labour was scarce, is
not necessarily evidence of the capitalist mentality. According to Marx, capitalist innovation is internal and continuous
(Bryer, 2005).
From the 1820s, as Northeastern merchants, many of whom or their ancestors had made fortunes in privateering and
smuggling, transported and exported increasing amounts of raw materials and agricultural produce, particularly southern
produced cotton, and imported manufactures. They accumulated money wealth and commercial contacts with European
capitalists and used them to spur agricultural and industrial development through huge investments in inland
transportation (Post, 1982, p. 37). Starting in the 1820s, merchants from the great seaports of Baltimore, Boston, Charleston
and Philadelphia poured capital into canals, and then into railroads (Robertson, 1973, p. 148; Gilje, 1996, p. 165; Previts and
Merino, 1998, p. 70). By the 1840s, railroads had undermined the farmers’ system of household production, bringing cheap
manufactures and giving them access to wider markets for cash crops (Post, 1982, p. 43). A large natural increase in the
population from the 1820s and immigration from the 1840s dried up the supply of cheap land in the northeast, pushing out
the sons and daughters of farmers in large numbers, forcing them and new arrivals to move west or become wageworkers
(Levine et al., 1989, p. 234; Gordon et al., 1982, pp. 59–60). However, neither farmers’ dependency on the market, the
increasing availability of wage labour, nor the employment of the labour-saving machinery from the 1840s to the 1860s –
particularly iron and steel ploughs, mechanical reapers, rakes, seed drills and threshers (Hacker, 1942, p. 224; Post, 1982, p.
43) – necessarily turned them into capitalists. Danhof claims that American ‘‘agriculture . . . emerged entirely from its earlier
self-sufficiency into a maturely capitalistic [sic], profit-seeking, and market-focused system’’ (1975, p. 150). Kulikoff argues,
‘‘Northern victory in the Civil War presaged the spread of capitalist agriculture’’, and ‘‘By the late nineteenth century yeomen
predominated in only small, isolated pockets of rural America’’ (Kulikoff, 1992, p. 37). Following Weber, who claimed during
a visit in 1904, ‘‘the American farmer is an entrepreneur like any other’’, and was a ‘‘rationally [sic] producing small
agriculturist a long time ago’’, Kulikoff agrees that by 1900, ‘‘Living in a capitalist society . . . most farmers were capitalists’’
(1992, pp. 13, 55). However, even this is doubtful.
Farmers fell into the market vortex from around the mid-19th century, but the accounting evidence suggests most
remained simple commodity producers. As they increasingly engaged with the market on a cash basis their ‘‘Account books
from the antebellum decades recorded fewer transactions than account books from the late eighteenth century’’, and
‘‘smaller numbers from the later period have survived, suggesting that fewer and fewer farmers were even bothering to keep
them’’ (Clark, 1990, p. 224; Lamoreaux, 2003, p. 460; Rothenberg, 1992, p. 54). The increasing use of cash from the 1850s was
not therefore necessarily ‘‘one indication of the emergence of rural capitalism’’ (Clark, 1990, p. 226), because the
simultaneous disappearance of accounts suggests their social function had been recording barter debts (Baxter, 1956, p.
275), which had gone. There almost no evidence of farmers using DEB (Lamoreaux, 2003, fn. 16, p. 442; fn. 59, p. 460), that is,
of even a semi-capitalist mentality.23 Not finding DEB is consistent with farmers rarely forming partnerships, and not finding
accounts at all with the fact that ‘‘the number of laborers employed even on the largest farms as late as the 1850s was still
very, very small’’ (Lamoreaux, 2003, p. 460). Large farmers did use temporary mass wage labour systems in Texas, California,
and other western states, but the general ‘proletarianization’ of farm labour did not occur: ‘‘wage labor was not the prevailing
system’’ (Wright, 1988, pp. 203, 193).24 Rather than employ workers, farmers mechanised where they could (Wright, 1988,
p. 208). Merchants often provided the money farmers needed to start or to expand production, and from the 1830s an ‘agro-
industrial complex’ of increasingly large manufacturers processed their crops, produced their farm equipment, and supplied
their inputs, and large railroad companies whom the government had given vast tracts of land, sold them land and shipped
their products and supplies. Farm mortgages and tenancies increased in the later 19th century, but the majority of farmers
continued to own their land well into the 20th century (Wright, 1988, pp. 183, Table 2, p. 203). However, none of these
changes necessarily made American farmers capitalists. Only if we assume they must be is it ‘‘surprising’’ that ‘‘at a time
when farmers were more engaged in production for the market than ever before, they showed little interest in figuring their
costs more precisely’’ (Lamoreaux, 2003, p. 460).
23 Clark gives one possible example, Charles P. Phelps of Hadley, Connecticut, from 1828, who owned half of one of the Valley’s largest farms, who had a
legal and mercantile career in Boston and ‘‘is known to have used accounting procedures . . . ‘after the manner of merchants and manufacturers’ . . .’’ (1990, p.
155), but provides no details. Matthew Roth examined ‘‘more than fifty account books from farmers, merchants, and manufacturers . . . for 1790–1850’’ and
‘‘told’’ Lamoreaux they ‘‘all used crude double-entry methods’’ (2003, fn. 16, p. 442). However, even if we knew how many farmers accounts Roth included in
the ‘more than fifty’, ‘crude double entry methods’ is probably not DEB.
24 In the 1840s, hiredhands, often unemployed in the winter months, accounted for between 30 and 40% of the farm populations in Ohio, Indiana, Illinois,
Michigan, Minnesota, and Wisconsin (Pessen, 1985, p. 106).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555528
3.2. Southern slavery
Most southern farmers were yeomen who did not own slaves, but there were around 400,000 slaveowners by 1860.
Were all or a significant number of them capitalists as many historians believe? Forced labour – slavery, serfdom, and
peonage – was the global norm until the 19th century (Kolchin, 1993). In the North American colonies, outside the
family farm bonded white labour was common, but as the supply fell during the later 17th century, Southern
landowners increasingly turned to cheaper and more productive African slaves (Kolchin, 1993, p. 11). By the mid-18th
century, slavery (legal in all British American colonies) had spread throughout America, but growing demand from
Europe for ‘staples’ – tobacco, sugar, rice, and later cotton – made it the dominant system in the South (Kolchin, 1993,
pp. 3, 18). The American Constitution confirmed its legality but required the abolition of external slave trading by 1808,
so from 1790 imports accelerated and, with natural growth, the number of slaves increased from 700,000 to 1.2 million
by 1810, which grew to 4 million by 1860 (Kolchin, 1993, p. 93; Clark and Hewitt, 2000, p. 322). Slavery dwindled in the
North (by the 1820s some northern and Midwestern states had abolished it, and others passed laws that would), but by
1860 it had spread south and west from a few states in the upper South (Virginia, South and North Carolina, Georgia) to
include nine new states reaching half way across the continent into Texas. Slave production of all staples expanded
during the later 18th century, but following Eli Whitney’s invention of the cotton gin in 1793, which increased the
productivity of separating seed 10-fold, ‘King Cotton’ became America’s leading export, earning more dollars than all
other exports combined (Clark and Hewitt, 2000, pp. 304–306, 322; Kolchin, 1993, p. 95). Annual production rose from
3000 bales in 1790 to more than 4 million bales by 1860, by when hundreds of thousands of ‘surplus’ slaves had been
moved west (Kolchin, 1993, pp. 95, 96).
By 1830, around 225,000 white Southerners owned slaves (Clark and Hewitt, 2000, p. 331). From the 1830s, Southern
wealth concentrated as the proportion of farmers owning slaves fell from 36% in 1830 to 31% in 1850 to 26% in 1860
(Kolchin, 1993, p. 180). By 1860, 400,000 slave owners possessed 93.1% of the South’s agricultural wealth, having on
average 13.9 times the wealth of non-slave owners (Kolchin, 1993, p. 180). Around 25% of slaves were on plantations with
between 1 and 9 slaves; 50% had 10 and 49 slaves; and 25% had 50 or more (Kolchin, 1993, p. 101). As more than 90% of slave
owners had 30 or fewer slaves, which accounted for roughly 56% of all slaves, the top 10% of owners had around 44% of all
slaves and 40% of southern agricultural wealth.25 By 1860, the top 2.7% of owners with more than 50 slaves owned 25% of all
slaves (Kolchin, 1993, p. 101), and this group wielded most political power in the South (Oakes, 1990, pp. 75–76; Clark and
Hewitt, 2000, p. 331). As slavery grew in America, emancipation proceeded elsewhere (notably in the British West Indies in
1833), and by the 1840s it was the South’s ‘peculiar institution’. Its ‘‘fabled prosperity’’ during the 1830s (Fogel and
Engerman, 1974, p. 93), following a series of unsettling slave revolts and increasing attacks from abolitionists, encouraged
slave owners to fiercely defend it. They ‘‘tightened their grip on blacks, free and enslaved, and on anyone else, South or
North, who challenged their right to hold humans in bondage’’ (Clark and Hewitt, 2000, p. 345).26 They tightened it again
during the 1850s as soaring worldwide demand for cotton generated a ‘‘sustained boom in profits for cotton planters’’
(Fogel and Engerman, 1974, p. 93).
American historians have long debated Southern ‘distinctiveness’, and have long resisted the conclusion that
slaveowners were capitalists. Up to the 1950s, they ‘‘denied that there was profit in slave ownership and rejected the idea
that a capitalist outlook could have characterized plantation owners’’, depicting them ‘‘as proud, even noble, paternalistic
landlords tragically out of place in capitalist America’’ (Ransom and Sutch, 1988, p. 134). This view collapsed when Conrad
and Meyer (1958) demonstrated that southern slavery was ‘profitable’ by estimating the typical slaveowner’s internal rate
of return. Taking the existence of Northern capitalists for granted, the debate focused on whether, given that their
‘commercial orientation’ predated Northern commercialism, slave owners were also capitalists. ‘Consensus’ historians
argued that slaveowners were capitalists because they had ‘‘shared American experiences and values’’ (Kolchin, 1993, p.
170). Following ‘‘Elkins, Stampp, . . . and many others’’ (Fox-Genovese and Genovese, 1985, pp. 22), flamboyantly deploying
the new ‘Cliometrics’, Fogel and Engerman (1974) loudly claimed in Time on the Cross that American slave owners were
‘‘quintessentially capitalistic’’ (Kolchin, 1993, p. 172).27 Critics quickly rebutted the corollary that slaves were proletarians
(David et al., 1976; Gutman, 1975), but most continued to accept that at least a significant minority of the slave owners
were capitalists (Fox-Genovese and Genovese, 1985, chap. 6). Some argue that Marx ‘‘recognized the capitalist nature of
American slavery long before American historians’’ (Ransom and Sutch, 1988, p. 133), when he commented, ‘‘Where the
capitalist outlook prevails, as on American plantations, this entire surplus value is regarded as profit’’ (Marx, 1998, p. 790).
However, regarding ‘this entire surplus value as profit’ is consistent with slave owners focusing on consumption, with
25 Assuming the ratio between the proportion of holdings and the number of slaves is constant, as 75% of slaves were on holdings between 1 and 40 slaves,
56.25% of slaves were on holdings between 1 and 30 slaves [75%� 30/40]. As 90% of slave owners had holdings between 1 and 30 (Kolchin, 1993, p. 101), 56%
of slaves, the other 10% had 44%, and as slaves represents the wealth of agriculture, the top 10% owned 40% of southern agricultural wealth
[43.75%� 93.1% = 40.73%]. Oakes says the richest 10% – 2–3% of the South’s free men – held 50% of the slaves (1990, p. 92). As agriculture dominated the
southern economy, this 10% was its ruling elite.
26 For example, in the 1830s, Virginia and South Carolina made it illegal to teach blacks to read, and other states made it illegal for them to control church
services. Many restricted slaves’ freedom of movement, requiring signed passes authorising absence from a plantation, and established militias to enforce it,
and banned anti-slavery books, newspapers, etc. (Clark and Hewitt, 2000, pp. 346, 348).
27 Elkins and Stampp were prominent historians of American slavery – for example, Elkins (1959), Stampp (1956).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 529
semi-capitalism, because by this Marx meant ‘‘The entire surplus-labour of the labourers, which is manifested here in the
surplus-product’’ (1998, p. 790), that is, the consumable surplus. Furthermore, Marx added, ‘‘The price paid for a slave is
nothing but the anticipated and capitalised surplus-value or profit to be wrung out of the slave’’ (1998, p. 795), in other
words, the slave owner had the money capitalists’ simple rate of profit mentality. Wallerstein (1974) argued that New
World slavery’s immersion in the world market meant it was inherently ‘capitalist’, but most Marxists take it as self-
evident that Marx did not ‘‘consider serf or slave estates to be capitalist, since he regarded wage labour, exchanging against
capital, as essential to the circuit of fully capitalist accumulation’’ (Blackburn, 1997, p. 374).However, Fox-Genovese and
Genovese (1985) influentially argued that Marx’s approach suggests that American slavery was a ‘‘hybrid system’’, ‘‘a
bastard child of merchant capital’’ (Kolchin, 1993, p. 173), whereas Marx himself was ambiguous and contradictory,
quoting the following (and other similar) passages that, they claim, ‘‘make no sense’’ (Fox-Genovese and Genovese, 1985, p.
20). Marx wrote,
28 Som
29 Thi
labour
30 ‘Ov
absolut
‘‘Adam Smith emphasises how, in his time (and this applies also to the plantations in tropical and subtropical countries
in our own day), rent and profit were not yet divorced from one another, for the landlord was simultaneously a
capitalist, just as Cato, for instance, was on his estates. But this separation is precisely the prerequisite for the capitalist
mode of production, to whose conception the basis of slavery moreover stands in direct contradiction’’ (Marx, 1998, fn.
42a, p. 773).
Does calling Cato ‘‘a capitalist’’ contradict Marx’s denial that the capitalist mode of production existed in the ancient
world? While Marx could have been clearer, Fox-Genovese and Genovese overlook the significance of his comments that
‘‘rent and profit are not yet divorced’’, that Cato was ‘‘simultaneously’’ a ‘‘landlord’’ (of a slave estate) and a ‘‘capitalist’’,
meaning here a merchant capitalist who sold his surpluses. As this was a footnote to his conclusion that Carthage and Rome
showed ‘‘most analogy with the capitalist rural economy’’, but that they did not ‘‘truly correspond . . . to the capitalist mode
of exploitation’’, Marx apparently saw Cato as semi-capitalist who ran his estates for a surplus that, from the capitalist
viewpoint, comprised ‘‘rent and profit’’.28 Marx’s point was that Cato’s estates showed ‘‘more similarity to a plantation
economy’’ (1998, p. 773), such as existed in America, than to capitalism. Fox-Genovese and Genovese ‘‘pause’’ when
confronted with his statement, ‘‘The fact that we now not only call the plantation owners in America capitalists, but that they
are capitalists, is based on their existence as anomalies within a world based on free labour’’ (Marx, 1973, p. 513). However,
this is consistent with plantation owners embedded in a capitalist world market who were nevertheless semi-capitalists
because they were an anomaly in using completely unfree labour. Fox-Genovese and Genovese accept Marx’s bald
statements, that ‘‘Negro slavery - a purely industrial slavery – . . . is . . . incompatible with the development of bourgeois
society and disappears with it’’ (1973, p. 224), and that ‘‘the capitalist mode of production’’ and ‘‘slavery . . . stand . . . in direct
contradiction’’ (Marx, 1998, fn. 42a, p. 773). They agree with him that merchant capital only played a ‘progressive role’,
promoted the transition to capitalism, ‘‘Under certain specified historical conditions’’ (Fox-Genovese and Genovese, 1985, p.
5), particularly free wage labour. Where this was not the case, as in the southern states of America, they argue that merchant
capital produced ‘‘a hybrid system . . . at once based on slave relations of production and yet deeply embedded in the world
market’’ (1985, p. 5). They conclude, therefore, ‘‘In one crucial respect . . . [slaveowners] were akin to the modern bourgeoisie:
they produced for a world market and had to think and act like businessmen in much of their endeavours’’ (Fox-Genovese
and Genovese, 1985, p. 16), but were constrained by the limits of slavery within the labour process. However, they do not
explain what it means to ‘‘think and act like the modern bourgeoisie’’, ‘‘like businessmen’’, and without this their claim that
the planters’ mentality was a ‘hybrid’ is potentially misleading. Rather than the peculiar mixture of two different species or
types, the accounting evidence supports Marx’s view that the planter’s mentality was merely the ‘graft’ of the merchant
capitalist’s mentality onto the roots of slavery that both fed and constrained it, that it was semi-capitalist, as we will see.29 As
Oakes says, ‘‘Marx captured the essence of the problem’’ (1990, p. 55) when he explained American slavery as the sum of ‘‘the
civilised horrors of over-work . . . grafted on the barbaric horrors of slavery’’ (Marx, 1996, pp. 243–244).30
Historians agree, ‘‘the intensity with which slaveowners drove their slaves depended upon . . . [their] commitment to the
production of staples for the international market place’’ (Berlin and Morgan, 1993, p. 4), and with Fogel and Engerman that
slaves were ‘‘a highly profitable investment which yielded rates of return that compared favourably with the most
outstanding investment opportunities in manufacturing’’ (1974, p. 4). However, while ‘‘A reasonable man might think that
the issue . . . had to do with the financial fortunes of slaveowners’’, which would require investigation of their accounts, ‘‘it
doesn’t’’ (Wright, 1976, p. 304). By ‘rates of return’ Fogel and Engerman mean, following Conrad and Meyer (1958), the
planter’s internal rate of return, which critics pointed out presumes the mentality it purports to discover (David et al., 1976,
p. 340), and which from Marx’s perspective presumes the money capitalist’s mentality, not the industrial capitalist’s.
Although there is ‘‘considerable evidence that slaveowners were hard, calculating businessmen who priced slaves with as
much shrewdness as could be expected of any northern capitalist’’ (Fogel and Engerman, 1974, p. 73), the assumption that
e Roman estates kept accounts of ‘‘monetary profitability’’ (Rathbone, 1994, p. 16), but whether Cato did is unknown.
s is the end of biological analogy because in Marx’s theory capitalism is a ‘hybrid’ unknown to biology in which the ‘mating’ of free capital and free
produces a new species.
er-work’ is a characteristic of the formal subordination of labour, of the intensification of labour and extension of the working day to maximise
e surplus value.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555530
Northern businessmen were capitalists is doubtful, as we shall see. Fogel and Engerman (1974) and others attempt to elide
the Marxist objection that free ‘‘wage-labour was absent’’ by defining capitalism as the ‘rational’ or ‘scientific’ management
of labour, whether free or not (Cooke, 2003, pp. 1901–1902). Fogel and Engerman argue that Southern slaveowners were
more capitalistic than the Northern capitalists because their slaves ‘‘labored under a regimen that was more like a modern
assembly line than was true of the routine in many of the factories of the antebellum era’’ (1974, p. 208). They assert, ‘‘the
great plantations were the first, large, scientifically managed business enterprises, and the planters were the first group to
engage in large-scale, scientific personnel management’’, and claim that ‘‘black slaves were the first group of workers to be
trained in the work rhythms which later became characteristic of industrial society’’ (Fogel and Engerman, 1974, p. 208). As
we observe degrees of ‘rationality’, so according to this view there are degrees of ‘capitalism’, and for many historians ‘‘the
debate has moved on from one between absolute capitalist – pre-capitalist positions to the consideration of questions of
degree’’ (Cooke, 2003, p. 1902). However, as it is impossible to decide questions of degree without a notion of the absolute,
and no one has yet satisfactorily defined ‘absolute capitalist rationality’, what follows uses Marx’s accounting signature for
‘absolute capitalism’ (ROI).31
The accounting evidence shows that American slave owners’ mentality was a question of ‘degree’ – the smaller ones were
simple commodity producers, and the larger ones were semi-capitalists, partly merchant capitalist and partly a simple
commodity producer whose means of production included slaves. Only the minority of large planters had the advanced SRP
mentality. We need archival research to explain their rate of profit calculations, but it is clear that the planter elite
participatedin social capitals. Although when most planters ‘‘had a surplus to invest [they] almost always put it into land and
slaves’’ (Chandler, 1977, p. 66; Clark and Hewitt, 2000, p. 517), larger planters did not necessarily follow them. Samuel
Postlethwait, owner of the Locust Grove plantation from 1802, which had 180 slaves, ‘‘was a prominent businessman in
Natchez and one of the founders of the Bank of Mississippi’’ (Barney and Flesher, 1994, p. 279). In 1850, 6% of slave owners
(some 26,000) were also ‘businessmen’ (including some civil servants), and 8% were ‘professionals’, mainly doctors and
lawyers (Oakes, 1983, pp. 60–63, 247). In the 1830s, John Cobb who owned a plantation with 150 slaves in Johnson county,
Georgia, had investments in goldmines, railroads, and banking enterprises, and Stephen Duncan, a successful planter and
banker, ‘‘urged his peers to diversify’’ (Clark and Hewitt, 2000, pp. 480, 481). Purchasers of shares in investment banks often
used slaves as collateral (Johnson, 1999, p. 25). ‘‘In town and cities across the South . . . elites had established banks and . . .
had built alliances with foreign merchants and northern factors’’ (Clark and Hewitt, 2000, p. 334). In the 1840s, some
‘‘investors, particularly in the towns and cities of the Southeast, began to diversify . . . by investing in industry’’ (Clark and
Hewitt, 2000, p. 513). Everyone agrees, ‘‘Large-scale commercial production of cotton, sugar, rice and tobacco were
businesses run for profit. And slavery was first and foremost a way of controlling the labor that produced those profits’’ (Clark
and Hewitt, 2000, p. 332). The key questions, therefore, are what kind of ‘business’ slavery was, and for what kind of ‘profit’?
To answer them we must examine the slave owners’ accounts.
3.3. Slave owning and accounts
Owners of 10 or fewer slaves usually worked alongside them. With less than 30 field slaves, ‘‘resident masters supervised
operations personally. They knew the slaves and their capabilities and directed their work informally, with a minimum of
record keeping and regimentation of labor’’ (Kolchin, 1993, p. 102). These slaveowners did not need accounts to hold their
slaves accountable, and because consumption was their aim, they had no need to calculate their ‘capital’ or ‘income’. Leisure
was a high priority. James De Bow, editor of De Bow’s Review (a journal devoted to planters’ interests), thought every ‘‘non-
slaveholder knows . . . that as soon as his savings will admit, he can become a slaveholder, and thus relieve his wife from the
necessities of the kitchen and his children from the labors of the field’’ (quoted by Oakes, 1990, p. 95). Owners of a few slaves
could, like yeomen farmers, function simply by counting their cash balance and recording their debts. As most smaller
planters worked with credit from a factor (merchant) who bought their crop and provided supplies, on ‘‘most plantations,
account books were usually kept by the planter’s factor, and not by the planter himself’’ (Chandler, 1977, p. 66).32 Affleck may
have exaggerated how few planters kept accounts because he was promoting sales of his book, The Cotton Plantation Record
and Account Book (1851), on how they should keep them, but was probably right that
31 His
control
the ach
Marx’s
capitali
32 Acc
accoun
of exte
‘‘. . . many planters go from year to year without keeping any records of their business [and are satisfied] if there is
enough [cash] left over to pay taxes, overseer wages . . . and a few hundred to meet expenses in New Orleans at
Christmas . . .. This is a true picture of the system pursued by too many who [do not] keep any records of their business.
torians often use Taylor’s ‘scientific management’ as the absolute standard of capitalist rationality, but Part 2 argues that its reliance on action
s, on managerial ‘absolutism’, means that Taylorism is not capitalist. Taylorism rewards (or punishes) ‘performance’ meaning obedience to rules, not
ievement of targets. We will see that plantations used results control in the same sense, for targeted work, not for the production of value. From
perspective, drawing parallels between Taylor’s ‘scientific management’ and plantation management (e.g., Cooke, 2003) shows that slavery was not
st.
ording to Chandler (who references Scarborough, 1966), ‘‘Some planters, however, did keep fairly accurate consolidated books when they had
ts with more than one storekeeper, factor, or banker. These double-entry accounts [sic], like those kept by factors and merchants, were only records
rnal transactions’’ (1977, p. 66). Scarborough gives no evidence of DEB.
33 Affl
1840s.
misman
(Oakes,
would]
135). H
mounte
34 She
35 The
slaveho
historia
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 531
. . . Under such neglect of all management, no business can possibly survive (Affleck, 1851, p. 79, quoted in Heier, 1988,
p. 152].33
Smaller planters did not have ‘businesses’. They sought a consumable surplus from their slaves’ and were satisfied if there
was enough ‘‘left over’’, a surplus for Christmas expenses, for luxury consumption. Affleck evidently did not expect smaller
planters to buy his book, which provided ruled pages for keeping various accounts (discussed below), because in the early
1850s he sold it in three sizes – for plantations with 40 or fewer slaves; from 40 to 80, and over 80, and in 1857 for 120 or
more slaves (Kolchin, 1993, p. 102). When they had 30 or more field hands, planters usually hired white overseers who
became a recognised professional group in the South (Gutman, 1975, p. 68; Kolchin, 1993, p. 102, 103; Cooke, 2003, p. 1910).
Affleck’s prime market was these larger plantations, those around 10,000 owners in 1860 with more than 50 slaves in total
(Gutman, 1975, p. 68), where the owner did not supervise, or did not supervise alone, when an overseer was essential. Then
the owner needed accounts to hold the overseer accountable for the surplus from the slave exploitation ‘business’, and how
he obtained it. It was on these larger plantations that ‘‘Many planters kept record books in which they listed their slaves and
livestock, recorded expenditures and sales, and kept track of agricultural operations, usually through brief daily or weekly
entries’’ (Kolchin, 1993, p. 102).
One of them was Thomas Jefferson, a large slave owner, who followed the ‘‘fairly usual custom’’ of plantation owners in
the late 18th century of keeping ‘‘accounts of cash receipts and disbursements’’ (Shenkir et al., 1972, p. 34). Jefferson came
from a wealthy family, part of the colonial Virginia elite, but his lavish lifestyle made him perpetually in debt, forcing him to
encumber his slaves with notes and mortgages (Sloan, 2001, pp. 14–26, 220–221). When he returned to his farms after ten
years of absence he found them ‘‘so much deranged that I saw evidently that they would be a burden to me instead of a
support till I could regenerate them’’ (quoted in Shenkir et al., 1972, p. 39). He decided to start a nailery because it required
‘‘little or no capital, & I now employ a dozen little boys [slaves] from 10 to 16 years of age, overlooking the details of their
business myself drawing from it a profit’’ (quoted in Shenkir et al., 1972, p. 39). He kept a ‘Nailery Manufacturing Account’
from 1794 to 1800 that included a daily production report for each slave, recording the materials used and the output, which
Jefferson summarised quarterly highlighting the wastage and ‘‘profit’’ per slave (Shenkir et al., 1972, p. 41). The ‘profit’,
summarised annually in the ‘Statement of annual disbursements and receipts on account of the nailery’, was the cash
surplus: ‘‘the nailery records are on a cash basis, with no inventory’’ (Shenkir et al., 1972, p. 41). The calculation of each
slave’s net cash surplus and his choice of the nailery because it required little ‘capital’, are consistent with an advanced semi-
capitalist mentality that focused on ‘profit’ seen as consumable surplus and‘capital’ as future consumption. Jefferson placed
a higher valuation on female slaves because a male slave’s labour provided only current consumption, whereas a female
produced ‘capital’, future slaves who would produce additional streams of consumption. ‘‘I consider a woman who brings a
child every two years as more profitable than the best man of the farm. What she produces is an addition to capital, while his
labor disappears in mere consumption’’ (Jefferson, quoted in Appleby, 2003, p. 77). Unlike a capitalist for whom workers,
male or female, produce profit, Jefferson thought of his slaves as a means of consumption, and sold them when he was short
of money (Appleby, 2003, pp. 77, 151–152). How typical were Jefferson’s mentality and his ‘‘meticulous’’ accounts, their
focus on consumable surplus, but particularly his ‘‘very carefully designed job-cost system’’, including ‘‘his continuing
development and use of standards’’, apparently based on experience, that he might have used to judge the performance of his
slaves (Shenkir et al., 1972, pp. 33, 41)?34 Was his ‘job-cost’ system evidence of the ‘scientific’ or ‘rational’ capitalist
mentality?
What follows uses Affleck’s well-known Plantation Record and Account Book as an ideal-typical model of slave accounting
to assess the archival evidence available.35 From a study of 52 plantation’s records in Mississippi and Alabama (virtually all
those that survive from 1825 to 1865), Heier found that although only six plantations used Affleck’s book, around 50%
implemented its methods (1988, pp. 144, 145). He concluded its ‘‘procedures represented a more or less uniform accounting
system that was employed by antebellum cotton plantations in Alabama and Mississippi’’ (Heier, 1988, p. 145). It was ‘‘an
extremely popular volume – multiple editions and thousands of copies were printed’’ in the 1840s and 1850s (Fleischman
and Tyson, 2004, p. 384; Kolchin, 1993, p. 102). Affleck claimed in an advertisement, ‘‘These works have been in the hands of
the most experienced and methodical planters of the Southwest, for several years. The demand has been steadily on the
increase, exhausting the first two editions and leaving large orders unfilled’’ (quoted by Heier, 1988, p. 144). In 1852,
the Editorial and Literary Department of De Bows Review described it as a ‘‘valuable book . . . coming into extensive use among
the planters’’ (p. 114). Its methods reveal an advanced semi-capitalist mentality, and re-examination of archival research
eck was a noted southern agricultural reformer and writer, born in Scotland, who married into a plantation outside Natchez, Mississippi, in the
Like other reformers (mainly from southeastern states), he was concerned about soil erosion, the exploitation of planters by factors, and
agement and cruel treatment of slaves by overseers, all of which they argued reduced ‘profits’ and encouraged debilitating western migration
1983, pp. 88–90; Heier, 1988, p. 133). Affleck claimed his book would provide ‘‘a uniform system of plantation management and discipline [that
contribute to successful and profitable planting, and to the health, comfort, and happiness of Negroes [Affleck, 1851, Preface]’’ (Heier, 1988, pp. 134–
owever, ‘‘Around 1850 the advocates of plantation management began to shy away from their reformist stance as pressure to defend their institution
d’’ (Oakes, 1983, p. 162).
nkir et al. (1972) provide no details of how Jefferson used this information.
re are ‘‘hundreds of collections of slaveholders’ papers’’, albeit ‘‘overwhelmingly biased in favor of the wealthiest, most stable, most educated
lding families’’, and geographically skewed to Atlantic coast states (Oakes, 1983, pp. xv–xvi), still apparently awaiting investigation by accounting
ns.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555532
shows that large planters were typically semi-capitalists, both before and after its publication.36 The first page is a ‘‘set of
directions and explanations about the book and how it was to be used’’ (Heier, 1988, p. 134), followed by fifteen types of
records on pages lettered A through P, which fall into two groups. First, the ‘Overseer’s Record Keeping Responsibilities and
Slave Accounting’ that, together with the ‘Valuation of Property, and Income Determination’ accounts, held the overseer
accountable to the owner. Second, the ‘Daily Diary’ and ‘Cotton Record Keeping’ accounts held the slaves accountable to the
overseer.
3.4. Accountability to the slave owner
Affleck required the overseer to produce a physical inventory of the owner’s ‘‘stock’’ (farm implements and livestock) to
act as ‘‘the overseer’s receipt for the property placed in his charge’’ (1851, p. 1), for which he was accountable to the owner
quarterly. ‘‘Much vexation and loss will be spared the non-resident planter, and very often the undeserved blame to the
overseer, if the correct keeping of these inventories is enforced’’ (Affleck, 1851, p. 1). Affleck held the overseer accountable for
the slaves by an inventory (births, health, visits by a physician, and deaths), by records of any problems with their behaviour,
and by records of the provisions delivered to the plantation and their distribution to the slaves (Heier, 1988, pp. 137–138). He
had the planter perform a full physical inventory and market valuation of the slaves at the year-end: ‘‘The PLANTER HIMSELF
will make a careful record of all the Negroes upon the plantation, in families; stating their ages as nearly as possible, and their
cash value at the commencement of the year. At its close, he will again enter the individual value at that time, adding the
year’s increase, and omitting those that may have died’’ (Affleck, 1851, p. 1). The owner then recorded the opening and
closing values of the slaves, land, livestock, and implements, inventories of produce, and the year’s sales and plantation
expenses, in a ‘‘balance sheet’’ (Heier, 1988, p. 139):
The planter debited (Dr) the ‘balance sheet’ with the opening ‘‘fair cash value’’ of the land, slaves, implements and utensils
and ‘‘Interest on the same at 6%’’, the purchases of stock (livestock), implements and utensils, and plantation expenses, and
credited (Cr) it with closing valuations and sales (Affleck, 1851, p. 1).37 If the credits exceeded the debits, the planter had
made a ‘profit’. That is, profit or loss = [Closing capital + Sales]� [(Opening capital� 1.06) + Stock Purchases + Expenses)].38
Affleck’s ‘profit’ is a mixture of income (sales� expenses) and valuation adjustments after deducting an interest charge on
the opening capital. His explanation of the interest charge was that ‘‘The plantation is justly chargeable with its own fair cash
36 From an examination of 30 or so plantation’s archives (discussed below), Fleischman et al. find, ‘‘US records were . . . maintained in a haphazard fashion
until the 1850s, when a degree of order and regularity became evident with the appearance of the Affleck plantation books’’ (2011, p. 766). However, there is
earlier evidence consistent with Affleck’s principles, and the greater numbers they found may reflect the increased survivability of bound books rather than
loose papers. It probably also reflects the increasing size of plantations in the 1850s encouraging slave owners to employ more white overseers. The number
of plantations with more than 100 slaves increased from 1479 in 1850 to 2279 by 1860, and the number of white overseers increased from 18,859 to 37,883
(Cooke, 2003, p. 1911).
37 Heier argues Affleck’s ‘‘use of current cash values to account for the assets and corresponding plantation income may have its origins in the property tax
laws enacted in Alabama and Mississippi during the 1850s’’ (Heier, 1988, p. 140). However, as Heier finds earlier accounts similar to Affleck’s (1988, pp. 140,
147), tax law could have reflected accounting practice.
38 Affleck was right when he ‘‘stated in the 1853 edition of his almanac that farm accounts similar to those outlined inhis book had been in general use in
Great Britain for a number of years’’ (Heier, 1988, p. 143) (see Bryer, 2006c).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 533
value at the commencement of the year; and with one year’s interest on the same at six percent. No course of farming can be
profitable, which will not pay a fair rate of interest upon the value of the land employed. . . . And so of Negroes, stock, and
implements’’ (Affleck, 1851, p. 1). Charging 6% interest on the opening capital produced the plantations’ residual ‘profit’, a
figure equivalent to an excess return on the opening capital, the SRP. In 1849, Colonel L.M. Williams, a large planter from
Society Hill, South Carolina, owning 254 slaves, calculated the residual income on the total capital invested, including land,
slaves, stock, tools, and equipment, which ‘‘was taken at $161,000’’:
‘‘The cash [sic] expenditures totalled $17,879.48, and included the following: interest on the capital at 7 per cent (carts,
wagons, plows, and other plantation tools excepted); taxes on slaves and land; wages of three overseers; medical
attention for slaves, iron, plantation tools and equipment; negro clothing, molasses, tobacco and salt. The cotton crop
was sold for $19,868.16 and other produce, such as beef, butter, bacon, corn, meal, mutton, and wool brought the total
income to $22,298.16. The profits over the interest and expenses were $4,403.68, or about 2.7 per cent return from the
investment’’ (Flanders, 1933, pp. 221–222).
It is unclear if Colonel Williams or Flanders calculated the excess rate of profit because Flanders says ‘‘the great majority of
planters . . . doubtless did not stop to consider the actual return on their capital invested . . . [but] one Georgia planter . . . did’’
(1933, p. 222). This was Farish Carter, one of the wealthiest planters of his day, who owned a 15,000-acre plantation in
Murray County and several other cotton plantations in the centre of Georgia. In 1851, he produced an account for the 15,000-
acre plantation showing the ‘‘Capital invested’’ at $50,000, and ‘‘Land stock and Negroes’’ $100,000, giving total capital of
$150,000; total ‘‘Sales of produce’’ of $4660, ‘‘Expenses’’ of $2700, giving ‘‘Net’’ income of £1530. In disgust, ‘‘Written across
the ledger, in pencil, were these words: ‘One and one quarter per cent on the capital invested’ . . .’’ (Flanders, 1933, pp. 222–
223)! Sydnor gives a hypothetical residual income calculation, and the example of Leigh, ‘‘a very intelligent planter . . . [who]
managed forty-nine slaves’’ in Mississippi who in 1852 charged interest on capital against revenue rather than add it to the
opening capital (1966, pp. 196–197). A dispute in 1853 about how much ‘profit’ Colonel Williams’ plantation had made
shows that calculating residual income was seen an alternative to calculating the rate of profit, even though detractors
thought it unnecessary and lacking in ‘principle’ as a means of doing so. Solon Robinson, a noted agricultural reformer,
calculated the ‘profits’ after charging 7% on the opening capital, and thought them low. The editor of the South Carolinian
disagreed with the interest charge and thought the profits and the rate of profit were high (Govan, 1942, p. 514). In the
editor’s view,
‘‘. . . the most glaring inconsistency which our agricultural tourist exhibits in calculating the profits of a business
investment, is in adding the item of interest upon capital as expense. A person investing money in any enterprise is
justly considered to be doing a fair business if he makes a small percentage over interest and expenses; and the
statement which Mr. Robinson furnishes of Col. Williams’ plantation, only proves that our fellow-citizen makes
about 12½ per cent. on his capital . . .. We deny the principle of adding interest on capital, as part of the expenses,
when the object is to find out the profits upon that capital’’ (quoted in Govan, 1942, p. 515; see also De Bow, 1852,
p. 163).
Supporters of deducting a capital charge could justify it using J.B. Say’s influential theory that only the residual ‘profit’ was
the ‘wages of superintendence’ (Govan, 1942, p. 516, fn. 8), but as it considerably reduced the planters’ apparent ‘profits’ it
could also serve political purposes. One reason ‘‘Published estimates of the cost of growing cotton and of profits of
plantations must be accepted with caution, particularly in the late 1840s and 1850s’’, was that English cotton merchants and
manufacturers were protesting against America’s ‘cotton monopoly’ (Govan, 1942, p. 526). During the 1830s and 1850s
abolitionists condemned slave profiteering, and ‘‘non-slave-holding white farmers . . . envied the profits made on
plantations’’ (Clark and Hewitt, 2000, p. 477). Calculating residual income could therefore simultaneously understate the
apparent ‘profit’ and calculate the equivalent of a rate of profit.
Not all large plantation owners calculated residual income or SRP, for example, William J. Minor, a sugar planter with
plantations in Natchez, Mississippi and Houma, Louisiana, who kept income and expense accounts in the 1830s and 1840s,
but rarely calculated his capital investment. For the Louisiana plantation, which had 183 slaves, the ‘‘accounts are, generally
speaking, operating accounts. When Minor incurred an expense he made a debit entry. . . . Credit entries were made to record
sales’’ (Razek, 1985, p. 27). Razek thinks Minor used DEB for outside transactions and singe entry for internal, but he ‘‘was not
interested in a balance sheet’’, and only in 1837 when Minor purchased the Waterloo Plantation did he debit his ledger with a
‘‘cash valuation’’ of his land, his slaves, and his ‘‘work, Stock, farming utensiles, etc’’ (Razek, 1985, p. 30). Minor did not ‘‘carry
this balance forward or revalue his assets, nor did he record depreciation’’ even though sugar plantations required
considerable fixed capital (Razek, 1985, pp. 30, 19). Minor ‘‘was interested primarily in the profit [sic] of each plantation’’
and, like yeomen farmers, ‘‘how much he owed or was owed’’ (Razek, 1985, pp. 30, 33).
There is no evidence that planters charged depreciation, which is consistent with a consumption focus. In Colonel
William’s accounts, ‘‘No allowance was made for depreciation’’ (Hacker, 1942, pp. 318–319). In 1852, De Bow reported the
calculation of ‘‘A writer in the Carolinian [who] declares [that a price of] 5 cents [per pound of cotton] will not pay in that
state any profit’’ (1852, p. 161), who charged ‘‘Annual wear and tear of land, say 5 per cent . . . upon estimated value’’, which
would have written off the value of the land in 20 years! However, by ‘wear and tear’ he meant expenditures for maintaining
the land or the losses from not doing, because he immediately followed it with the same charge for ‘‘Contingencies, such as
restocking the place with mules, wear and tear of wagons, etc.’’ (De Bow, 1852, p. 162, emphases added). Robinson made a
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555534
charge for the ‘‘average expenditures for iron, tools, and equipment’’, which Govan thought was ‘‘the equivalent of
depreciation [sic]’’ (Govan, 1942, p. 514), but was probably for repairs and renewals. From 1827 to 1852 John Couper, who
managed 380 slaves on the Hopeton plantation in Glyn County, Georgia, kept ‘‘detailed financial information concerning
receipts and expenditures’’ including those of Couper and his family (Govan, 1942, p. 528). There was ‘‘No charge for
depreciation on lands, or slaves, or other capital assets’’ (Govan, 1942, p. 530). The Gowrie plantation on the Savannah River
with 50 slaves owned by Louis Manigault also kept a ‘‘detailed account of receipts and expenditures’’, and James H.
Hammond of South Carolina, owning 150 slaves, produced a memorandum of income and expenditure for 1849–1853, but
neither charged depreciation (Govan, 1942, pp. 532–535). Affleck’s ‘fair cash value’ of the plantation depended on whether
the planterhad maintained and improved the land and buildings and, if not, any ‘‘difference between the two valuations is so
much out of the year’s profit’’ (Affleck, 1851, p. 1), but this is not depreciation. Affleck recommended charging ‘‘wear and tear
of teams and implements’’ and ‘‘depreciation’’ of the slaves, but he did not mean the systematic allocation of cost. By ‘wear
and tear’, he meant charging any fall in the fair cash value of the teams and implements, just like the plantation. By
‘depreciation’ of the slaves, Affleck meant a charge should ‘‘with equal justice’’ be made for ‘‘depreciation in the value of the
Negroes occasioned by overwork and improper management’’:
39 Flei
worth’’
‘‘It will be readily understood that each year’s crop is chargeable with the wear and tear of teams and implements. It is
chargeable, with equal justice, with any depreciation in the value of the Negroes, occasioned by overwork and
improper management; in the effort, perhaps, to make an extra crop, independent of every other consideration. On the
other hand, should the number of children have greatly increased during the year; the strength and usefulness of the
old been sustained by kind treatment and care; the youngsters taught to be useful, and perhaps the men instructed in
trades, and the women in home manufactures, the increased value of the entire force will form a handsome addition to
the side of profits’’ (Affleck, 1851, p. 1).
Fleischman and Tyson have no doubt, ‘‘Clearly, Affleck advocated the use of depreciation techniques for human property’’
(2004, p. 382), but as Heier says, ‘‘this is similar [sic] to a modern concept of depreciation but represents an adjustment of
value used [by overwork, etc.] rather than an expense matched with a revenue’’ (1988, p. 142), a write-down or ‘impairment’.
Whereas capitalists charge depreciation regardless of fluctuations in market value, in Affleck’s mind, the planter could offset
any ‘depreciation’ of the slaves by overwork, etc. by limiting the fall in value of the old by ‘kind treatment and care’ and
adding value to the young.
Heier wonders whether Affleck ‘‘had a rudimentary understanding of double entry bookkeeping with expense items as a
debit and revenue items as a credit’’, but rightly concludes that, as there is no ‘‘general system of integrated accounts’’,
‘‘strictly speaking’’ this is single entry (1988, p. 143). DEB adopts the ‘proprietorial concept’, adopts the semi-capitalist or
capitalist owner’s viewpoint, and focuses on the owner’s ‘net worth’. Affleck by contrast accounts from the plantation’s
viewpoint, adopts the pre-capitalist ‘entity concept’, so his balance sheet was ‘‘a statement of account, as it were, between
the Planter and his plantation’’ (1851, p. 1), just as the English lord’s charge and discharge accounts were between him and
his estates, personified in the steward. His entity concept explains why ‘‘Affleck denotes the value at the beginning of the
year (the debits) as a loss to the plantation and the ending year’s value (the credits) as the plantation’s profit’’ (Heier, 1988, p.
142). It also explains why ‘‘Affleck had any adjustments for revenue and expenses taken directly into the valuation process on
the PLANTER’S ANNUAL BALANCE SHEET rather than an adjustment to a Net worth account as modern accounting rules
prescribe’’ (Heier, 1988, p. 140).39 Finally, it explains why he did not account for plantation liabilities because these, like the
increment to the owner’s wealth, were private matters: ‘‘Planters will generally keep private statements of their accounts,
their liabilities, the expenses of their families, and so on, which would, moreover, be entirely out of place here’’ (Affleck, 1851,
p. 140). In practice, however, ‘‘In accounting for their income and outgo, the planters included their own personal expenses
and those of their families – as did the merchants’’ (Chandler, 1977, p. 66), suggesting an overwhelming focus on production
for consumption.
In the one published example where the slave owner produced a DEB balance sheet, slaves appeared as inventory valued
at ‘‘fair market value’’ and ‘‘periodic declines in the value of the account were charged to cost of goods sold [sic]’’ (Flesher and
Flesher, 1980, p. 127). This was the Andrew Brown Company, a large sawmill and lumber business in Mississippi, that from
1860 employed slave labour, which wrote off its slave account in the same way on emancipation in 1865 (Flesher and
Flesher, 1980, p. 125). Heier reported 24 out of 52 plantations had implemented ‘‘Affleck’s procedures’’ including those for
‘‘Annual Financial presentation’’, presumably including slave valuations (1988, Exhibit II, p. 146). However, regular
accounting for the market value of slaves appears the exception according to Fleischman and Tyson’s examination of around
30 sets of plantation records from Alabama, Louisiana, Mississippi and North Carolina from 1840 to 1865, for evidence of
slave valuations (and records of slave productivity, considered below) (2004, pp. 378, 383). They found ‘‘a wealth of statistics
on slave ages and values’’, but only in a minority of archives – ‘‘most individual plantations did not include slave valuation
data’’; ‘‘these particular pages [for slave values in Affleck’s book] were the most infrequently filled in of all the sections’’
(Fleischman and Tyson, 2004, pp. 383–384). All kept daily comments and had an annual parade of their slaves (Fleischman
and Tyson, 2004, pp. 384, 386), but those that recorded valuations did not often do it systematically – where they occurred,
schman and Tyson mix up the proprietorial and entity concepts when they say that Affleck’s balance sheet measured changes in the ‘‘plantation’s net
(2004, p. 382, emphasis added).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 535
‘‘it appears that slave appraisals were undertaken frequently, albeit not universally, and not altogether haphazardly’’
(Fleischman and Tyson, 2004, p. 387). A possible explanation is that in conjunction with unrecorded ‘depreciation’, slave
values normally had little impact on the planters’ consumable surplus. Not charging depreciation was consistent with a
consumption mentality because in America ‘‘slaves generally reproduced themselves at a rate generally more than sufficient
to offset depreciation [sic] and death of those originally purchased’’ (Razek, 1985, p. 19). Unlike the Caribbean, Russia, and
Brazil, the American slave population grew (Kolchin, 1993). This could justify not reporting fluctuations in slave values
systematically, whereas most owners of large plantations regularly calculated a physical inventory of their slaves, for
example, the ledger of the Locust Grove Plantation that grew from 23 slaves in 1825 to around 50 from the mid-1830s
(Barney and Flesher, 1994, p. 279). The difference was that whereas larger slave owners produced semi-capitalist financial
accounts to judge the commercial success of their plantations as merchants, they and their overseers controlled the labour
process as slave masters.
3.5. Controlling the slave labour process
The difference between slavery and feudalism was that the slave owner controlled their slaves’ lives to extract surplus,
whereas self-sufficient peasants were only accountable for surplus labour. The similarity was the coercive control principle;
slave and peasant were physically accountable for their labour. The slave owner possessed the ‘life’ of the slave, the slave’s
body and its capacity for work. In addition to a multiplicity of rules designed to secure ‘‘obedience’’, ‘‘to introduce a daily
accountability in every department’’ (Oakes, 1983, pp. 154, 156), owners used two main methods of controlling work,
‘ganging’ and ‘tasking’. Ganging was the traditional method of organising sugar cultivation in the Caribbean. North and South
American plantations used it for growing tobacco, short-staple cotton, sugar, and coffee (Morgan, 1988, p. 197). Ganging
organised slaves into groups supervised by the ownerand/or overseer, and drivers, who used whips to work the slaves in
unison as hard as possible from sun up to sun down (Morgan, 1988, pp. 189, 194, 198). Tasking assigned required amounts of
work for a day or week to individuals or groups without direct supervision, measured their performance, and punished or
rewarded according to the outcomes, that is, results control of work. Tasking was used for most other New World products –
arrowroot, cocoa, long staple cotton, hemp, naval stores, pimento, rice, and timber (Morgan, 1988, p. 190). Historians often
argue that the ‘‘original association of task and gang labour with particular crops’’ depended on ‘‘the degree to which direct
supervision . . . was required by various crop cycles or by pivotal operations within crop cycles’’; ‘‘Wherever supervision was
at a premium, gang systems seem to have arisen’’ (Morgan, 1988, pp. 202–203). Thus, according to this view, sugar, tobacco,
and short-staple cotton, ‘required’ continuous direct supervision, whereas the other crops did not, and the large area per
slave made it expensive, so slave owners used tasking (Morgan, 1988, p. 205). However, history showed that crop
requirements did not dictate the choice between ganging and tasking so much as the social consequences of human bondage
whose limits were contestable and changeable.
In the late 18th and early 19th centuries, some Caribbean sugar planters introduced tasking for certain work (e.g., cane-
holing), and with the encouragement of the British government a ‘‘transformation . . . began to take place on many sugar
estates from gang to task labor at the end of the slave era’’ (Morgan, 1988, p. 197, 207). Elsewhere, tasking was ‘‘surprisingly
widespread’’ and ‘‘became more widely adopted over time’’ (Morgan, 1988, p. 202).40 According to Berlin and Morgan it grew
‘‘particularly in the early nineteenth century and was even adopted by sugar planters as they sought to increase productivity,
reduce costs of supervision, and lessen metropolitan criticism of the hard driving associated with gangs’’ (1993, p. 15). Tyson
et al. agree, drawing out the implication that ‘‘slave owners and managers [sic] were behaving like capitalists by switching to
tasking in order to maximize labor surplus’’ (2004, p. 770). Echoing Fogel and Engerman (1974), and others (e.g., Aufhauser,
1973; Cooke, 2003), they claim, ‘‘planters used tasking in ways that were comparable and antecedent to how proponents of
scientific management would use factory standards in the late nineteenth and early twentieth centuries. For example, slave
workers were often graded according to their ability; highly skilled and/or tireless workers were selected to establish task
rates; work norms were established and generalized to different work groups and work settings; and output was measured
individually’’ (Tyson et al., 2004, p. 766). However, we will see their accounting evidence suggests other conclusions and
other motives. It shows that owners held overseers accountable for the consumable surplus, and overseers held slaves
accountable for the maximum amount of work, whether they used ganging or tasking, not productivity. As Governor
Wodehouse of British Guiana put it, task work ‘‘is payment . . . of work done without any necessary reference to the time
expended. . . . What is this but a device for obtaining a certain amount of work without any trouble of superintendence?’’
(quoted by Morgan, 1988, p. 210). Neither this switch nor an apparent interest in ‘scientific management’ reveals the
capitalist mentality. Instead, the evidence suggests that slave owners reluctantly conceded the spread of tasking and the
benefits of ‘improvement’, particularly ‘humane treatment’, because of slave shortages, political pressure generated by
growing public criticism of slavery and, most importantly, because they responded to slave demands. Slaves resisted their
masters, setting limits to their authority by pretending to be stupid, destroying tools or injuring livestock, feigning illness,
‘theft’, escape, or outright rebellion. Faced with resistance, the attitude of most slave owners was anything but ‘scientific’:
40 The trend was not universal. James Henry Hammond acquired a South Carolina estate in 1813 with 147 slaves, and imposed order by, amongst other
changes, shifting from tasking to ganging (Kolchin, 1993, pp. 119–120). There was also a counter trend in the 1830s, as we shall see.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555536
‘‘Unable to recognize their slaves as human beings like themselves, who shared their desire for freedom and material
possessions, owners generally interpreted slave behaviour as proof of innate inferiority’’ (Clark and Hewitt, 2000, p. 488).
To support their view that tasking signalled ‘scientific’ management, Fleischman et al. reference Aufhauser (1973) who
notes ‘‘experiments in ascertaining the output that could be expected from their field laborers under various soil and
weather conditions’’ (2004, p. 766), but they were to ascertain the ‘‘maximum work’’, the ‘‘greatest long-term exertion of the
labor force’’ (Aufhauser, 1973, p. 816). It is unclear if these ‘experiments’ were guided by the contemporary ‘science’ of
racism, the claim that for various reasons ‘‘black slaves were . . . inherently more responsive than whites to the motivating
force of physical coercion’’ (Oakes, 1990, p. 130), but whatever their theory, these planters were not capitalists seeking the
maximum rate of profit and not necessarily the greatest work effort. Some masters claimed they had increased their slaves’
productivity by ‘‘careful management techniques’’, but there is little evidence they did, and the supposed costs and benefits
of humane treatment remained in dispute (Oakes, 1990, pp. 140, 141). One anonymous letter writer to the American Farmer
said his ‘‘creed’’ was the ‘‘greatest product from the least labour’’, but he meant obtaining the greatest amount of work from
his slaves by eliminating the ‘‘standing army’’, and engaging them by showing humanity:
‘‘My negroes are fed and clothed as labourers ought to be, comfortably lodged in houses with stone chimneys: they are
auxiliaries in my agricultural success, and in conscience, I feel myself bound torecompense them. I find also, like other men,
they are endowed with minds capable of reflection and investigation; give them fair play and I entertain no doubt, but that
they will in engage as well as nine tenths of those that are occupied to drive them; therefore, policy, and humanity dictate
the propriety of elevating the nature and condition of those people, as much, at least as they will consistently bear. My
creed, as an agriculturist, is to make the greatest possible product, from the least possible labour, &c. A farm or individual,
supporting a large, and oftentimes useless, auxiliary force may justly be compared to a nation supporting a large and
useless standing army; bankruptcy, sooner or late, is the inevitable consequence’’ (American Farmer, 1821, p. 141).
Also talking about output rather than the ratio of output to effort, in 1852 an Alabama planter claimed, ‘‘no man realizes
more to the hand than I’’, and in 1856, a Louisiana planter said that by ‘‘paying particular attention to the slaves . . . the
amount of work done . . . has increased’’ (quoted by Oakes, 1990, p. 140, emphasis added). Arguably, where it occurred,
‘‘Eliciting . . . acknowledgement . . . [of] the humanity of their bondmen . . . marked a victory for the slaves’’ (Morgan, 1988, p.
219), but this hardly qualifies as a ‘scientific’ discovery, and falls far short of the capitalists’ insight that ‘freedom’ was the best
motivator. However, there is little evidence that many planters took the insight seriously because the critics of inhumane
treatment ‘‘disputed the presumably common opinion that humane treatment reduced the revenue generated by the slave’s
work’’ (Oakes, 1990, p. 141, emphasis added). The opinion of, for example, the fictional (but authentic)Simon Legree,
infamous plantation owner in Uncle Tom’s Cabin, published in 1852, who told a stranger who admired his newly acquired
slaves that when he began his career he took ‘‘considerable trouble fussin’ with ‘em and trying to make them hold out’’, but
now ‘‘I don’t go for savin’ niggers. Use up, and buy more’s my way; makes you less trouble, and I’m sure comes cheaper in the
end. . . . I lost money on ‘em’’ (Beecher Stowe, 1995, pp. 315, 407).
Increasing demand and limited supply boosted the price of slaves, which ‘‘led early nineteenth century owners to place a
premium on the survival and natural reproduction of the slaves they already owned, sometimes limiting their cruelty and
even inspiring them to more generous food and housing allotments’’ (Clark and Hewitt, 2000, p. 328). It inspired many to
analyse and interfere with every aspect their slaves’ lives, whether they ‘married’ (not sanctioned by law), how they lived,
what they ate, what they wore, what time they got up, when they went to bed, etc. However, this is not evidence that the
owners were calculating capitalists, but that they were calculating semi-capitalists. The aim of much thought, as Georgia
planter John C Reed put it, was devoted to ‘‘the greatest profit of all [, which] was what the master thought of and talked of all
the day long – the natural increase of his slaves as he called it’’ (quoted by Clark and Hewitt, 2000, p. 328). Despite the
recognised negative incentive effects of breaking up families by selling slaves (Oakes, 1990, p. 151), slave owners had no
qualms ‘‘when high prices promised otherwise unobtainable profits [sic]’’ (Clark and Hewitt, 2000, p. 329), to finance
consumption or provide wedding gifts to their children. Similarly, owners required or allowed slaves to get married; allowed
them to grow provisions, or forbade or withdrew these and other privileges, as they chose, ‘‘in order to assure dominance,
meet the requirements of staple production, and maximize profits [sic]’’ (Berlin and Morgan, 1993, p. 26).
This evidence does not support the view that slave owners were early ‘scientific’ managers, or the presumption that slaves
were embryonic industrial workers with the protestant work ethic. It suggests, to the contrary, that slaves demanded tasking
because it was a step towards their ideal of the independent simple commodity producer, which would explain why its spread
was associated with allocating time and land for slaves to cultivate their own crops, and with growth in the internal ‘slave
economy’ (Joseph, 1987). Just like yeomen farmers who, we will see in Part 3, had a labour theory of value, ‘‘the fixed point in the
negro’s system of ethics’’ was, as Fredrick Olmstead (a knowledgeable observer) said, ‘‘that the result of labour belongs of right
to the labourer’’ (quoted by Berlin and Morgan, 1993, p. 1). When we hear their voice, slaves wanted their own land to grow their
own food and market the surplus (Morgan, 1988, p. 217). As free people they refused gang work, avoided wage labour except by
the task, insisting on tasking where previously masters had insisted that such operations were ‘‘unthinkable without gang
labor’’ (Morgan, 1988, p. 209). Most opted for sharecropping and the ‘‘two-day’’ system, working a third of their time on their
employer’s crop and receiving land to work on their own account (Morgan, 1982, pp. 585, 586).
It was not just that ‘‘society’s values shifted away from brutal gang structures’’, slaves deeply resented them, and their
‘‘verbal protests, absenteeism, sabotage, and strike action’’ were not simply ‘‘tacit bargaining’’ (Tyson et al., 2004, p. 767),
they reflected stubborn resistance to their use. Slaves had good reasons to loathe ganging – its brutality and association with
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 537
short life expectancies for male slaves (which on average were already less than 40 years) and high infant mortality (Oakes,
1983, p. 195; Morgan, 1988, p. 218). Wherever planters used it, there is evidence of ‘‘a constant struggle between slaves and
managers over the labor process’’ (Morgan, 1988, p. 208). Therefore, as ‘‘Tasking provided an opportunity [sic] for slave
workers to participate more fully [sic] in determining task rates as well as the number of free days, self-hire rules, and the
amount of time available to tend provision grounds’’ (Tyson et al., 2004, p. 767), etc., we can interpret its spread as a major
victory for the slaves. This would explain the correlation between the spread of tasking and ‘‘the number of resistant or
rebellious slaves [which] also increased’’ in the 1830s and 1840s (Clark and Hewitt, 2000, p. 478). As Turner said of Jamaica,
‘‘slave workers were able to establish customary norms for estate work and respect for their expertise’’ (1999, p. 19, emphasis
added), that is, after continuous struggle, to push back the frontiers of planter control. In America, slaves also succeeded in
challenging the ‘‘organizing principle . . . [of] absolute control of the master’’ (Oakes, 1983, p. 153), in ‘‘setting limits on his
power and profits’’ (Clark and Hewitt, 2000, p. 479).
Some planters and observers argued that tasking would motivate slaves. An upcountry Georgia planter explained, ‘‘the
overseer . . . will get more work, and the negro will be better satisfied . . . [by] gain[ing] time to devote to his own jobs or
pleasure’’ (quoted by Morgan, 1988, pp. 206–207). An Essay on Task Work supported Wilberforce’s call for it to lessen the
hours of labour because ‘‘the negroes, having an expectation of being able to finish their work in good time, would exert
themselves with spirit and alacrity, and work very differently from the drawling manner they generally do’’ (quoted by
Morgan, 1988, p. 208). However, there is little evidence that planters took this source of motivation seriously. Affleck’s
Plantation Record and Account Book required the planter or overseer to keep a detailed daily diary of events, which unlike the
merchant’s daybook was not for financial events, but for noting the weather and progress with crops, but particularly work
completed by the field hands (Heier, 1988, p. 134). Affleck’s book provided for a daily ‘‘record of all that transpires upon the
plantation’’ (1851, p. 1), particularly the amount of cotton gathered by each slave for each field, and space for the number of
bales and their weights before shipping. Affleck envisaged owners requiring overseers to collect and use this information to
hold slaves individually accountable for their ‘‘behavior, good or bad’’ (1851, p. 1), for assigned work tasks, and for cotton
picking, but they did not do this systematically. These pages of Affleck’s book invariably contained the weights of individual
cotton bales, but Fleischman and Tyson otherwise found them ‘‘frequently filled in but with widely varying degrees of care
and consistency. Many were done haphazardly, a week here and a week there’’ (2004, pp. 384, 387). For example, the ‘‘Locust
Grove Plantation initially used the ledger to record the cotton picking efforts of slaves’’ (Barney and Flesher, 1994, p. 279), but
they found its records ‘‘almost devoid of consistency throughout . . . two decades’’ (Fleischman and Tyson, 2004, p. 386). In
contrast to the methodical zeal we might expect from ‘scientific’ capitalists, to set work targets several plantations ‘‘used
productivity data or the overseer’s impression to rate slave performance and so classify workers on that basis’’ (Fleischman
and Tyson, 2004, p. 388, emphasis added). In the Caribbean, Fleischman et al. found no ‘‘accounting evidence of ‘completing
the loop’, whereby an individual’s output was formally evaluated against his or her own pre-determined standard’’ (2011, p.
780). They found none in America, where ‘‘In numerous plantation records, output was counted and entered into books of
account, although there is virtually no evidence of evaluation taking place’’ (Tyson et al., 2004, p. 762). Overall, ‘‘plantation
managers/ownerspaid . . . [a] lack of attention to individual slave productivity’’ (Fleischman and Tyson, 2004, p. 390); ‘‘the
productivity of individual slaves was generally ignored in the accounting records’’ (Fleischman et al., 2011, p. 766).
Tyson, Fleischman and Oldroyd nevertheless argue that, ‘‘consistent with neoclassical theory’’, ‘‘tasking can be perceived
as representing replacement of physical theory (e.g. overseers, whippings) . . . [with] economic motives, in conjunction with
the information and control that accounting systems could [sic] provide’’ (2004, p. 770). In other words, that the aim of
tasking was to increase slave productivity through ‘economic motives’ and accounting. However, whipping remained the
foundation of control: ‘‘In theory, whipping was a last resort; in practice, it was the disciplinary center-piece of plantation
slavery’’ (Oakes, 1983, p. 167). Before 1850 reformers ‘‘frequently suggested that bad management led to too much
whipping’’, but in response to the criticism from northern abolitionists this generated, after 1850 ‘‘such sentiments were
rarely voiced’’ (Oakes, 1983, p. 163). Gutman’s analysis of the whippings on the Bennett H. Barrow Plantation in Nueva
Feliciana Louisiana east of the Mississippi, that used tasking, revealed that in 1840–1841 a ‘‘slave – ‘on average’ – was
whipped every 4.56 days’’, certainly enough to have ‘‘social visibility among the enslaved’’ (1975, p. 19). Based on legal
physical coercion, slave management cannot ‘‘be equated with the problem of labor control in capitalist enterprises’’,
because when ‘‘masters contemplated the ‘management of the slaves’ they were reflecting on the appropriate exercise of
powers that extended far beyond those of a factory owner’’ (Oakes, 1990, p. 142). To set and enforce performance targets for
cotton picking, for example, overseers could and did use the whip (e.g., Tyson et al., 2004, p. 765).
Fleischman and Tyson (2004) accept that whipping did not stop with tasking, but imply it became ‘rational’. ‘‘Although
positive incentives were used to elicit greater work effort and were accounted for, the vast majority of accounting data reflect
individual slave output that could support the use or threatened use of physical coercion to compel greater work effort’’
(Fleischman and Tyson, 2004, p. 392). On the Barrow plantation, which appeared to treat slaves better than many of his
neighbours, most (73%) whippings were for ‘‘inefficient labor: ‘for not picking as well as he can’, ‘not picking cotton’, ‘very
trashy cotton’, . . . and so forth’’ (Gutman, 1975, p. 27). A ‘rational’ owner would presumably whip the least productive to
punish them and encourage greater output, and not whip the productive slaves as a ‘reward’, but Gutman shows that on
average on the Barrow plantation, whose accounts recorded the amounts of cotton picked each year by individual slaves, the
most productive slaves were whipped the most (1975, pp. 28–30)! There was no ‘science’ of whipping. From the slaves’
viewpoint, any whipping was irrational and often produced negative reactions. Barrow also used ‘positive labour incentives’,
but Gutman found ‘‘No pattern existed’’ in their use that would justify the conclusion that he had developed ‘‘a system of
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555538
positive rewards to motivate the labor of his slaves’’ (1975, pp. 46). Fleischman and Tyson give some ‘‘vignettes [which]
suggest that the plantation owners in some instances constructed an incentive scheme to reward good behaviour and
performance on the job and to encourage supplemental production on the slave’s personal allotment’’ (2004, p. 391), but
there is no evidence of the widespread use of rewards. Whether organised in gangs or by task, ‘‘Punishment was used more
often than reward to induce slaves to work harder, and whipping was the most common means’’ (Clark and Hewitt, 2000, p.
327).
Tyson et al. argue that the growth in tasking is ‘‘consistent with neoclassical theory that would see owners and managers
using accounting information and controls, in this case measurement of output and task quotas, to maximize income
rationally’’ (2004, p. 770). However, this explanation is not consistent with finding ‘‘the use of tasking and acceptance of
customary work norms developed hand-in-hand over time’’ (Tyson et al., 2004, p. 770, emphasis added), because as Gutman
stressed, ‘‘There is a great difference between a ‘universal custom’ and a selective labour incentive. A custom is a habitual
practice’’ (1975, p. 47). Tyson et al. claim, ‘‘accounting came into its own in tasking though the setting of targets and
monitoring performance’’ (2004, p. 77), suggesting that slave owners took the initiative to change the labour process though
accounting, referencing Turner (1992). However, Turner says that in Jamaica ‘‘The establishment of work norms opened the
way to demands for task work, sharpening the division between master’s time and slave’s time and led to forms of outright
wage bargaining’’ (1992, p. 20, emphasis added). Moreover, Georgia’s ‘‘Lowcountry masters were careful not to encroach
upon their slaves’ ‘own time’ unless offering payment’’ (Morgan, 1988, p. 212) because they had fought long and hard for the
‘right’, and ‘‘Frequently, they – not their owners – initiated independent economic production’’ (Berlin and Morgan, 1993, p.
24). By the early 19th century ‘‘a modus vivendi had apparently been reached’’, tasks were so ‘‘well settled by long usage that
upon every plantation [the task] is the same’’, according to one South Carolina rice planter (Morgan, 1982, p. 567). Certainly,
‘‘Slaveholders honored . . . conventions . . . only so far as they satisfied their desire for ever higher productivity and profits’’
(Berlin and Morgan, 1993, p. 14), but by ‘higher productivity’ they meant more work, and by ‘profits’ they meant the
consumable surplus. Where they thought they could get this by reverting to ganging, as in upcountry Georgia in the 1830s,
the proponents of ‘‘scientific management’’ who filled the many Southern agricultural journals were ‘‘Arguing for the
superiority of closely supervised gangs, [and] planters sought to eliminate all remnants of the task system’’ (Reidy, 1993, p.
146). Where masters conceded task work and provision land they strove to turn them to their advantage, ‘‘remained deeply
suspicious of the slaves’ independent economic activities’’, and ‘‘most slaves earned only pocket change’’ (Berlin and Morgan,
1993, pp. 41, 35) from marketing their produce.
Strong evidence that they were not capitalists is that ‘‘Planters made little effort to analyze their overall cost or the unit
cost of raising a bale of cotton or a hogshead of sugar’’ (Chandler, 1977, p. 66). Even on large estates ‘‘planters were content
with the simplest records and figured profits or losses on the basis of cash income and expenditure’’ (Govan, 1942, quoted by
Chandler, 1977, p. 66). A study of three South Carolina rice plantations found ‘‘very limited attempts at labor cost accounting’’
(Stewart, 2010, p. 116). Fleischman and Tyson (2004) also discovered ‘‘One interesting but confounding feature of plantation
accounting’’–‘confounding’, that is, for their hypothesis that slaveowners were capitalists – ‘‘was the apparent concern
owners/managers had for the revenue side of operations but a corresponding disinterest in expenses. We have seen no
calculations but one of the cost of slave upkeep’’ (2004, pp. 391–392). Clearly, ‘‘the absence of systematic record keeping for
costs and expenses suggests that the data were not primarily used to measure the plantation’s financial performance’’
(Fleischman and Tyson, 2004, p. 393), that is, to calculate labour costs or, generally, the cost of production. They find it
‘‘difficult to understand how presumably rational [sic] plantation owners/managers should take such apparent care with
their revenue accounting while ignoring associated costs’’ (Fleischman and Tyson, 2004, p. 392). They surmise,‘‘The true
answer to this conundrum may well lie in the stultifying economics of the slavery/cotton/plantation system’’ (Fleischman
and Tyson, 2004, p. 392). That is, with high, uncontrollable fixed costs, and revenues determined by the market price, the
slave owner displayed their capitalist rationality by maximising income through maximising output (Fleischman and Tyson,
2004, p. 392). However, most increases in output came from investing in new land and new varieties of cotton (Wright, 1976,
p. 327). There is no evidence the owners increased output by increasing labour productivity – got the same or increased
output from less labour input. Under tasking, ‘‘slaves probably did not work less and certainly not at a slower pace . . .
[because] [s]laveholders attempted to define the task so that it filled the slave’s entire working day’’ (Berlin and Morgan,
1993, p. 15). Furthermore, as Fleischman and Tyson also ‘‘saw little evidence linking plantation productivity records to
pecuniary rewards or physical punishment’’ (2004, pp. 390, 393), this and their other evidence suggests that slave owners
rarely tried to increase output through increasing productivity.41 This conclusion leaves us with a ‘conundrum’ unless we
accept that planters were not ‘rational’ capitalists.
Further strong evidence they were not capitalists is that planters could not resolve the contradiction between holding
overseers’ accountable for maximum output and managing a labour process where the slave’s resistant body was ‘‘the
terrain upon which slaves and masters battled’’ (Berlin and Morgan, 1993, p. 2), the contradiction between maximizing
‘profit’ and maintaining human ‘capital’ in a coercive labour process. ‘‘The overseer was pulled in two incompatible
41 This evidence supports Chandler’s argument that the southern plantation, ‘‘although it required some subdivision of labour and some coordination of
the activities of the work force, had little impact on the evolution of the modern business enterprise’’, because there ‘‘was little the planter could do to
increase productivity or speed up the processes of the crop cycle’’ (1977, pp. 56–67). However, Part 2 argues that Chandler’s candidate for this prize,
‘managerial capitalism’, is also semi-capitalist.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 539
directions by the concurrent planter emphases upon the production of a large staple crop, on the one hand, and the care of
the Negroes, livestock, and farm implements and buildings on the other’’ (Scarborough, 1984, p. 198). It was because they
often failed to maintain human capital that ‘‘Many planters hired a new overseer every year, hoping to find one with the
perfect mix of agricultural expertise, personal authority, and managerial integrity’’, why they littered their diaries and letters
with exasperated outpouring of their problems with overseers (Clark and Hewitt, 2000, p. 506). It was not because overseers
were generally incompetent or lazy (Scarborough, 1984, p. 6), but because holding the overseer ‘‘responsible for the health
and wellbeing of the slaves as well as the profitability of the plantation . . . was a great deal to ask’’ (Oakes, 1983, p. 156).
These objectives were incompatible and therefore, unlike the manager of a capitalist enterprise, overseers were not
accountable for financial targets, but for maximum output and the ‘‘well being of the negroes’’ (Stewart, 2010, p. 114). The
correspondence of three rice plantations in South Carolina ‘‘did not reveal any form of quantitative objective setting,
financial budgeting, or any formal operational planning that are fundamental elements of contemporary management
control systems’’ (Stewart, 2010, p. 114). The absence of financial targets explains why ‘‘The overseer rarely handled money
or accounts’’ (Chandler, 1977, p. 65). To assess their ‘‘managerial stewardship’’ owners instead tried to balance ‘‘non-
financial metrics or agricultural cultivation, crops harvested, or measures of human activities (slave births, deaths, etc.)’’
(Stewart, 2010, p. 116) against financial results. The owners’ priority, however, was ‘‘a large crop of cotton [etc.] [that] was
considered the touchstone of success in the overseeing profession’’ (Scarborough, 1984), as this was the pre-requisite for a
large surplus.
The contradiction between maximum surplus and preserving human capital meant that while slave owners demanded
large outputs and judged their overseers accordingly, most would not pay by results. Bonuses were ‘‘opposed by many
planters and agricultural reformers, who argued with considerable justification that [they] encouraged the overseer to
overwork the slaves’’ (Scarborough, 1984, p. 30). Where they did pay bonuses, as in the new plantations of the lower
southwest, they put ‘‘intense pressure’’ on overseers to produce large outputs, slave mistreatment increased, and overseer
turnover was rapid (Scarborough, 1984, pp. 30, 39, 200). Shifting to tasking and independent production eased the problem,
but was only ‘‘a temporary resolution’’: ‘‘the day-to-day dynamics of the master-slave relationship was constantly being
negotiated and renegotiated. The contest had no end’’ (Berlin and Morgan, 1993, p. 42). Standing between the master and the
slave was the overseer who was accountable for ‘‘the management of his employer’s most valuable asset, the slaves’’, but was
subject to frequent interference and criticism from the owner. On one side, ‘‘slaves deliberately sought to promote
disharmony among personnel in the management hierarchy – for example between driver and overseer, overseer and
proprietor’’ (Scarborough, 1984, p. x), and often succeeded. On the other, ‘‘his authority over the slaves was often diminished
by the intervention of the planter’’ because although the overseer was accountable for crop results, owners frequently made
operational decisions (Scarborough, 1984, p. 6). Inevitably, this ‘‘explosive combination of anarchy and absolutism’’ (Oakes,
1990, p. 139) meant, ‘‘Being an overseer could be a thankless task’’, and was why ‘‘dissatisfaction with the performance of
overseers was rampant amongst slave owners’’ (Kolchin, 1993, pp. 103, 104). Stuck within the limits of physical coercion and
demands for maximum surplus, ‘‘few critics offered any alternative to the overseer system or did anything to correct the evils
about which they loved to complain’’ (Scarborough, 1984, p.6). There were no alternatives because ‘‘the contradictory self-
interests between owner and overseer made conflict between the two almost inevitable’’, made it ‘‘inherent in the nature of
the system itself’’ (Scarborough, 1984, p. 137).
Evidence that accounting played a limited role in controlling the labour process is consistent with the hypothesis that
slave owners were not capitalists. Fleischman and Tyson, however, claim their research provides ‘‘clear evidence of
accounting’s immense social power’’ because within the accounts ‘‘slave workers were categorized, enumerated, and valued
with complete disregard of their humanity’’ (2004, p. 393). This, they suggest, also explains the slaveowner’s lack of interest
in the cost of production: ‘‘The conclusion we tentatively draw is that accounting for slave costs was far less important than
accounting for social control’’ (Fleischman and Tyson, 2004, p. 392). In other words, slaveowners were capitalists, but like the
slaves enmeshed within a racist system of social control in which ‘‘accounting is much more constructive than reflective,
more active than passive in social ordering, and, therefore . . . [is] complicit in sustaining slavery and its institutions’’
(Fleischman and Tyson, 2004, p. 393). Tyson et al. (2004) say their evidence ‘‘supports the concept of the governable person
as discussed by Miller and O’Leary (1987)’’ (Tyson et al., 2004, p. 766), an application of Foucault’s theory that control
changed from ‘sovereign power’, coercive power, in the 18th century to ‘disciplinary power’ in the 19th century.42 However,we saw that power remained overwhelmingly coercive even under tasking, and Tyson et al. (2004) make the doubtful
assumption that slaves accepted their categorisation and dehumanisation in the accounts, for which they offer no evidence.
An alternative reading of the evidence is that slave accounts reflected the humanity of people striving to survive in a
system that gave them few choices by resisting their owners’ demand for absolute control. They also reflected the ‘humanity’
of the owners who demanded absolute control, but accommodated to the reality that their ‘social power’ was negligible by
relying on physical repression. The haphazard accounts of the labour process shows the owners’ myopic preoccupation with
physically extracting consumable surplus, which gave them very limited ‘social power’, very limited legitimacy with the
slaves. This explains the slave owners’ professed ‘paternalism’ as a self-justifying explanation of the disjuncture between the
‘total control’ demanded in planter rhetoric and the reality. Fogel and Engerman’s explanation of the disjuncture is that
‘‘what most planters sought was not ‘perfect’ submission but ‘optimal’ submission’’ (1974, p. 232). However, rather than
42 I criticise the use of Foucault’s theories in accounting history research in Part 2.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555540
‘optimal submission’, their accounts show the owners paid close ‘‘heed to where slaves were and what they were doing [;] a
. . . focus on labor turnout rather than labor efficiency’’ (Fleischman and Tyson, 2004, p. 390). Rather than the ‘optimal’ use of
force, Fogel and Engerman admit that underlying the superior ‘productivity’ of slave plantations over free farmers was the
plantations’ ‘‘higher rates of the utilization of labor capacity’’ and the ‘‘extraordinary intensity of labor’’ (1974, p. 208).43 As
the foundation of forced labour is ‘turnout’, while slave owners were happy with semi-capitalist financial accounts and
simple, haphazard cost accounts, they kept careful day-by-day records of where their slaves were and what they were doing,
with their health, births and deaths, were assiduous accountants of their slaves’ bodies (Fleischman and Tyson, 2004, pp.
390–391).
If America was not born capitalist, and capitalism did not ‘‘come from the countryside’’ (Kulikoff, 1992, p. 264), when and
how did it appear? Following sections argue that Northern manufacturers shared the Southern slave owners’ semi-capitalist
mentality because they also had limited control of the valorisation process.44 Part 2 argues that capitalism appeared around
1900. How it came to America is a story of the accumulation of social capitals; the growth of wage labour; social, economic
and political conflict; the eventual plentiful supply of free wage labour, and the formation of a total social capital. To begin to
tell it, the following reviews evidence from the accounts of early merchants and manufacturers produced during the first half
of the 19th century. We need more research, but it supports the hypothesis that American merchants were semi-capitalists
and manufacturers were simple commodity producers or semi-capitalists.
3.6. Early manufacturers
Capitalists used full absorption cost accounting in Britain from the mid-18th century (Fleischman and Parker, 1997;
Bryer, 2005, 2006b), but in America ‘‘cost accounting came into evidence only after 1800’’ and was ‘‘rudimentary’’ (Previts
and Merino, 1998, pp. 56, 57). Early shipbuilding firms, for example, had a ‘‘very rough-and-ready type of receipts and
expenditure system, with no clear view of accounting for overhead allocation or the loss of fixed asset value via depreciation’’
(Previts and Merino, 1998, p. 57). The Woodwell Shipyard in Newbury, Massachusetts, for example, kept an account book
from 1755 to 1770 giving only a running total of expenditures (Gambino and Palmer, 1976, pp. 21, 22). Gideon Woodwell, a
master shipwright, was an artisan ‘‘who took charge of bringing together and supervising a group of skilled shipwrights,
riggers, caulkers, and the like’’ (Chandler, 1977, p. 53). There is no sign of a balance sheet or calculations of surplus,
suggesting he was a simple commodity producer, and the account ‘‘does not include the labor of the firm members, nor does
it include certain overhead charges, particularly depreciation’’ (Gambino and Palmer, 1976, p. 22). By the mid-19th century,
possibly because the artisan status of its workers had deteriorated, the shipyard calculated ‘‘profit [sic] as the excess of
receipts over expenditures’’, including the cost of ‘‘Labor’’ (Gambino and Palmer, 1976, p. 22), consistent with a semi-
capitalist mentality focused on consumption, distinguishable from the simple commodity producer’s only by calculating
‘‘Profit’’.
In the colonial iron industry, ‘‘smelting furnaces and the forges associated with them were often company enterprises’’
(Clark, 1929, p. 172). For example, the Cornwall Furnace, established in 1742 by Peter Grubb near Lebanon, Pennsylvania,
who leased the operation to Cury and Company for 20 years at £250 a year, a ‘plantation’ containing a furnace, forge, iron
mines, charcoal house, forests, homes for workers, various stores, grain fields and orchards (Gambino and Palmer, 1976, p.
24; http://en.wikipedia.org/wiki/Peter_Grubb). It kept several sets of books, possibly using DEB as the ‘‘Furnace ledger
differed little from one that would have been kept by a merchant’’ (Gambino and Palmer, 1976, p. 24), but Gambino and
Palmer give no details. The furnace used artisan labour, simple commodity producers who ‘‘rarely followed exclusively
manufacturing pursuits’’ (Clark, 1929, p. 182). Predictably, the owners focused on controlling prime costs. They kept a Pig
Iron Book, a Blast Book, an Ore and Cordwood Book, and a Time Book (Gambino and Palmer, 1976, p. 24). Although kept ‘‘in a
strict debit and credit fashion’’, these books were bilateral inventory accounts that, for example, debited a founder’s account
with the production of pig iron for a week, for which he was paid, and credited it with shipments to others (Gambino and
Palmer, 1976, p. 25). The Blast Book debited each caster with the number and type of castings made, and credited with it
‘shortages’, excessive waste over predetermined norms, and with shipments (Gambino and Palmer, 1976, p. 28). The Ore and
Cordwood Books kept records of the raw materials brought to the furnace by which worker, for which they received credit.
The Time Book was a monthly ‘‘List of working hands’’ and their attendance (Gambino and Palmer, 1976, p. 29). Cash
payment was rare: the ‘‘iron master credited his workers with the amount of wages earned and charged them with
merchandise and goods bought at the store which he owned’’ (Gambino and Palmer, 1976, p. 29). Gambino and Palmer
examined ‘‘quite a few of the books of Colonial Pennsylvania furnaces and forges’’, but ‘‘no references to the costs of
production or any sort of cost accumulation was found’’ (1976, p. 29), strongly suggesting the iron masters were not
capitalists.
The merchant partnerships of William Almy and Smith Brown, and William Almy, Moses Brown and Samuel Slater
(1789–1797) from Providence, Rhode Island, who constructed the first water-powered spinning mill in America in 1793
43 They estimate that in the free economy only one-third of the population worked, whereas two-thirds of slaves did, an ‘‘extraordinarily high labor-force
participation rate’’ (Fogel and Engerman, 1974, p. 207).
44 Part 3 uses this correspondence to support the ‘consensus’ view that the Civil War was a fight within a society sharing the same values and not between
two fundamentally different societies, for example, between a capitalist North and feudal South.
http://en.wikipedia.org/wiki/Peter_Grubb
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 541
using British technology provided by Slater, were prominent early examples of the ‘‘movement of capital from commerce
to industry’’(Clark, 1929, p. 367). Almy and Brown managed the business and Moses Brown (a successful Boston
merchant) provided most of the capital (Conrad, 1984, pp. 7, 8). Their accounts show this was a partnership of ‘‘merchant
capitalists’’ (Conrad, 1984, p. 15) in Marx’s sense, that is, of advanced semi-capitalists. According to Conrad the
partnership used ‘‘modified double entry bookkeeping’’ and was driven by the ‘‘Quaker’s profit [sic] motive’’ (1984, p. 12),
but it is unclear what ‘modified’ means as he provides no evidence of DEB beyond its language of debit and credit.45
Evidence of their notion of ‘profit’ comes from a ‘Running Account Carried January, 1793, to December, 1803, settled
September 27, 1804’ between Almy, Brown, and Slater (reproduced by Ware, 1931, Appendix H), that reveals a semi-
capitalist focus on consumption. It records a series of expenditures on the ‘‘Spinning Mills to Almy and Brown, Dr’’,
totalling $149,061.61, and other entries ‘‘Contra Cr’’ for sales and other credits of $163,100.41 (Ware, 1931, pp. 311–314).
Adding ‘‘interest on $20,903.94, the difference between our debit and the mills debit 12 Mo 31, 1801’’ (the undistributed
‘‘profit’’ owed by the mill to Almy and Brown at that date) of $3,992.97 to the credits, and deducting the debits, gave a
‘‘profit’’ of $18,031.77 (Ware, 1931, p. 314):
Spinning mill in account current with Almy and Brown.
Dr.
4
1
le
To our account to date as rendered. . .. . .. . .
5 Conrad references ‘Day Books’, ‘Inventory of machinery’, ‘Account to Moses Brown’, ‘Account for Yarn Rec’d, Sold, used and left o
792’, ‘Cloth Sales Books’, ‘Weaver’s Books’, ‘Inventory’, ‘Smith Brown, Inventory of Goods, 1 September, 1789’ (Conrad, 1984, pp.
dgers or balance sheets.
149061.61
To accounted for with Saml Slater the other owner of the. . .. . .
mill for the balance in our settlement with him, say
 18031.77
————————————
$167093.38
Cr.
By spinning mills a/c to date. . .. . .. . .
 163100.41
By the interest on $20,903.94 the difference between our
debit and the mills debit 12 Mo 31, 1801. . .. . .. . .
 3992.97
————————————
$167,093.38
Focused on consumption, from this account ‘‘it is not possible to determine at any time what the total investment was’’
because it ‘‘only shows the total expenses in each year and does not separate capital outlay’’ (Ware, 1931, p. 124).
Almy, Brown and Slater did not employ free wage labour, but hired whole families, employing the children for
preparatory work and spinning in the mill, and hired the parents as weavers, mechanics or overseers paid in store goods
(Ware, 1931, p. 245), selling the excess yarn for weaving. The parents ‘‘were villagers and therefore also farmers’’ (Hacker,
1942, p. 261), that is, simple commodity producers. From 1809, Slater brought the hand weavers into a workshop because he
found that ‘‘a hundred looms in families will not weave so much cloth as ten at least constantly employed under the
immediate inspection of a workman’’ (quoted in Ware, 1931, p. 51). From 1813, he replicated his system, establishing
factories in Dudley, Massachusetts, that employed 260 workers by 1840 (Prude, 1998, pp. 41–42), and he, his sons and
relatives, and many others, replicated it elsewhere (Ware, 1931, p. 126). Dudley’s workers were amongst America’s first
factory ‘operatives’, but they remained simple commodity producers, some highly skilled, who only slowly adjusted to the
discipline of factory life. They rarely took collective action, but initially resisted working long days all year round, continually
resisted regular attendance, sometimes engaged in arson, sabotage, and ‘stealing’ a share of production, quickly demanded
‘overtime’, increased pay for increased output, and had very high rates of turnover (Prude, 1998; see also, Prude, 1996). With
such workers, employers like Slater and his partners were themselves unfree because they had to adopt a ‘‘highly personal’’
management regime, involve themselves with the ‘hands’, to dominate production (Prude, 1998, p. 42; Tucker, 1981, p. 301).
Although Slater was ‘‘the real beginning of the cotton manufacture in America and this was the center from which it
spread during the next twenty years’’ (Ware, 1931, p. 21), he was not a capitalist. Slater himself rejected any distinctions
between ‘capitalist’, ‘employer’ and ‘labourer’. They did not apply to his Rhode Island mills ‘‘where one or two men put up the
capital and managed the business entirely themselves, earning at one and the same time their salaries, profits and interest on
their capital, and saving on their wage bill by employing members of their families as laborers’’ (Slater, quoted in Ware, 1931,
p. 131). Not employing free wage labour, Almy, Brown and Slater did not seek economic control of the labour process. In
1794, at a time of crisis, the partners could not ‘‘determine operating costs’’ (Conrad, 1984, p. 15). When Slater hired
overseers from 1829, for 10 years he kept no production cost records, and relied on monthly reports of output and ‘problems’
(Tucker, 1981, p. 308). In the early 1840s, only ‘‘an elementary form of cost accounting was introduced’’ that focused on
labour and materials cost (Tucker, 1981, pp. 308–309). In short, Slater employed a social capital, was involved in many
enterprises, employed unfree wage labour to generate a surplus, and by calculating it as receipts and expenditure and
deducting interest on the partners’ capital to calculate ‘profit’, to calculate SRP as residual income, he revealed his dual
origins as a simple commodity producer and a merchant.
n hand up to 25 October,
16–18), but no journals,
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555542
Gunpowder manufacturer E.I. DuPont de Nemours & Co started in 1802 with French capital and machinery at the
Eleutherian Mills on Brandywine Creek, near Wilmington, Delaware, financed by a social capital (in 1815, it had 12 shares) of
bankers, merchants, business friends, and working partners (Johnson, 1989, chap. 2). By the mid-19th century, it was the
largest supplier of gunpowder to the US military. Accounting historians judge its accounts ‘‘sophisticated’’ (Previts and
Merino, 1998, p. 58), which they were, but they reveal only an advanced semi-capitalist mentality. DuPont used DEB and the
sixth Article of its 1801 Deed of Association calculated its ‘profit’ as the residual income over ‘‘the interest’’ on the ‘‘original
stock’’ (Johnson, 1989, p. 84). ‘Profit’ was ‘revenues’ minus ‘expenses’, recognising accruals in contrast to the cash surplus
used in many contemporary accounts (Johnson, 1989, p. 69), but this is consistent with a semi-capitalist consumption
mentality, and is ‘sophisticated’ only in allocating the surplus to the activity of particular periods. On the same principle,
DuPont’s bookkeepers charged the raw material cost of production to the ‘‘Profit and Loss’’ account, carrying the inventory
(including work-in-progress) to the balance sheet, and at each annual valuation charged profit with the ‘‘ware and tare’’ of its
assets (Johnson, 1989, pp. 72, 79). However, the charge for ‘ware and tare’ is not necessarily depreciation – it could be
expenditure on maintenance and repairs – and DuPont did not inventory its labour costs or its production overheads, did not
hold the management of the mills or the workers accountable for the circulation of capital through production.46
Predictably, DuPont did not employ free wageworkers or a free capital. It imported skilled artisans from France who
organised production, provided them with lodgings, and kept separate accounts for each one that included ‘‘when and how
the wages had been earned’’, and the ‘‘record keepers recorded both cash payments and barter arrangements whereby the
firm provided or paid for goods, services or other eventualities’’ (Johnson, 1989, pp. 10, 27, 65–66, 88). Its capital was not free
because Pierre DuPont’s son, Eleuthére Irenée (E.I.) supervised the Company’s mills (Johnson, 1989, pp. 6, 43). ‘‘EI had gone
into themanufactory not as an owner, but as a manager . . . to establish and superintend the day-to-day operations of the
business to the best of his ability for the benefit of the shareholders, and particularly for the benefit of the majority
shareholder’’ (Johnson, 1989, p. 43), the family. E.I. was accountable to all the shareholders for the ‘‘great profits’’ his father
envisaged, but their appropriation tilted strongly in his and his family’s favour (Johnson, 1989, p. 84), so although DuPont
had a social capital, its management retained a strong proprietorial element. Free capital was not holding free labour
accountable for the generation of surplus value in production.
The highpoint of factory production before the mid-1830s was the government controlled Springfield Armory that
employed 250 men, which Chandler and others see as the ‘‘prototype of the modern factory’’ (1977, p. 73), but there is no
evidence of the capitalist mentality. At its head was a military officer accountable to the War Department’s Ordnance
Department, notably Colonel Roswell Lee. In 1815, Lee centralised authority and delegated responsibility by appointing a
superintendent, and devised and organised ‘‘controls that assured accountability for material used and for the quality of the
product, and at the same time permitted the piecework wages to be accurately determined’’ (Chandler, 1977, p. 73). He
increased the division of labour, established a hierarchy of foremen, inspectors, and master armorer responsible to him, and
set up a system of accounts for every transaction in production. Chandler thought Lee used ‘‘standard double-entry accounts’’
(1977, p. 74), but they are bilateral charge and discharge accounts (Hoskin and Macve, 1994, p. 18). The master armorer and
foreman had a day book in which they debited the amount and value of materials and supplies handed to each worker, and
credited it with the units completed, on hand, scrap, waste, and tools returned, which gave ‘‘complete accountability’’, but
only for prime costs. Therefore, even though Springfield Armory’s accounts were ‘‘certainly the most sophisticated used in
any industrial establishment before the 1840s’’ (Chandler, 1977, p. 74), they were not capitalist. There is no evidence that Lee
or anyone else ‘‘developed accurate figures on the cost of making a single gun, bayonet or other product’’ (Chandler, 1977, p.
74).
Hoskin and Macve nevertheless argue that during the 1840s the Springfield Armory was the first to use accounting, like
capitalists today, to generate for ‘‘participants . . . the continuous anticipation of having their performance measured which
predisposes them, in thought, word and deed, towards an internalized self-discipline’’ (1988, p. 68). That is, it was the first to
use results control.47 They credit the reorganisation and new ‘norm-based’ piece rates calculated and enforced from 1841 by
Daniel Tyler with creating a new mentality that generated an increase in productivity. However, Tyson (1990) argues that the
‘‘post 1841 rates were not norm-based’’, were not ‘standard costs’, but designed to engineer a wage cut (Fleischman and
Tyson, 2007, p. 1073), but in any event, they were not capitalist because workers remained accountable for output, not the
cost of production. Productivity probably increased because Tyler imposed military discipline and mechanisation, and
46 We will see later that DuPont’s response to the McLane questionnaire in 1833 suggests it did not use depreciation accounting.
47 Hoskin and Macve appear to mean results control when they say that accounting at Springfield gave the superintendent ‘‘disciplinary power’’ because
‘‘‘Disciplinarity’ as we use it refers to new modes both of knowing and of exercising power, where the same set of practices – writing, examining, and grading
– are involved in constituting both. Once these practices were translated into business, they enabled a constant tracking of performance, setting of targets,
evaluation against norms, etc. – all of which became most powerful when internalized. Thus, a new kind of work control environment developed within
hierarchically networked organization structures. So disciplinary power is grounded in the application of expert disciplinary knowledges’’ (Hoskin and
Macve, 2000, p. 92, fn. 2). ‘‘Disciplinarity’’ therefore means ‘‘knowing’’, the creation of an objective record and ‘‘exercising power’’, holding the agent
accountable, judging and handing out punishment or reward. To hold an agent accountable (to ‘discipline’) means setting targets and making judgements of
performance against those ‘‘norms, etc.’’. Hence, ‘‘the power-knowledge interrelation’’ (Hoskin and Macve, 2000, p. 95) means accountability for results,
having expert knowledge of performance (what norms are achievable and how to discipline agents so that they behave appropriately), and the power to
punish or reward. If the agent ‘‘internalises’’ the norms, etc., accepts them as his or her own, so much the better for the principal. However, we will see in Part
2 that there is an ambiguity in Foucault’s notion of ‘performance’ that can mean the control envisaged by ‘‘Plantation management theory . . . developed
around the concept of ‘obedience’ [which required] . . . the slave to obey implicitly’ . . .’’ (Oakes, 1983, p. 154).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 543
because immigration increased the labour supply (Tyson, 1990). If Tyler’s system of accountability generated a new
mentality, evidence that it was not the innovative capitalist mentality is that ‘‘the armories soon stagnated and the
technological action quickly shifted to the private sector’’ (Hoke, 1989, p. 126).
McGaw’s (1985, 1987) investigation of the small paper making firms of Berkshire County, Massachusetts, is the only long-
term study of technological and accounting change in American industry during the 19th century. It provides evidence
consistent with transitions from simple commodity production to semi-capitalism, and some of transitions to capitalism
from the 1880s that Part 2 considers in detail. From 1801 to the 1880s, small (often family based) partnerships and sole
proprietors operated local paper mills in Berkshire County, generally starting as artisan paper workers (McGaw, 1985, p.
706). As simple commodity producers whose aim was ‘‘adequate living allowances’’, ‘‘like most of their contemporaries in
the 1820s, [they] failed to strike periodic balances or to calculate profit’’ (McGaw, 1985, pp. 710, 724). Working along side
their few workers, some highly skilled and mobile ‘‘mill-owners-in-training’’, and other unskilled, often temporary, workers
from local farming households, ‘‘permitt[ed] direct surveillance by the mill owner’’, allowed ‘‘family governance of workers’
behavior’’ (McGaw, 1987, pp. 57, 36, 51–52, 280). Predictably, ‘‘Only two types of mill account books survive from the 1820s:
time books, in which millowners listed workers and their work; and daybooks, in which they recorded company-store
transactions, paper shipments, mill expenses, and personal disbursements as they occurred, and on a monthly basis recorded
mill payroll, board, and rents’’ (McGaw, 1985, p. 713). They kept detailed records of labour and materials costs, but did not
account for inventories or fixed capital, and ‘‘did not depreciate fixed assets’’, treating renewals as ‘‘operating expense’’
(McGaw, 1987, pp. 149, 151; 1985, p. 708). Predictably, they did not calculate their rate of profit: ‘‘Judging from their books,
paper makers did not misrepresent the facts when they reported to Treasury Department investigators in 1831 that their rate
of profit was ‘Altogether uncertain, and unknown’ . . .’’ (McGaw, 1985, p. 724: see McLane, 1833, Volume 1, p. 146). The
‘‘Debits of millowners’ modest living expenses are the only evidence in company records of return on investment. Since their
personal and business accounts ran together in their books, millowners did not need to decide what proportion oftheir
profits [sic] they would reinvest. They automatically reinvested all that they did not consume’’ (McGaw, p. 724). Not
accountable to outsiders for dividends, and not planning investments elsewhere, ‘‘accurate annual calculation of return on
investment was not necessary for comparison with other industries’’ (McGaw, 1985, p. 710).
The Berkshire paper makers aimed for ‘‘long-term capital [sic] appreciation’’ (McGaw, 1985, p. 710), for larger future
consumption. Because skilled workers were scarce, from the late 1820s they began investing in labour saving machines
(McGaw, 1985, p. 722) to expand output to get it. They acquired a variety of new and improved machines between 1827 and
the late 1850s that were increasingly complex and costly (McGaw, 1985, pp. 706–707). As their output multiplied during the
1830s working capital grew rapidly, so millowners trained themselves in financial accounting, extended their accounts to
deal with debtors and creditors, and kept closer track of physical movements and of expenditures (McGaw, 1985, p. 714).
From the 1840s, with continuing mechanisation, the number of less skilled and ancillary workers multiplied, and
superintendents and foremen appeared (McGaw, 1987, pp. 284, 281, 303–304). Along with them, ‘‘To meet the urgent need
to account for augmented working capital, owners of mechanized paper mills adopted the full range of available commercial
accounting procedures by the 1840s and 1850s’’ (McGaw, 1985, p. 713). They now had a problem of accountability and
solved it using ‘‘conventional double-entry bookkeeping’’, meaning that ‘‘In the years after mechanization millowners kept
their daybooks, journals, and ledgers with greater care, closing them annually, striking monthly balances, and developing an
increasing number of balance-sheet accounts’’ (McGaw, 1985, p. 713). They became semi-capitalists, calculating their ‘profit’
and ‘capital’ as well as controlling prime costs with ‘‘better expense, raw material and labor cost records as their mounting
scale of operations made informal assessment more difficult’’ (McGaw, 1985, p. 713). They focused on financial accounting
until the adoption of new machine technology from the 1860s, from when owners began to take an interest in cost
accounting. However, only from the 1870s and 1880s, when they had greatly increased capital intensity and replaced
artisans possessing knowledge of all aspects of paper-making by specialised skilled workers, which separated owners from
workers by ‘‘curtail[ing] movement of workmen into mill ownership’’ (McGaw, 1987, pp. 289, 12), did they begin using it.
Predictably, cost accounting appeared as mill workers achieved their first ‘‘sense of class solidarity’’ (McGaw, 1987, p. 281),
as free wageworkers, when their local mills became absorbed into large corporations, a story replicated in many other
industries, as we will see in Part 2.
3.7. Merchants and manufacturers
During the late 18th and early 19th centuries, the ‘‘hundreds of well-to-do . . . merchants . . . dominated overseas trade’’,
who focused on the transatlantic trade with Europe, and took no interest in production (Chandler, 1977, p. 15; Levine et al.,
1989, p. 224; Wood, 1993, p. 249). They often worked alone or in small groups. For example, in the 1790s shipping from
Baltimore ‘‘was substantially merchant and locally owned; sole ownership was the predominant practice except with regard
to the largest vessels, and even there investor groupings were quite small’’ (Gilbert, 1984, p. 14). There is some evidence of
DEB from the early 18th century, but an individual merchant accountable only to himself ‘‘kept his accounts to suit his own,
and not third party, needs’’ (Previts, 1976, pp. 14–15; Previts and Merino, 1998, p. 48). Predictably, like the yeoman farmer
and inland merchant, these individual merchants did not calculate ‘profit’. Baxter criticised the lack of precision in their
accounts, and their use of single entries that focused on personal debts (1956, p. 279), but for a merchant like Robert Oliver
(1783–1819), ‘‘except for the necessity of dividing profits with joint investors, no such calculations were required’’ (Bruchey,
1958, fn. 1, p. 273).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555544
Sole ownership of vessels was unusually high in Baltimore. In Boston and Philadelphia joint venture partnerships were
widespread, and in practice even in Baltimore an apparently individual merchant ‘‘often, with other partners, was a
shareholder’’ in other merchants’ ships (Chandler, 1977, pp. 16, 18). When these joint ventures grew in scale during the
second half of the 18th century they often used DEB (Volk, 1926; Bruchey, 1958, pp. 277, 278; Gambino and Palmer, 1976, p.
10). For items or lines of merchandise, ‘‘Profits were determined from merchandise accounts’’ (Volk, 1926, p. 8), debiting
accounts with purchases and crediting sales, calculating income less expenditure, which large concerns might collect in a
sales book and deduct all other expenses and losses to calculate overall ‘profit’. For example, the records of the Tudor Ice
Company started by Fredrick Tudor who formed his first social capital in 1820 (Seaburg and Paterson, 2003, p. 91), which sold
ice from Massachusetts to the rich southern American cities, to Cuba, the Caribbean, etc. These included journals, waste
books, cashbooks and ledgers with ‘‘many similarities’’ to ‘‘modern accounting systems’’ (Kistler et al., 1984, p. 24). It kept
separate accounts for each market, and ‘‘extensive statistics and financial data on a monthly and an annual basis for such
items as revenues, shipping costs, landing charges, tons sold, sales, prices, number of purchases, and the amount of profit and
loss’’ (Kistler et al., 1984, pp. 27–28).48 Others ‘‘preferred to determine profits or losses by comparing net worths at the end of
two accounting periods’’ taking all possessions other than property into account (Volk, 1926, p. 10), to achieve the same
result after all expenses and losses. Regardless of method, all display their semi-capitalist rate of return mentality by
charging interest on partner’s capital accounts (Bruchey, 1956, p. 58), measuring ‘profit’ as residual income.
Overseas merchants exerted a powerful influence over late 18th and early 19th century economic development (Clark,
1929, p. 442). They imported European manufactures, exported agricultural surpluses and raw materials, organised inland
transportation, immigration, and capital for farmers, invested and speculated in land, promoted household production,
promoted and gave credit to manufacturing shops and factories, and, in the early 19th century, some turned to
manufacturing. Merchants first stimulated and later undermined farmer’s household production. From the 1770s, they
organised the ‘‘integration of domestic manufacturing – the traditional handmade production of goods such as cloth and
cheese – into the market economy’’ (Henretta, 1991, p. xxvii). Shortly before the Revolution they ‘‘began to systematically
organize industrial production by distributing materials and receiving finished goods from their customers’’, from farmers
who also purchased goods from them, acted as ‘‘exchangers of household manufactures’’ (Clark, 1929, p. 442). Merchants
were also ‘‘promoters of shops and factories’’ (Clark, 1929, p. 442). In the late 18th century, Massachusetts’ traders ‘‘were
actively mobilizing labor, advancing credit and raw materials to induce their customers to make hand-sewn shoes during
slack times in the agricultural cycle’’ (Henretta, 1991, p. 257). Up to the mid-18th century, few farm families produced cloth,
but the wars from the 1770s to 1815 disrupted supplies and home manufacture soared (Kulikoff, 1992, p. 49). However, in
1815 when the second war between Britain and America ended, demand for household production fell as cheap British and
French imports undercut household spinners and weavers (Gordon et al., 1982, p. 57). As home manufacture of textiles had
absorbed largeamounts of surplus labour, this began the process of shifting workers off farms.
The growth of American manufactures under tariff protection, particularly textile and shoe production, progressively
destroyed household production. Having prospered during the European war, merchants were active in the promotion and
erection of mills, shops and factories, stimulating new banks and insurance companies, and a rapid expansion of ports
(Gordon et al., 1982, p. 49). In 1820, ‘‘two thirds of the textiles used in America were made in families’’, but by the 1830s
household production had all but disappeared from the northeast (Clark, 1929, pp. 438–439), replaced by workshops and
factories, mostly employing women and children from farms and villages, often temporarily (Clark, 1929, p. 391). In Western
Massachusetts in 1820 rural manufacturing in households occupied 20% of the adult men and a higher proportion of women
and children. During the 1820s, production expanded in households, but there was also ‘‘an increase in the number of mills,
workshops, and factories employing significant amounts of capital and more than a handful of workers each’’ (Clark, 1990, p.
228). Merchants began to act on ‘‘Josiah Quincy’s dictum that ‘labor [is] the root and spring of all profit [sic]’’ (Clark, 1990, p.
116), but this did not necessarily make them capitalists. An example is the shoe industry.
From the late 18th century to the 1840s, homes or farms often produced shoes, taking materials from a merchant or
master cordwainer. The workers were simple commodity producers who ‘‘enjoyed all the latitude he [sic] needed or wished.
He sowed his fields and cut his hay when he was ready. He . . . went fishing when he pleased’’ (Hazard, 1913, p. 258).
However, counter trends were evident in Lynn, Massachusetts, where the town’s prosperous merchants and landowners
incorporated the ‘Mechanic Bank’ in 1814 to finance putting out shoe production and trade, which ‘‘became a mausoleum in
the graveyard of the master mechanics’’ who had previously organised production within specialised artisan households
(Dawley, 1976, p. 26). ‘Shopkeepers’ used their own and others’ capital to hire journeymen and employ them in ‘central
shops’ so they could oversee and control the critical stage, cutting the soles and uppers, and also put out increasingly large
amounts of work, something the local newspaper in 1837 judged required ‘‘a considerable capital’’ (quoted in Dawley, 1976,
p. 27). At the pinnacle of this occupation was Micajah Pratt, born into a well-to-do landowning and shoe dealing family, who
took a leading role in the establishment of the Mechanic Bank, becoming an officer, who employed up to 500 men producing
250,000 or so pairs annually, who was ‘‘closely allied in business with his neighbours’’ (Dawley, 1976, pp. 27–28). Most
central shops were much smaller and their failure rate was high. For the bigger ones, ‘‘By the 1820s and 1830s . . .
48 Kistler et al. say that its ‘‘management information systems . . . differed significantly’’ from current systems, but give few details (1984, pp. 24–29). They
presumably mean its failure to calculate the full cost of production.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 545
industrialization relied increasingly on capital from banks and corporations’’ (Gilje, 1996, pp. 168–169), but this did not turn
them into capitalists.
Dawley is right that industrial capitalism eventually ‘‘resulted from the application of the values and practices of the
marketplace to the production of commodities’’, but wrong that this was because ‘‘manufacturers bought labor and raw
materials as cheaply as he could and sold finished products as dearly as he could, just as the merchant’’ (1976, p. 33). The
fact that the early 19th century shoe manufacturers in Lynn ‘‘talked the same language as their eighteenth century
[merchant] predecessors’’ (Dawley, 1976, p. 33) suggests they were semi-capitalists. Dawley notes, ‘‘Once informal
credit and accounting methods characterised the industry. Now [in the 1830s], it was double entry bookkeeping, careful
calculations of wage costs, and scrupulous attention to the terms of a loan’’ (1976, p. 223), which are characteristics of
the semi-capitalist mentality. It therefore seems unlikely that ‘‘By the 1830s and 1840s, New England capitalists [sic]
had brought workers – either women or entire families – together in the nations first factories’’ (Clark and Hewitt, 2000,
p. 298). In most trades the ‘‘enlarged shop was still a personal enterprise’’, most neither developed nor used machinery,
and often the ‘‘master . . . remained responsible for feeding and housing his apprentices and journeymen’’ (Chandler,
1977, p. 53).
Merchants invested in transportation, facilitating growth in commercial farming and manufacturing, but this did not
necessarily make them or those they dealt with capitalists, the view, for example, that ‘‘The aggressive pursuit of profits
[sic] by Philadelphia merchants played a major role in the transition to a capitalist [sic] agricultural system’’ (Henretta,
1991, p. 273). Some of the preconditions for the capitalist mentality were forming, particularly social capitals. Like the
merchants, affluent farmers pooled capital to finance water-powered gristmills, sawmills, and fulling mills. ‘‘Most were
owned by partnerships; all but one of the mills in Northampton in 1798 were held in one-third, one-quarter, one-fifth,
or one-sixth shares by families who also owned farmland’’ (Clark, 1990, p. 103). Following the disruption of trade after
1815, some Northeastern merchants turned inland to investment in transport, and some to textile manufacturing
(Levine et al., 1989, p. 226). In addition to replicas of Almy, Brown and Slater’s Rhode Island system, some merchants
turned to cotton textile manufacturing using large social capitals and wage labour, creating ‘‘large companies financed
by Boston capital at Waltham and Lowell [that] attained spectacular success’’ (Ware, 1931, pp. 34–36). Part 2 shows that
these large merchant manufacturers were not capitalists, and the final section below shows that the ‘‘small
manufacturers, with resources hardly exceeding those needed to run a farm, [that] more truly represented American
industry’’ (Clark, 1929, p. 373), who often retained strong links with farming (Wood, 1993, p. 314), were not capitalists
either. Small manufacturers ‘‘As investors . . . resembled the farmers from whom they were descended. Like these, they
were at the same time labourers and capitalists [sic], whose savings guaranteed them regular employment and self-
direction, and who reckoned this security and independence among the elements of gain from their investment’’ (Clark,
1929, p. 373). They retained, in short, important elements of the simple commodity producers’ mentality, a view
supported by evidence from the ‘McLane Report’ published in 1833, the result of an investigation into the case for
reducing tariffs overseen by Secretary to the Treasury, Louis McLane, which suggests that many manufacturers were
semi-capitalists.
3.8. The McLane report
McLane sent a long questionnaire to eleven northern states, parts of which requested information on the ‘‘rate of profit’’.49
The answers suggest that many respondents were semi-capitalists who saw ‘profit’ as the consumable surplus and thought
of their rate of profit as the SRP. They reveal evidence of the simple commodity producer mentality, and some appears
consistent with the capitalist mentality, but we must distinguish between understanding and talking about capitalist
accounting and using it. Many manufacturers refused to respond to the questionnaire.50 An examination of those that did
49 McLane’s commissioners collected around 2000 questionnaires from Maine, Massachusetts, New Hampshire, Vermont, Rhode Island, Connecticut, New
York, New Jersey, Pennsylvania, Delaware, and Ohio, and published the returns in two volumes. These states contained 75% of all American manufacturing
evenin 1850 (Chandler, 1977, p. 61). Volume 1 contains 567 ‘documents’ – letters, tables, reports, questionnaires with replies, etc. – covering 1050 pages,
and Volume 2 contains 546 (more standardised) ‘documents’ of largely questions and answers, covering 888 pages. The flaws in the questionnaires were
that they gave no definitions of key terms; there were three different versions of the questionnaire with different question numbers; there was no
compulsion; no check on accuracy; and some were beyond the competence of manufacturers to answer. Question 17 of the questionnaire sent to Maine and
Massachusetts asked, ‘‘What has been the rate of profit in each particular branch of manufacturing in the county, each year, since its establishment in the
county, supposing the business to be carried on with the manufacturer’s own capital, and not by borrowed capital? What, more particularly, has been the
rate for each of the last three years. What has been the cause of the increase or decrease of profit from time to time?’’ (Volume 1, p. 67). Question 18 asked,
‘‘What is the usual rate of profit in the county in the various kinds of businesses generally?’’ (Volume 1, p. 67). The most common version of the
questionnaire (used in eight states) moved question 17 to question 6 (in Pennsylvania, this was question 5). It asked for the ‘‘Annual rate of profit on the
capital invested since the establishment of the manufactory, distinguishing between the rate of profit upon that portion of the capital which is borrowed,
after providing for the interest upon it; and the rate of profit upon that which is not borrowed (Volume 1, p. 636). Question 8 in this questionnaire asked for
the ‘‘Rates of profit on capital otherwise employed in the same State and county’’ (Volume 1, p. 636) (in Pennsylvania this was question 10). Question 25 of
this version asked, ‘‘What has been the rate of your profits, annually, for the last three years? and if it is a joint stock company, what dividends have been
received, and what portion of the income of the company has been converted into fixed capital, or retained as a fund for contingent or other objects, and,
therefore, not divided out annually?’’ (Volume 2, p. 142). The Pennsylvanian version sought this information in questions 7 and 8 (Volume 2, p. 9).
50 For example, the investigator collected only 39 from 250 questionnaires circulated in Rhode Island (Lamoreaux, 2003, p. 444), of which 19 provided
information on their rate of profit.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555546
shows that just over half did not report their ‘rate of profit’. Some respondents said they could not give an answer for various
reasons, some gave an estimated dollar surplus, but a sizeable number did report a rate of profit, and some explained how
they calculated it.
Responses to the McLane questionnaire requests for the ‘rate of profit’.
V
6
7
9
2
4
5
7
7
6
2
4
51 Failures to provide an answer to a question request
olume 1, pp. 3[2], 15, 17, 96, 97, 134, 136, 146, 150, 20
91[7], 693[8], 695[19], 696[24], 700[14], 702[22], 707
61, 766, 767, 769, 785, 829, 831[2], 866, 867, 882[2], 8
66, 1006, 1014[2], 1024, 1034, 1038, 1044[3]. Volume
57, 259, 261, 265, 267, 273, 275, 277, 280, 281, 285, 28
01, 411, 412, 413, 415, 419, 420, 431, 448, 466, 473, 4
99, 600, 601, 603, 604, 605, 606, 620[2], 656, 675, 693,
37, 738, 739[2], 740, 741, 744, 745, 746, 747, 752, 75
73, 791, 793, 800, 810, 811[2], 816, 832.
52 Non-responses for these reasons appear in the foll
69, 674, 675, 682, 760, 802, 837, 882[2], 886[15], 908,
5, 27, 32, 36, 64, 76, 84, 94, 136, 156, 172, 173, 188, 24
60, 470, 485, 486, 489, 491, 494, 568, 661, 802.
Volume 1
ing an annual rate of profit are evide
0, 203, 286, 325, 576, 620[5], 621[5],
[16], 709[23], 711[24], 713[27], 715[
84[4], 892[10], 897[10], 899[19], 901
2: pp. 140, 145, 148, 151, 153, 154, 1
7, 289, 294, 302, 303, 304, 305, 308,
73, 475, 477, 484, 515, 523, 526, 527,
695, 700, 702, 711, 712, 714, 715, 716
3, 754, 758[2], 759, 759, 760, 761, 76
owing pages, with the numbers in sq
916, 919, 925, 939, 942, 943, 947, 948
4, 245, 264, 296, 299, 333, 336, 360,
Volume 2
nt on the following pages with the n
623[3], 624[5], 626[4], 627[12], 628
20], 717[15], 719[18], 723[30], 725[
[8], 909, 912, 915, 916, 920[2], 922,
56, 158, 159, 161, 162, 190, 215, 22
309, 309, 312, 328, 329, 341, 351, 38
528, 529, 530, 533[2], 567, 569, 570
[2], 718[2], 720, 721, 722, 728, 729,
2[2], 763, 764[2], 765, 766, 767, 768
uare brackets: Volume 1, pp. 6, 73[2
, 950, 960, 962, 964, 965, 969, 1023
366, 387, 422, 430, 434, 450, 451, 4
Totals
No.
 %
 No.
 %
 No.
umber in square b
[11], 631, 672, 678
21], 727[25], 729[2
944, 946, 952, 956
2, 226, 239, 242, 2
3, 371, 391, 394, 3
, 571[2], 573, 596
731, 732, 733[2], 7
, 769, 770[2], 771
], 136, 146, 150, 1
[3], 1,035. Volume
52, 453,454, 456, 4
%
No answer – no reason given
 524
 49.9
 161
 33.9
 685
 44.9
No answer – no profit, just started, etc.
 51
 5.0
 45
 9.5
 96
 6.3
$ surplus
 23
 2.0
 57
 12.0
 80
 5.2
% rate of return
 454
 43.1
 212
 44.6
 666
 43.6
Totals
 1052
 100.0
 475
 100.0
 1527
 100.0
Around 45% of respondents did not report their ‘annual rate of profit’ giving no reason, which may tell us more about the
political background to the report than their calculative mentalities.51 The commissioners complained of hostility to this
question. Andrew Prevost for Pennsylvania found ‘‘a universal objection to several of the queries of the department’’, and
thought, ‘‘With many individuals this has operated, no doubt, as a pretext for disregarding the whole of them’’ (Volume 2, p.
197). Jonathan Allen for Pittsfield, Massachusetts said in response to question 17 asking for a rate of profit, ‘‘No definite
answer has been given to this by a single manufacturer: they have generally declined, or said ‘we make little or nothing’ . . .’’
(Volume 1, p. 134). A manufacturer from New Jersey thought it was ‘‘Not a fair question’’ (Volume 2, p. 170). A glass
manufacturer from West Pennsylvania insisted this information was ‘‘private’’ (Volume 2, p. 523). Some ‘‘appeared to be
surprised by the terms of the interrogatories submitted to them, supposing these to evince a disposition unfriendly to their
interests’’ (Volume 2, p. 235). Morgan Neville found in Cincinnati ‘‘a universal reluctance in answering questions, particularly
as to profits and capital borrowed’’ (Volume 2, p. 861). Some said they feared increased taxation (e.g., Volume 1, p. 875), and
some may have feared the reactions of competitors or workers. Henry Stark reported that in New Hampshire,
‘‘. . . factory agents, in some cases, evinced a disposition to conceal facts; and, in others, furnished statements by which
it would appear that their establishments were unprofitable, when it was known, from the circumstances of the
proprietors continuing to invest largely in the same stock, and from other facts . . ., that a profit of at least 12 per cent.
was accruing from the business’’ (Volume 1, p. 684).
Stephen Badger for Bradford, New Hampshire, thought two enterprises ‘‘unquestionably realise a large nett profit, but
refused to give the required information’’ (Volume 1, p. 750). Some respondents (6.4%) said they did not report a rate of profit
because they had made no profit, had made losses, or had only recently started in business,52 but others said they did not
know. Oliver Heald for Nelson, New Hampshire, found ‘‘In many instances it was impossible for mechanics to give an
accurate account of their outgoes and income’’ (Volume 1, p. 798). A manufacturer from Fall River, Massachusetts said, ‘‘I am
unable to state the precise rates of profit during this time’’ (Volume 1, p. 75). Others said their rate of profit ‘‘Has not been
ascertained’’ (Volume 2, p. 219); ‘‘we cannot give an explicit reply’’ (Volume 2, p. 278); ‘‘Cannot tell’’ (Volume 2, p. 369);
‘‘Cannot say with certainty’’ (p.464); ‘‘Can’t say’’ (Volume 2, p. 476);‘‘This is a difficult question to answer’’ (Volume 2, p.
503); ‘‘Hard case to tell’’ (Volume 2, p. 600); without giving the reasons. John Gibson complained of the small manufacturers
in Francistown New Hampshire, ‘‘These people keep their accounts very loose, and their answers are not as definite as could
be wished’’ (Volume 1, p. 835). However, this may not be because they were inept, but because they were simple commodity
producers keeping accounts only of indebtedness, as Martin Croaker explained for Manchester, New Hampshire:
‘‘We have a few shoemakers and a few blacksmiths, but none who manufacture for any but a domestic market, and
none of them can give me a very accurate statement of the amount of stock used by them, as they procure their
materials partly for cash and partly for barter, and keep no accounts except personal ones with their customers’’
(Volume 1, p. 860).
rackets:
, 689[7],
7], 755,
, 957[2],
52, 255,
96, 400,
[2], 598,
35, 736,
, 772[2],
97, 621,
2: pp. 9,
58, 459,
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 547
Accountable only to themselves, they did not need other accounts. As the owner of a Tannery in Delaware explained, ‘‘Not
having a joint concern, nor any borrowed capital, I have not been under the necessity of keeping any account of purchases or
sales; have not a balance sheet nor any means to ascertain profits or losses, but by experience’’ (Volume 2, p. 748). For many
small employers the rate of profit was a meaningless concept because they had little or no ‘capital’, as John Tyler for the
County of Suffolk, Massachusetts explained:
53 Res
69, 70,
656[25
707[4],
824, 83
910[2],
998, 10
110, 11
342, 34
435, 43
520, 52
575, 57
623, 62
54 For
informa
55 Res
707, 71
549, 55
701, 70
‘‘. . . it is obvious that there are many artisans, whose real capital is their individual skill, and whose business is
carried on with a trifling amount of money, but whose annual gain is greater by far than the money invested; and
thus, in the different pursuits which come under the general designation of manufactures, there is found every
shade and variety, from the establishment which employs $40,000 and his realizes $4,000 per annum, to the
artist, whose stock in trade is $200 and his income $1,000 or $1,500; hence it is impossible to answer this question
directly, by stating a rate per cent., as the inquiry, in that form, presupposes the investment of a given capital’’
(Volume 1, p. 471).
Some respondents gave bookkeeping problems to explain their nil return, and I consider their comments below.
However, I count 666 answers (43.6%) reporting a percentage rate of profit,53 a percentage limit,54 or a percentage loss.
Many probably understated it (Clark, 1929), some were probably guesses, and there is evidence of collusion (runs of
identical answers or non-answers from respondents from the same area), but many appear to derive from accounting
calculations. That 666 respondents answered the question is prima facie evidence that many manufacturers had a ‘rate of
profit’ mentality, and the calculations and comments of several respondents suggest that this was predominantly, if not
exclusively, semi-capitalist.
Some respondents (5%) only gave their dollar ‘profits’, which is consistent with the semi-capitalist mentality that
calculates income as the consumable surplus.55 Seven ‘‘Workshop and Household Manufactures in Southampton,
Rockingham County’’, New Hampshire, reporting capitals from $2,000 down to $106, gave as their ‘‘Rate of profit upon
capital employed’’: ‘‘$600 net’’; ‘‘Labor’’; ‘‘Labor’’; $100 net’’; ‘‘$95 net’’; ‘‘Labor’’; ‘‘Labor’’ (Volume 1, p. 629). ‘Labor’ appears
to mean no income above subsistence wages. ‘‘Captain Jonah Cutting, of Guildford in the county of Windham, and State of
Vermont (he being the owner of an oil mill)’’ answered: ‘‘I cannot say, for some years I have lost the whole of my labor and
part of the amount paid for stock; other years I have realized for my labor, &c., several hundred dollars’’ (Volume 1, p. 925). A
Saddlery in West Pennsylvania answered: ‘‘Can’t tell, but I know that I take in more than I give out’’ (Volume 2, p. 602), and a
Sole Leather manufacturer from Delaware, ‘‘$500 per annum; can’t say further’’ (Volume 2, p. 688). Some respondents made
clear they thought of ‘profit’ as potential consumption. For example, an iron manufacturing partnership explained that its
rate of profit was before the partners’ wages: ‘‘No wages allowed for the five active partners’’ (Volume 2, p. 293). Most Rhode
Island cotton manufacturers mixed wages and profits. ‘‘In reviewing the history of the cotton industry, in 1831, Samuel
Slater said that most manufacturers worked in their factories and that, after deducting ordinary interest on their
investment and their own wages, their profits [sic] would be very small. Manufacturers of this class seldom failed, because
their losses fell on all three items – profits, interest, and wages’’ (Clark, 1929, p. 372). The practice of not charging the
owner’s wages could explain why, as Morgan Neville for Ohio pointed out, ‘‘Where the owners themselves are generally the
operatives, the profits are double what they are in those establishments which are distinguished by the names of joint stock
companies’’ (Volume 2, p. 860). The owner of a Saddlery from West Pennsylvania said his rate of profit was ‘‘About a living
profit counting bad debts’’ (Volume 2, p. 602). The owner of a blast furnace in Delaware made his ‘profits’ from not paying
cash wages:
‘‘The profits of the establishment are such as are derived from the payment of part of the wages: cost of raw materials
and transportation of them to the furnace in merchandise instead of cash, – were the whole expenditure to be paid in
pondents reported ‘rate(s) of profit’ on the following pages, with the number of occurrences in square brackets: Volume 1, pp. 3, 5, 9, 11, 12, 14, 16,
71, 72[2], 75, 76, 78, 81, 85, 86, 88, 92, 172, 199, 280, 290[3], 372, 471, 583[2], 585, 599, 610, 620[3], 621, 625[7], 626, 627, 630[5], 631, 632[10], 638,
], 657[15], 658[8], 659[3], 660[20], 661[20], 664, 669[9], 674[7], 675[6], 677, 680, 682[2], 684, 689[3], 691, 693[2], 695, 699[3], 701, 703, 705[6],
709[2], 711[5], 713[4], 717[4], 719[4] 721[5], 723[5], 725[5], 727, 729, 732, 751, 754, 756, 757, 761, 766, 767, 773, 774[3], 777[7], 798, 820, 822[6],
0[2], 832, 833, 842[2], 844, 846, 857, 862, 874, 878[25], 880[15], 882[22], 884[7], 886[20], 890[5], 892[6], 894, 897[10], 899[4], 901[3], 903, 906, 908,
911, 912, 913, 914, 915, 916, 917, 919, 921, 922, 923[2], 934, 939, 940, 941, 944, 945, 948, 949[2], 951[2], 953, 955, 956, 957, 959, 961, 963, 964[2],
01, 1004, 1007, 1008, 1015, 1016, 1,017[4], 1020. Volume 2: pp. 11, 14, 17, 20, 23, 29, 30, 34, 39, 43, 45, 60, 62, 67, 70, 71, 80, 81, 86, 99, 101, 105, 108,
1, 125, 138, 143, 145, 149, 165, 186, 220, 225, 227, 241, 248, 249, 262, 270, 283, 293, 297, 300, 301,305, 307, 311, 313, 316, 318, 321, 323, 325, 331,
4, 346, 349, 354, 356, 357, 358, 359, 363, 364, 372, 374, 375, 376, 377, 380, 383, 385, 393, 396, 399, 410, 411, 413, 414, 416, 425, 427, 428, 432, 433,
6, 437, 439, 441, 442, 443, 444[2], 445, 446, 447, 448, 449, 455, 465, 467, 475, 479, 481, 482, 483, 484, 492, 498, 500, 502, 505, 511, 512, 513, 514, 518,
2, 534, 535, 536, 536, 537, 538, 539, 540, 541, 542, 543, 544, 545, 546, 548, 549, 558, 559, 560, 561, 561, 562, 563, 564[2], 565, 566, 568, 572, 573, 574,
6, 577[2], 578, 579, 580, 581[2], 582, 583, 584, 586[2], 587, 588, 590, 591, 592, 593, 594[2], 595, 606, 607, 609, 610, 611, 612[2], 613, 615, 619, 622,
4[2], 625[2], 626[2], 628, 666, 672, 673, 676, 679, 684, 687, 705, 710, 797, 812, 815, 824, 830, 868, 871.
example, ‘no more than 7%’, the maximum legal rate of interest. I score any answer giving a rate of profit to any of the questions requesting this
tion (depending on the version of the questionnaire, 17 and 18; 6, 8 and 25; 5, 7 and 34).
pondents reported this on the followingpages, with the number of occurrences in square brackets: Volume 1, pp. 7, 72, 73, 628[2], 628[4], 693, 697,
1, 721, 727, 925, 1,023[7]. Volume 2: pp. 228, 268, 369, 379, 389, 402, 404, 406, 417, 418, 424, 426, 427, 451, 452, 487, 507, 509, 516, 521, 531, 547,
0, 550, 551, 552, 553, 553, 554, 555, 555, 556, 557, 585, 589, 590, 597, 598, 608, 609, 613, 617, 618, 621, 627, 628, 629, 678, 683, 684, 688, 691,696,
3, 829.
56 The
57 Am
unusua
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555548
cash, the profit would be nothing, – probably it might be set down as a losing concern’’ (Volume 2, p. 669, see also, p.
808).
The presumption that all ‘profits’ would be distributed was typical of large and small companies in New England.
‘‘Manufacturing operatives, owners of small shops and water mills invested their accumulations in extending their
businesses, and thus became the founders of large enterprises. . . . These companies occasionally, in their articles of
association, agreed to add all their earnings for a period of years to their original investment’’ (Clark, 1929, p. 367,
emphasis added), but usually they did not. The bookkeeping taught in American textbooks up to the mid-19th century
treated the working proprietor as the ‘business entity’ and did not deduct the proprietor’s ‘wages’ when calculating
‘profit’. Up to Thomas Jones’ Principles and Practices of Bookkeeping (1841) and Bookkeeping and Accountantship (1849),
American textbooks did not ‘‘distinguish clearly between real and nominal accounts’’ (Previts and Merino, 1998, p. 77;
Littleton, 1933, pp. 173, 177), between assets (real), and revenues and expenses (nominal), that is, they did not clearly
identify the proprietor’s profit. Like McLane’s respondents, in early 19th century American bookkeeping textbooks, ‘‘the
concepts of ‘costs’ and ‘income’ had not yet formed’’ (Littleton, 1933, p. 183). These works made no distinction between
‘expenses’ and ‘losses’, between expenditure that ‘‘partakes more in the nature of an asset, since it is an expenditure that
confers a benefit on the business’’, and ‘‘a loss, which confers no benefit’’ (Littleton, 1933, p. 184). ‘‘Capital was
augmented by profits [sic] and diminished by losses’’ (Littleton, 1933, p. 184), which according to Marx’s theory means
they made no distinction between expenditures on productive and unproductive labour, so were not capitalists.
Important unproductive expenses that many did not distinguish were for the consumption of the owners and their
families. Lamoreaux says, ‘‘the intermixing of family and business transactions in their accounts . . . made it difficult for
firms to calculate profits and rates of return on investment. . . . Proprietors withdrew earnings from their enterprises to
pay for household expenses, and those payments were often recorded in the same books as expenditures for raw
materials and labor’’ (2003, fn. 21, p. 444). However, mixing family and business expenses did not make it impossible to
calculate a ‘profit’ or a ‘rate of profit’. For example, a joint stock Coach maker from Delaware, gave its rate of profit as
‘‘About 15 per cent.; there has not been any dividends; we simply draw out of the firm for the support of our families’’
(Volume 2, p. 681).
Most respondents who gave a rate of profit did not explain how they calculated it, but the comments of some suggest, and
others show, that they thought of it as a return on the original capital, the SRP. Ira Gay’s response for the Nashua
Manufacturing Company, Hillsborough County, New Hampshire, implied that the ‘capital invested’ meant the original
investment:
The establishment is a cotton manufactory, operated by water power, and is a joint stock concern, of a capital of six hundred thousand dollars, invested as
follows:
In land and water power
McLane questions asked for the rate of profit on the capital ‘invested’.
os Whitmore apparently adjusted his rate of profit for ‘depreciation’, but whether he had adjusted his accounts is unclear. If he di
l, as we shall see.
$95,800
In boating canal
 30,000
In buildings
 130,000
In machinery
 294,000
In cash
 50,200
—————————
$600,000
Which last sum has been found too small, and we have from time to time, borrowed from fifty to one hundred thousand dollars, for the purpose of
purchasing materials, and the payment of wages, the interest of which borrowed sum has been paid and charged to the account of profit and loss, previous to
making dividends. The average rate of profit, annually, has been five and a half per cent. on the capital’’ (Volume 1, p. 832).
The $600,000 was the initial capital ‘‘invested’’. Although the company borrowed more to finance its working capital,
it apparently used $600,000 to calculate its average rate of profit ‘‘on the capital’’ ‘‘invested’’.56 Daniel Ingalls of
Dunstable appeared to do the same when he answered, ‘‘1. Capital invested in ground, buildings, water power, and
machinery is 2,000 dollars. 5. Average amount of stock in trade, including payment of wages, 3,200 dollars. 6. Annual
rate of profit on the capital invested does not exceed 7 per cent’’ (Volume 1, p. 830, emphases added). ‘Capital invested’
clearly meant the initial capital in Amos Whittemore’s comments on ‘‘Whittemore, Fevey, and Crayen, and Co.:
commenced operation in May, 1824’’:
‘‘The above cotton factory has paid nine per cent. on the capital invested after paying repairs, taxes, &c., losses by bad
debts included, amounting to one per cent. on the whole nett income, and the depreciation of property amounting to
three and a half per cent., leaving a balance of only four and a half per cent. of interest on the capital invested in 1824’’
(Volume 1, p. 846, emphasis added).57
‘Capital invested’ is also clear in the calculation of Charles Barnett the agent for the Water Loom, Souhegan,
and Columbian Factories at New Ipswich in Hillsborough County, New Hampshire, who had invested ‘‘One hundred
d, he was probably
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 549
and ninety thousand dollars’’ in the ‘‘factory, buildings, and machinery, which constitute the capital’’ (Volume 1, pp.
862–863):
6. Seven per ct. as near as can be estimated, as will appear from the following statement.
When in full operation the above factories will make 5500 yards coarse cotton per day.
5
re
5
th
1,688,000 per year, at 9c. will sell for
8 Only the questionnaire circulated in Maine and Massachusetts asked for ‘w
spective branches of manufacturing carried on in the county, of wear and tea
9 It is therefore unlikely that earlier in the 19th century by ‘ware and tare’ DuPo
e ‘‘present value’’ of its land, buildings, waterpower, and machinery, presumab
ear and tear’ expense. Question 13 asked: ‘‘What is the exp
r’’ (Volume 1, p. 67).
nt meant depreciation. Instead of calculating its capital, DuPo
ly the current replacement or selling price, which it estimated
$151,470
Materials required, . . ..
 92,432
. . ..
Labor . . .
44,218
Insurance against fire, say
 1500
———————————
133,150
Leaving for profits on capital
 13,320. . .. . ..
 $151,470
Barnett calculated the seven per cent ‘‘profits on capital’’ as sales less materials and labour and insurance, with no hint of
depreciation or working capital,58 on the cost of the factory, buildings and machinery ($13,320/$190,000 = 0.07). Question 6
asked for the rates of profit on debt and on equity, which is a meaningless distinction to a capitalist, but relevant for a semi-
capitalist as it imagines that equity (‘capital invested’) finances the fixed (or ‘real’) capital, the initial capital, and consumes all
the ‘profits on capital’, and debt finances the working capital. As Benjamin Cozzens, ‘‘Agent and active partner in the Providence
Manufacturing Company, Providence’’, ‘‘Town of Warwick, county of Kent’’, Rhode Island, said in a rare articulation of the
capitalist mentality, what mattered was not the source of the capital, but the amount employed, including accumulated profits:
‘‘6. Thereis no such distinction between capital borrowed and not borrowed, as contemplated by the question. . . . The
present owners have realized an average of 73/4 per cent. for interest of money and all hazards. This is the rate of profit
upon the capital employed from year to year. This capital consists of the amount paid in in 1823, and since, together with
the annual profits since, which have been added to the fixed and floating capital’’ (Volume 1, p. 934, emphasis added).
However, Alvin Bronson for New York State probably spoke for the majority when he equated the ‘Annual rate of profit’
with the rate of ‘interest of money’, a return on the nominal sum invested, or SRP:
‘‘Investments which yield the greatest profits are, as a general rule, extra hazardous; and when the losses which are
incurred are taken into the account, the average profits, it is conceived, will not differ materially from the interest of
money. . . . As a general rule, a man with prudent management, who invests a few thousand dollars, will make 12 or 13
per cent; but it is to be considered that he has incorporated his own labor with it, and when the value of his labor is
deducted, he will not be a greater gainer than he would be if he had loaned his money at interest, and hired his services
to some other person’’ (Volume 2, p. 3).
Several respondents for joint stock companies thought of their rate of profit as the nominal dividend yield, a
form of the SRP. A manufacturer of cotton in New York organised as a joint stock equated its ‘‘rate of profits’’ with
‘‘About 12 per cent dividend’’ (Volume, p. 23). Another, who saw dividend yield as part of the rate of profit, began its
answer by noting, ‘‘We have not declared any dividends for the last three years’’, implying that this was because ‘‘The
net profit of the establishment for the last three years has not been more than nine percent, on the forty thousand
dollars invested’’ (Volume 2, p. 38). Bradbury Bartlett answered for the Newmarket Manufacturing Company in New
Hampshire, ‘‘The dividends have averaged five per cent’’ (Volume 1, p. 610). A joint stock manufacturer from New Jersey
could not give its rate of profit because ‘‘We have never divided a cent since we started. The stock is at 331/3’’ (Volume 2,
p. 141). The owner of a furnace in Maryland commented: ‘‘Cannot answer, as no dividend has ever been struck’’ (Volume
2, p. 690).
The DuPont gunpowder manufactory of Delaware refused to disclose its rate of profit because the ‘‘Public interest does
not seem, to us, to have any concern in this’’ (Volume 2, p. 658), but also excused itself by bookkeeping problems. Consistent
with the semi-capitalist mentality, DuPont explained that it had charged the cost of renewing and extending its fixed assets
against revenue and could not therefore calculate the ‘rate of profit’ because, apparently interpreting this as the capitalist
ROI, it could not calculate its capital employed! ‘‘The manufactory, having been gradually and progressively enlarged, out of
its profits, ever since its establishment, the whole amount of capital cannot be calculated’’ (Volume 2, p. 656).59 Other
respondents gave similar bookkeeping explanations for their failure to report a rate of profit. For example, David Anthony
reported for six manufacturers in Fall River, Massachusetts, ‘‘they are unable to say anything definite’’ about their rates of
profit because,
ense, in the
nt disclosed
at $80,000.
60 Que
and wh
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555550
‘‘Very few of them have kept an expense account, for repairs, &c., and which has come out of the profits, and some new
machines have been placed in lieu of old ones, alterations have been made to old machines; and without knowing the
value of their machinery, they are unable to make an account of profit and loss’’ (Volume 1, p. 73; see also, for example,
Volume 2, p. 17).
Elijah Howard replied to question 17, ‘‘In order to answer this question satisfactory to myself, have examined the books
and papers of the Pawtucket Cotton Manufacturing Company within named, having found it impossible to establish, or
ascertain the rate of profits each year, from their mode of transacting business, I have made annual estimates of profits’’
(Volume 1, p. 171). Geo. Savary explained for a cotton manufacturer in Attleborough, Massachusetts, that it ‘‘afforded a
handsome profit, all of which has been invested in improvements. Rendering it difficult to estimate the rate of profits’’
(Volume 1, p. 197). Daniel Drown, reporting for manufacturers in Portsmouth, New Hampshire, could not answer question
25, partly because the agents ‘‘did not seem prepared to give an answer’’, but mainly because ‘‘different opinions exist in
relation to the mode of computing the annual profits’’ (Volume 2, p. 589). Drown did get information from John Williams who
leased Upper Factory, for whom he apparently calculated the SRP, with no mention of depreciation. ‘‘Calculating . . . the
profits of the manufactory improved by Mr Williams, upon the amount of capital invested in ground, buildings, water power
and machinery, after paying for materials and labor, there is found a profit of 20 per cent’’ (Volume 1, p. 583). Recently started
concerns that used semi-capitalist accounting could legitimately claim, as the proprietor of a forge in West Pennsylvania
explained, ‘‘Profit not known . . .. [W]e have not been able to ascertain what are profits are, if any, as we are not done with our
improvements’’ (Volume 2, p. 337). An agent of a joint stock forge from the same area, who equated ‘improvement’ costs with
losses from fire and water, both losses of potential consumption, had the same problem: ‘‘Profit not exactly known, but not 6
per cent., owing to still making improvements and accidents of fire and water’’ (Volume 2, p. 338). As all these respondents
kept semi-capitalist accounts, Lamoreaux is wrong to conclude they show that ‘‘small manufacturers were . . . casual in their
bookkeeping’’ (Ware, 1931, pp. 133, 134), that ‘‘manufacturers, even in the most advanced industries, generally kept very
poor accounts’’ (2003, p. 444). Some simply did not keep fixed asset accounts, as Harris and Greene, agents for Greene
Manufacturing Co., Warwick, Kent County Rhode Island, noted in explaining a nil return. ‘‘6. It would be very difficult for us to
tell with any degree of accuracy, having begun with a small capital and expended our profits as fast as accumulated, and have
no expense account of our buildings, &c’’ (Volume 1, p. 942).
Some respondents appeared to evince the capitalist mentality by arguing for, and a few by charging, ‘wear and tear’ or
‘depreciation’, but appearances are probably largely deceptive. Consistent with the semi-capitalists’ mentality, most who
answered question 25 (or 26) happily gave their estimate of the proportion of selling price accounted for by wages, materials
and ‘profit’.60 Apparently adopting the capitalist view, however, DuPont scoffed at the implication of the question that ‘profit’
was selling price less only the cost of materials and labour. It thought this method gave ‘‘a very erroneous idea of the profits of
any manufacture. The interest of capital, numerous contingent expenses, the repairs of machinery, the chance of losses, &c., &c.,
ought also to be calculated’’ (Volume 2, p. 659). DuPont did not say what it meant by ‘contingent expenses’ or what the ‘chance of
losses, &c., &c.’ included. Aaron Tufts from Dudley, Massachusetts however, reporting aggregate sales and cost data from the
owners or agents of ‘‘most of the woollen factories in this county’’, which showed a small profit over direct and indirect costs,
noted that one of them was ‘‘Wear and decay of machinery, buildings, &c., 8 per cent. at least’’ (Volume 1, p. 69), implying an
overall loss. However, Tufts did not report this loss, leaving open the question whether or not these manufacturers actually
charged for ‘wear and decay’. David Anthony’s comment on a Fall River manufactoryraises the same question:
‘‘As relates to the profits of the last three years in our business, they would be considered very fair if the state of the
machinery was not taken into account, but if that is taken into the account, the reduction on it, in consequence of
improvements in machinery, made in the last three or four years, the interest of expenditure cannot be realized’’
(Volume 1, p. 71, emphases added).
This appears to be a hypothetical calculation: if Anthony had charged for obsolescence, the rate of profit would be less
than the rate of interest. Two other manufactories at Fall River said they made losses or nothing ‘‘owing to the depreciation of
machinery’’ (Volume 1, p. 73), but whether they charged it in their accounts is unclear. Elijah Howard, of Easton
Massachusetts noted in answer to question 13, ‘‘It is [on] expenses of this description that the nominal profits of cotton
manufactures have been dissipated’’ (Volume 1, p. 85, emphasis added). Howard was ‘‘confident’’ that after ‘‘deducting a fair
allowance for the depreciation of the property, the proprietors have not realized a profit exceeding six per cent’’ (Volume 1, p.
85), but whether they deducted it from the ‘nominal profits’, those they actually calculated, is not clear. J Treadwell of Salem,
who could not answer question 17 ‘‘with accuracy’’, likewise thought it ‘‘extremely doubtful whether, since machinery was
first adopted to any considerable extent in manufacture, capital employed therein has not met an annual return of six per
cent’’ (Volume 1, p. 86, emphasis added). In other words, he did not know. The partners of a Cotton Manufactory, Alleghany
County, West Pennsylvania, reported earning $15,000 the previous year, but added in hypothetical justification,
‘‘. . . from which, if the interest of capital invested be deducted, and if the necessary allowance for wear and tear of ten
per cent, it will be perceived that the proprietors are by no means exorbitantly rewarded for their enterprise . . .. [T]he
stion 25 (or 26) asked, ‘‘What portion of the cost of your manufacture consists in the price of the raw material, what portion of the wages of labor,
at portion of the profits of capital?’’ (Volume 2, p. 662).
61 As
62 Onl
worker
people’
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 551
profits of business being the rewards for skill, enterprise and industry . . . it is fair that the manufacturer who combines
both should receive an advantage equivalent, after providing a contingent fund for wear and tear, losses &c’’ (Volume 2,
p. 462, emphases added).
The partners’ equation of charges to a ‘contingent fund’ for ‘wear and tear’ with ‘losses’ suggests they were not for
depreciation, the systematic allocation of cost, but provisions for future losses, consistent with a semi-capitalist mentality
that manages long term consumption. A joint stock paper mill from Fayette County also gave an apparently hypothetical
calculation to explain why it had not reported its rate of profit: ‘‘Allow $800 interest on capital invested, $600 for manager
and clerk, $500 for wear and tear of machinery, leaves a small profit, if any’’ (Volume 2, p. 516). A joint stock Woollen
Manufactory from Delaware included production overheads and wear and tear of machinery in a ‘general’ answer to
question 26. ‘‘The price of raw material is generally considered one-half of the value produced; one quarter is paid in wages,
one quarter is interest on capital employed, cost of coloring, commissions and guarantee on sales, insurance, fuel, light, and
wear and tear of machinery’’ (Volume 2, p. 662). The owner of an incorporated manufactory from Whitetown in New York
State gave his ‘‘estimate’’ that ‘‘natural wear and tear (including improvement) in machinery’’ was 15% of the sales price
(Volume 2, p. 42). A Cotton Yarn manufactory from Delaware answered: ‘‘The cotton cost 11 cents per lb., waste 2 cents,
wages 8 cents – is 21 cents. No.1’s yarn is worth 25 cents – leaves 4 cents to pay rent, fuel, light, oil, wear and tear of
machinery, &c’’ (Volume 2, p. 706). It is unclear whether any of these respondents actually calculated depreciation. Some
made clear they had not. An iron manufacturer from New Jersey saw the need but took ‘‘no account’’ of ‘‘interest of capital
invested, decay of works, expense of managing, taxes, &c’’ (Volume 2, p. 184). A cotton company in Ohio admitted, ‘‘The
profits of the company have been about 11 per cent since the commencement, without calculating the depreciation of
buildings, machinery &c’’ (Volume 2, p. 867). A cotton factory from Warwick, Kent County, New Hampshire reported: ‘‘6. The
annual rate of profit, making no allowance for wear and tear of machinery and natural decay of building may be 15 per cent.
from which interest should be deducted’’ (Volume 1, p. 944). The Hope Factory, Providence County answered: ‘‘from 1820 to
the present date we have, after providing for the annual interest, insurance against fire, &c. made an average of five per cent.
profit exclusive of deterioration of machinery’’ (Volume 1, p. 961). By contrast, one Forge in Ohio said it had included ‘‘Wear &
tear of machinery, buildings, &c’’ (Volume 2, p. 864) in calculating its costs, and Denton Thurber, Agent of the United
Manufacturing Company, County of Providence, Rhode Island, and Benjamin Cozzens from the same area, appeared to have
calculated capital after charging for depreciation:
‘‘6. Previous to the year 1820 no dividends were made, but our capital, after making fair allowances for depreciation,
wear and tear of machinery, and decay of buildings, had increased to something rising $60,000, and has been the same
up to the present time, with but little variation . . . Since 1820, dividends have been annually made of about 9 per cent.
On the present capital, after making fair and reasonable charges for decay of buildings, depreciation and wear of
machinery’’ (Volume 1, p. 953).61
A manufactory from Fall River also claimed, ‘‘it was their practice, in making up their annual account, to deduct 10
per cent. upon the cost of the machinery, to ascertain the result of the past year’s business’’ (Volume 1, p. 73). In short,
while most of comments appear to be opportunistic appeals to ‘wear and tear’ to justify their rate of profit, only two
(including Amos Whitmore) appear to evince a capitalist mentality by charging ‘depreciation’, and two by charging for
‘wear and tear’. However, we must be cautious in interpreting ‘wear and tear’ to mean depreciation, because it could
mean charging for maintenance and repairs. For example, an ‘‘Estimate of the general cost’’ of a cotton factory on
Brandywine Creek noted it ‘‘is usual to deduct ten per cent per annum for wear &c., of machinery, which is found very
little more than sufficient to keep it in good working repair’’ (Volume 2, p. 795). However, if manufacturers understood
depreciation accounting but did not use it, this would support the hypothesis that America was a society of simple
commodity producers and semi-capitalists because it eliminates lack of knowledge as a cause of pre-capitalist
accounting.
3.9. Concluding comments
Is the ‘‘important lesson to draw from these responses . . . the primitive state of accounting practices at the time’’, and does
this mean they do not ‘‘tell us much about the aspirations of the business people keeping the accounts’’ (Lamoreaux, 2003,
pp. 444, 445)? Lamoreaux accepts that these conclusions imply ‘‘merchants and manufacturers were not interested in profits
[sic]’’, whereas many evidently were and strove to increase them (2003, p. 445). She blames a ‘‘lack of consensus about how
to figure a rate of return’’ (Lamoreaux, 2003, p. 445), but the evidence suggests a predominance of the semi-capitalist SRP
mentality. However, to make a plausible hypothesis convincing requires more case studies of early manufacturers’ accounts,
particularly those of the smaller firms typical of the respondents to the McLane questionnaire.62 Because the records ofsmall
entities have low survival rates, most archival research on early manufacturers has focused on the accounts of large
Thurber does not mention interest, this seems to be the dividend return on equity.
y 249 of the respondents had assets greater than $50,000, and only 106 had $100,000 or more, 88 of them textile companies; only 36 had 250 or more
s, most in textiles. ‘‘The overwhelming majority of the enterprises . . . had assets of only a few thousand dollars and employed at most ten or a dozen
’ (Chandler, 1977, pp. 60–61).
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555552
companies, particularly the Boston textile mills, which Part 2 re-examines. It is true that ‘‘Information about early American
industrial cost-accounting is sparse’’ (Previts and Merino, 1998, p. 56), but accounting historians have not thoroughly
investigated all possible sites.63 Perhaps deterring them is the misleading view that the early firms had accounting systems
that were ‘‘unique, peculiar to each company, and ad hoc’’; that although ‘‘regular cost-keeping . . . was a general practice’’, it
was ‘‘specific to each entity’’ (Previts and Merino, 1998, pp. 58, 95). If true, further study of early accounts would be
uninteresting because we would have little to learn about the ‘‘origins of modern accounting’’, the ‘‘fixation’’ of management
accounting history research (Hopper and Armstrong, 1991, p. 405). However, we have seen it is not true and, Part 2 argues,
we have much to learn from the history of American cost accounting about the genesis of modern management accounting.
4. Conclusion: whither capitalism in America?
In search of a genealogical history of American accounting theory, the paper constructed an accounting history model of
America’s transition to capitalism by adapting Marx’s theory of the transition in England. According to his theory, yeoman
farmers were simple commodity producers that the model predicted would produce only single entry accounts of
indebtedness. Because merchants employing a social capital, and planters and manufacturers employing unfree labour, were
according to his theory semi-capitalists, the model predicted they would calculate their consumable surplus as receipts less
expenditures, emphasise action controls, seek to control only prime costs, and would calculate the SRP when they
participated in a social capital. As free capital did not face free wage labour, the model predicted we would find no capitalist
accounting. We need more research, but the evidence supports these predictions. Many scholars assume that America was
‘born capitalist’, and some historians argue it had become capitalist by the early 19th century. However, according to the
evidence surveyed above, America did not have capitalist farmers, slaveowners, merchants, or small manufacturers during
the late 18th and early 19th centuries, which raises the questions, when and how did it make the transition, and what were
the consequences, for America and accounting?
Detailed archival evidence exists for larger manufacturers and the railroad companies for the second half of the 19th
century, and their accounts are the focus of Part 2. Historians have argued that ‘capitalism’ appeared in the Boston textile
mills, the high point of industrial development in America before the Civil War, but re-examining the accounting evidence
shows that, like large southern slave-owners, the Boston Associates who owned them were semi-capitalists. Chandler (1977)
famously argued that ‘managerial capitalism’ first appeared on the railroads and quickly spread to the iron and steel
industries from the 1860s through the efforts of ‘entrepreneurial capitalists’ like Andrew Carnegie. However, Part 2 shows
that the railroads and entrepreneurs like Carnegie remained semi-capitalists, and that not until around 1900, after two
decades of intense conflict between ‘capital and labor’, in a growing ocean of free wage labour and a rising tide of free social
capital, did capitalists appear in the big corporations. Typified by Pierre DuPont, they set about the real subordination of
labour and the separation of ownership from control through new systems of management accounting, a process only
completed in the 1920s when America abandoned plutocratic capitalism, professional managers ran large corporations, and
investors held diversified portfolios.
According to Marx, contradictions within feudalism gradually produced capitalism in Europe against persistent violent
resistance, from his perspective taking England around 350 years to reach its most advanced form (circa. 1550–1900) (Bryer,
2000a). By contrast, Part 2 argues, the transition took America around 50 years (circa. 1880–1930). By European standards,
before the 1880s America was relatively peaceful, Part 3 argues, because it was a society of simple commodity producers and
semi-capitalists, which also explains why its transition to big business capitalism from the 1880s to the 1920s was
exceptionally violent. The final transition in Britain to large businesses financed by the capital market and run by
professional managers from around the 1880s, to ‘total social capital’ by 1900, took an already capitalist society with free
wage labour and revolutionary Chartism behind it, relatively peacefully to its highest level. In America, by contrast, big
business rapidly and violently transformed a society of simple commodity producers and semi-capitalists into a society with
widespread free wage labour, dominated by plutocrats and Wall Street. The conflict this generated, Part 3 argues, explains
why America’s political ideology dramatically changed. Big business created an ideological problem for the ruling elite
because it split the employing class between small and large corporate employers, and united farmers, workers, and many
small businesses, against it in a political context where socialism became a threatening possibility. To counter this threat,
politicians, business leaders, Wall Street capitalists, and intellectuals came together during the ‘Progressive Era’ to formulate
a new ideology of ‘corporate liberalism’, of ‘social responsibility’ and ‘regulation’, to undermine socialism’s appeal and justify
big business (Weinstein, 1964; Sklar, 1988). Unnoticed by historians, one of these intellectuals was Irving Fisher, a young
professor of political economy at Yale, a rising star who grew up with this political agenda, absorbed it, and Part 3 argues,
made a seminal contribution to its success by popularising his theory of accounting, his unique contribution to neoclassical
economics, his theory of ‘capital’ and ‘income’. Part 3 argues he designed it as a critique of Marx and American socialism, to
reconcile simple commodity producers and semi-capitalists with the money capitalists of Wall Street, thereby underwriting
corporate capitalism with a unifying ideology apparently substantiated by the mundane practices of accountancy. Part 3
concludes that Fisher’s theory reproduced Americanism in a new form that went beyond Adam Smith to explain and justify
63 Several studies are by non-accounting historians, e.g., Ware (1931); Conrad (1984); McGaw (1985, 1987), and those by accounting historians often have
limited ambitions.
R. Bryer / Critical Perspectives on Accounting 23 (2012) 511–555 553
the capitalist world of big business. Fisher created a new language that accounting theorists and through them the American
middle classes came to live and breathe, a language that history would show had pathologically divorced accounts from
reality (Bryer, 2011).
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http://eprints.lse.ac.uk/428/1/NikRose1.pdf
http://eprints.lse.ac.uk/428/1/NikRose1.pdf
	Americanism and financial accounting theory - Part 1: Was America born capitalist?
	Was America born capitalist?
	Marx's theory of the transition to capitalism in England: lessons for America
	Marx on America
	An accounting history of the transition to capitalism in America
	Simple commodity production
	Semi-capitalism
	The transition to capitalism
	Testing the model
	Yeomen farmers and inland merchants
	Southern slavery
	Slave owning and accounts
	Accountability to the slave owner
	Controlling the slave labour process
	Early manufacturers
	Merchants and manufacturers
	The McLane report
	Concluding comments
	Conclusion: whither capitalism in America?
	References