From renaissance Venice to today
January 29, 2014
Taking a break from theology and philosophy, I read a history of accounting! Yes. The book is Jane Gleeson-White’s Double Entry: How the Merchants of Venice Created Modern Finance (Norton, 2012). It is the story of how Venetian bookkeeping — “double entry” wherein every transaction is entered twice in separate columns, debit and credit — revolutionized the world. The natural order became controllable and less mysterious, such that nature could be quantified and calculated. The concept of “capital” was born, though not theorized until the late 19th century.
The book is really twofold. The first section, about 2/3 of the book, is a recounting of the history of “double entry,” including the necessity of Arabic numerals and the gradual de-mystification of mathematics. The industrial revolution of the 19th century is when “double entry” would come into its own, resulting in the explosive growth of the newest trade, “accounting,” which fought hard to justify its respectability alongside law and business. The final portion of the book is a fairly swift transition to the financial scandals of the 20th century and, especially, the first decade of this century. It is here that her Keynesian side is most pronounced, irksome to many reviewers. I appreciate both the strong points of Keynes and his opposition at the University of Chicago, so I was not bothered. I rather enjoyed her passionate defense of federal regulation. Her main thesis is that far too much that is valuable to humans — the environment is the main example — is not “quantified” and thereby “valued” by all of the measures for a nation’s well-being and success (such as the GDP). This is especially problematic for developing countries where vast natural resources are not measured and, as a result, do not account for the country’s value in the global market, until these resources become commodified. This thesis is set alongside a parallel thesis, tangentially related, about the manipulation of financial records by accounting firms (and auditors), with hardly any “accountability” of their own because accounting is treated as purely objective (“scientific”) and above reproach. This will be the most compelling to a broad range of readers.
You can watch a presentation of the book: “Monks, Maths, and Magic.”