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Smith, Marx or Foucault in understanding the early British Industrial Revolution?

A re-examination of management and accounting for capital and labour at the Carron Company# Robert A. Bryer, Richard K. Fleischman and Richard H. Macve* To be presented at the28th EAA Annual Congress, Gteborg, Sweden. 18-20 May 2005.
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The authors are, respectively, Professors of Accounting at Warwick University, John Carroll University (USA) and the London School of Economics.

Correspondence details: Professor R.A. Bryer, Warwick Business School, Warwick University, Coventry, CV4 7AL, Warwickshire, U.K. E-mail: Rob.Bryer@wbs.ac.uk Paper reference number: 90481
This version: 14th March 2005 Abstract
Archival historical work has been re-evaluating the role of accounting and early management practice in the BIR. Interpretations have been offered both by economic rationalist (or Neoclassical) historians and by Foucauldian historians. Recently Bryer has argued for a Marxist accounting and management history in which the accounts played a critical role in controlling production for profit, in technological innovation, and in protecting or undermining the social cohesion of its capital and its capitalist zeal. We re-examine the primary archival evidence about managerial practices in the Carron Company between about 1760 and 1850, focusing on the emergence of an early multi-unit (vertically integrated) business; the vicissitudes that afflicted the co-partners in establishing the capitalisation of the business on a sound footing and in organising an effective management structure; the introduction of free wage labour into a region where serfdom was still prevalent; and the technological breakthrough of the invention of the Carronadesince comparable features have been held to be significant in the rational economic development of modern, sophisticated cost, management and financial accounting techniques in other industries. We explore the different ways in which the Neoclassical, Foucauldian and Marxist frameworks serve to illuminate the archival evidence for the developments that took place at Carron, and the significance of the role of its accounting.

We would like to thank the staff at the National Library of Scotland, George IV Bridge, Edinburgh, and at the National Archives of Scotland, West Register House, Edinburgh, for their help and hospitality, particularly Linda Ramsay, Head of Conservation, Thomas Thomson House, Edinburgh.

INTRODUCTION Getting the story straight The Carron Company, formed in 1759 to exploit the coal and iron-ore of central Scotland, features in the textbooks as an outstanding example of large-scale enterprise during the British Industrial Revolution (BIR) (for example, Pollard, 1965; Mathias, 1983; Berg, 1994). Despite Carrons importance and the large number of its records that survive, historians have not examined its accounts in any detail. Campbell (1961) discusses Carrons financing and its accounts, but he gives limited details; gives no references to his sources; and he had a limited understanding of accounting. Pollard (1965) looked at Carrons accounts but gave few details and was not an accounting specialist (Bryer, 2005a). Fleischman and Parker (1990, 1997) identified elements of modern cost accounting, but did not investigate Carrons financial accounting system, or its interrelationships with the management accounts, in any detail. In response to (Rob) Bryers paper, A Marxist accounting history of the British Industrial Revolution: a review of evidence and suggestions for research (Bryer, 2005a), that includes an analysis of Carrons accounting history using published materials, (Dick) Fleischman invited him and (Richard) Macve to jointly re-examine Carrons archives. Our agreed aim was to isolate differences between Neoclassical, Marxist, and Foucauldian theories by confronting them with the same large archive at the same time. The main priority was to collect as much primary data as possible and thoroughly reexamine its accounting, management, and labour histories.1 The Neoclassical and Foucauldian views of accounting history are well known and discussed, but the Marxist view is not. Rob has therefore written up the Carron material in detail from his Marxist viewpoint as a stand-alone paper (Bryer, 2005d), which this joint paper draws upon and discusses.2 In what follows, after a very brief outline of the main features of Carrons early history, each participant outlines his involvement in the project, assays the evidence he considers important, and states what he thinks we learn from Carron. Each then evaluates the contribution of the other two frameworks and focuses on points of conflict, before drawing conclusions. As Robs is the new voice, his contribution come last (rather than second according to Marxs place in the chronology of ideas) to enable a more targeted critique of the others. As the sponsor of the project, Dick concludes with his reflections on the successes and failures of this joint venture in accounting history. Campbell (1961) and Watters (1998) have told Carrons history. It was founded in Scotland 1759 and its first blast furnace was fired on 1st January 1760. Initial partners
Richard made a preliminary visit, but was unfortunately ill when Rob and Dick visited the National Archives of Scotland and the National Library of Scotland on 10th-11th July 2003. Richard visited on 3rd 4th December 2003; Dick, Rob and Richard visited on the 25th-27th May 2004; Rob visited on the 17th24th August 2004 and from 27th September to 1st October 2004; and Rob visited with Richard from 29th30th November 2004. We are grateful to David Oldroyd (Newcastle University) for advice accessing this archive. 2 Available from Rob Bryer on request.
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included Garbett, Roebuck and his brothers, and the Cadells (senior and junior). Only Wm. Cadell junior was resident at Carron and he managed the business. Following a critique of his management in A Short View of the affairs of Carron Company, January 28th 1769 [GD 58/4/1/1],3 addressed to the partners, Gascoigne (who had married into Garbetts family) supplanted him in March 1769. The company had always been short of capital and faced a further financial crisis in 1772. The partnership restructured itself as a chartered company in 1773. In 1778, the company successfully introduced the Carronade, a revolutionary lightweight gun that contributed greatly to Britains naval superiority, and saved the companys finances. After Gascoignes departure to flee his creditors, from 1787 to 1873 Stainton and Dawson managed the company virtually as a private fiefdom, leading to a major lawsuit by aggrieved shareholders in 1864 and the payment of large damages for misleading them by manipulating the accounts. I THE NEOCLASSICAL VIEW DICK FLEISCHMAN CARRON: THE SECOND COMING It is now nearly two decades since I first travelled to Edinburgh to study the Carron Company archive. In that instance, my purpose was an attempt to rehabilitate British Industrial Revolution (BIR) cost accounting from the severely negative evaluation of the now late Sidney Pollard (1965, 1990). The Carron archive was a revelation, perhaps as much for the sophistication of its costing methodologies in the years immediately following the founding of the enterprise as for its disappearance in subsequent generations of management. Also singular in the Carron story was the chronology of these developments sophisticated costing at a time before most historians date the advent of the BIR. Consequently, I felt compelled to write of Carron itself (Fleischman & Parker, 1990, 1997) before attempting the best-case scenario that appeared the next year (Fleischman & Parker, 1991). The purpose for subsequent visits to the Carron archive has been far different. More recently, I have participated in a number of papers in which my coauthors and I have urged archival joint venturing in order to test whether differing paradigms could contribute additively and synergistically to our understanding of key events in accounting history (Fleischman et al., 1996; Fleischman & Tyson, 1997; Fleischman, 2000; Fleischman & Radcliffe, 2003). I have had opportunity to cooperate with leading Foucauldian scholars in several BIR studies (Fleischman et al., 1995; Fleischman & Macve, 2002). This paper brings on board for the first time a prolific Marxist theorist for a tripartite investigation of the Carron records, thus combining representatives from the three leading paradigms that evolved in accounting history during the 1990s. This project has featured numerous visits to the archive, some undertaken singly, sometimes in pairs, and on one occasion all three together. There has been a complete exchange of all information gleaned. Our mutual understanding was that each would write about those aspects of the archive that each found the most compelling and, at the
The text is anonymous (but Bryer, 2005d almost certainly correctly identifies the author as Gascoigne), and it breaks off suddenly.
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same time, those aspects identified as important within the rival paradigms that each felt either contributed to our understanding of the Carron phenomenon or, alternatively, which each felt led their advocates into false paths. THE NEOCLASSICAL CASE Having written about Carron previously, I do not want to expend too much of my allotted space rehashing the details of the economic rationalist position that can be found in Fleischman and Parker (1990, 1997). However, it needs to be confessed that the archival visit that led to the Carron article was very brief (three days to the best of my recollection) as it was but a single stop on the more general BIR project to re-evaluate its managerial accounting. Consequently, a number of errors and omissions were allowed to intrude upon that analysis. The most serious was the inattention I paid to the financial statements produced at Carron, in particular the extent of its double entry bookkeeping and the integration of its financial and cost accounts. My coauthors on this paper have focused much more extensively on these aspects of the record keeping than time or interest permitted me, either two decades ago or even now. I very much applaud their superior attention to the detail of the financial accounts, in part because they have corrected the errors occasioned by my dependence on Campbell (1961) for conclusions about the financial accounting side of operations. I might also aver on behalf of economic rationalists who are more attentive to financial accounting methodology that my relative lack of concern is atypical. For example, a major focus of Edwards early paper on Cyfarthfa (1989), for example, was the integration of the costing and financial records at this Welsh iron-producing giant. The discussion that follows is divided into three main sections: (1) an articulation of those aspects of the Carron archive than an economic rationalist would find most compelling; (2) those features of the record where the Marxist/labor-process and Foucauldian paradigms have contributed in a meaningful way to expanding our understanding of the Carron story; and (3) a commentary on areas of disagreement in our analyses of either the importance or lack of significance of certain factors that contributed to Carrons early history. Economic Rationalism: Carrons Daily Operations From my perspective, Carrons accounting was most remarkable in that it appeared so early in the firms history and in the BIR itself. Most historians date the BIR from 1780 whereas Carron was founded in 1759. Other major players in the BIR iron industry, such as Coalbrookdale and Cyfarthfa, predated 1780, but none manifested the sophistication reflected by the costing and managerial instincts of Carrons founders. The Carron experience lends credence to the hypothesis that the genesis of BIR management emanated from a corps of entrepreneurs who, in the absence of a costing literature or a university commerce curriculum, operated by the seat of their pants and frequently got it right. It also evinces how quickly costing expertise can dissipate, as was the case at Carron after the founding generation passed from the scene in 1786.

The aforementioned costing significance extended to a wide variety of managerial aspects that far transcend the labor control mechanisms that Foucauldians, particularly Hoskin and Macve, privilege in their search for the genesis of modern management. Most obviously, and perhaps what would be most apparent in a nascent costing system, was expense control. The Carron founders tracked product-line costs very carefully, including the allocation of overhead (general charges) according to a predetermined formula (GD 58/2/1/1, Resolution #73, 1763). The differential costs of raising coal, iron ore, and ironstone in various mineral fields were tracked and subsequently reflected in transfer prices to the blast furnaces (GD 58/2/4/1). Department managers were made accountable for expense control in their individual operations on a weekly basis (GD 58/2/3/1, Resolution #1, 1768; Resolution #319, 1770). Expense data were utilized extensively in business decision making, such as the abandonment of product lines (nails, anchors, and anvils) (GD 58/2/1/1; GD 58/4/1/1; GD 58/2/1/1; GD 58/58/2/3/1) and the leasing of mineral fields (GD 58/2/1/1, Resolution #409; GD 58/2/3/1, Resolution #345). Economic rationalists would be impressed by Carrons use of a pre-modern standard costing system in several components of its operations. Transfer prices of raw materials were at standard (GD 58/6/4/4). Whilst labor standards were not articulated to please a Foucauldian, Carrons management had sufficient knowledge to anticipate what a good workman should produce in a day (ACC 5381, box 29, folder 1, 1768). When the company reduced piece rates for holing from 4d to 3d per yard in 1766, it was estimated that a good worker could still earn 2/6s per day (ACC 5381, box 29, folder 1). Carron paid great attention to its raw material supplies. Frequent trials of coal, iron ore, and ironstone varieties were undertaken (e.g., Mathews was ordered to test coal types in 1769 [GD 58/2/3/1, Resolution #115]). There is in evidence estimations of reserves in the various mineral fields (GD 58/6/4/1; ACC 5381, box 28, folder 2). There were at least two substantial coal production analyses undertaken in the early 1770s (ACC 5381, box 28, folder 1, 1768; ACC 5381, box 28, folder 2, 1770). Details are provided in Fleischman and Parker (1990, 1997). In summation, it appears that Carrons management had a good handle on the firms dayto-day operations. Expectations from managers and workers alike were delineated. Internal investigations were conducted to gauge whether expectations were being met (e.g., GD 58/2/3/1, Resolution #478, 1773). More of the attempt of Carrons management to control daily operations will be considered in the following section. Economic Rationalism: Links to Current Practice I have debated in other venues the issue of whether historians must take pains to divorce present usages from their narrations of the past (Fleischman & Tyson, 1997; cf., Miller & Napier, 1993; Carnegie & Napier, 1996). It is my conviction that the reader of an historical narrative is brought more into the picture if linkages to contemporary practice can be made. However, care must be taken to avoid the thought that current methodologies represent best practice. Johnson and Kaplan (1987) conveyed this message forcefully on behalf of economic rationalists everywhere.

There are numerous instances in the Carron archive of attempts to legislate responsibility, not only amongst rank-and-file workers, but throughout the managerial hierarchy from top to bottom. Managerial responsibilities had been clearly delineated amongst the partners as early as 1762 (Campbell, 1961). A May 1766 letter from Garbett urged the resident manager Cadell to place the different branches of the business completely on the shoulders of their superintendents for better or worse, glory or infamy (Acc 5381, box 28, folder 1). Managerial performances were critiqued, sometimes in unflattering terms, as with the case of Mathews whose general management of the coaling operation was called shocking by Cadell (ACC 5381, box 28, folder 1). As of 1768, approximately 20 managers were ordered to generate weekly reports (GD 58/2/3/1, Resolution #1; GD 58/2/1/1, Resolution #329). Perhaps as significantly, Resolution #2 specified that the partners were to examine them. Formal job descriptions for managers were articulated in 1771 (GD 58/6/4/2). Resolution #510 of October 1772 required each clerk to pledge his salary as security for the due performance of his duty (GD 58/6/42). In 1784, near the end of his lengthy reign as general manager of Carron, Gascoigne announced the need for job descriptions for all workers, not just the managerial corps (GD 58/2/3/1, referencing Resolution #754). Records were maintained that would allow for the comparison of job performance. Most regular were the blast furnace accounts, which recorded the inputs and outputs of the five furnaces kept in blast during times of full production. One of these account books for the 1790s (GD 58/6/4/4) has survived. The respective performances of the managers of Kinnaird and Quarole, Carrons two major coalfields, were compared (citation). Likewise, data exist for the respective output costs of two ironstone managers in the early 1770s (GD 58/6/4/1). With the crisis of Carrons cannons failing at proof at Woolwich, the firm established responsibility for subsequent trials, particularly of the Carronade. Whereas the warehouse keeper was generally responsible for the quality of Carrons products, the borer of each individual cannon was made responsible as of December 1772 (GD 58/2/3/1). Perhaps this shift in accountability contributed to the greater success of the Carronade and the salvation of the company. It must be confessed, however, that there is little evidence that enforcement of penalties for malfeasance took place. For example, despite several complaints about Mathews performance, he was apparently never discharged. Lesser-skilled laborers were much more at risk than the managerial corps. Eleven named clerks were discharged in 1769 (GD 58/2/3/1). The institution of pay tickets for individual workers in 1778 was ostensibly a labor control mechanism for miners particularly, but the process was long in coming and there is no supporting evidence of the new policys effectiveness (GD 58/2/2/1, Resolutions #596, #799). The accounting system at Carron was elaborate in comparison to other companies of the time, and the partners expected it to be instrumental in controlling operations. Resolution

#60 of the General Court in 1763 provided full articulation of how the various books of account were to be kept. Resolution #65 specified that the pay for bookkeepers was to be 25 in their first year with an annual increase of 5 until a maximum of 50 was reached. Resolution #68 specified the information that was to be provided monthly in the accounts (GD 58/2/1/1). Johnson and Kaplan (1987) argued that the U.S. had lost its global economic hegemony in the 1980s because of the inability by managerial accountants to identify which product lines were profitable. Carrons management two centuries before realized that the viability of its product lines was vital to its survival (GD 58/4/1/1, A Short View of the Affairs of Carron Company, 1769, p. 18, hereafter called the Short View). The CadellGarbett correspondence through the 1760s featured detailed analysis of the nail trade, culminating with the sale of that branch of the business to the Cadells in 1770 (ACC 5381, box 29, folder 1). We have seen how Resolution #329 in 1768 mandated weekly reports from 20 different department managers (see Resolution #67, 1769 and #321 in 1765 for details). Carron was decades ahead of its time in allocating oncost to productive departments and structuring transfer prices to reflect the differentials in the cost of raising raw materials. Many venerated accounting histories (Garner, 1954; Urwick & Brech, 1964; Wells, 1978) advanced the theory that managerial accounting could not spread during the BIR because of the absence of a costing literature and a concomitant secrecy about operations to preserve competitive advantage. The Carron archive demonstrates clearly that benchmarking was prevalent in the BIR. In July 1768, John Gillies visited several Lancashire and other Northwest coal companies to learn of their methods. It was observed that a good workman could produce six tons of coal daily and would be paid not only piece rates per ton but also for forward progress. A lengthy travel log of his findings exists in the Cadell papers (ACC 5381, box 29, folder 1). Mr. Mathews was sent to Coalbrookdale in 1769 to gather data and to poach some skilled miners (GD 58/2/3/1, Resolution #18). Thomas Roebuck went on a three-month, fact-finding mission to Lancashire, London, and Yorkshire in 1770 (GD 58/2/1/1, pp. 232-233) and Benson travelled to Lancashire in 1784 (GD 58/2/3/1; see also, Resolution #174.) The Short View was an important statement of Carrons managerial philosophy, especially if it was indeed authored by Charles Gascoigne, as many believe. Herein are reflected many theories of modern management. However, one of these theories belied in the companys practice was the advocacy of cost reduction and control as the bases upon which Carron would be competitive in the market place. A letter to Adam Wiggin & Co. of London in 1772 suggested that Carrons future depended upon a dedication to quality rather than price. Carrons management averred, we hope to support our sales by the quality of our work rather than by underselling others (GD 58/6/1/12). It was also stated in the Short View (pp. 52-53) that Carron should embrace a demand-pull manufacturing approach characteristic of contemporary just-in-time manufacturing philosophies and inventory systems.

Carrons quality control methods were advanced for the times as evidenced by the frequent inspections its managers were directed to take of its mineral fields (GD 58/2/3/1, Resolution #478; GD 58/2/1/1; GD 58/6/4/1) and even its accounting reports (GD 58/2/3/1, Resolution #201). As Carron imported Shropshire colliers in its early days, the contractual arrangements specified not-to-compete covenants in the event these workers left the firms employ (ACC 5381, box 29, folder 1, 1767; GD 58/2/3/1, 1778). The iron giant even had environmental concerns about its abandoned ironstone leases, and in Resolution #388 (GD 58/2/3/1, 1771), the firm determined to establish formal guidelines for future conduct in this area. The return of Quarole to its lessor in 1781 included an agreement that the coalfield was to be restored to its pre-lease condition (GD 58/2/3/1). The best-case scenario outlined above is impressive to an economic rationalist at least on paper. One might wish, however, that there was greater evidence of the implementation of these managerial theories and the translation of cost accounting data into affirmative action and decision making. FOUCAULDIAN AND MARXIST CONTRIBUTIONS This project has convinced me of the value of joint venturing into archival research by scholars of differing paradigmatic groundings. I do not feel with similar assurance that the thought is universal amongst my co-conspirators. I have gained much new information and new insights as a result of the experience. Two additional trips to the Carron archive, which I would not have considered undertaking were it not for this study, speak volumes in and of themselves. One of my colleagues (Rob) had done virtually no archival research before, but took to it with an infectious enthusiasm. Again, I wish to reiterate the assistance provided me to understand the financial accounting at Carron, to correct old errors that had resulting from my overdependence upon an economic historian, and to increase my awareness of the steps taken at Carron to institute a doubleentry bookkeeping system and to integrate the costing and financial records in the preparation of financial statements. Economic rationalism, in terms of looking at business enterprises strictly as economic entities, is broader, given that limited perspective, than either Foucauldianism or Marxism. At the same time, a Neoclassical approach is more reductionist in my view than Foucauldianism which, as a post-modernist philosophy, incorporates a wider variety of discourses and kindred disciplines into the analysis (Loft, 1986; Hopwood, 1987; Miller & OLeary, 1987). Marxists, again in my view, tend to approach accounting history in disparate ways. Some have retained the economic orientation of what has come to be called vulgar Marxism; others have expanded their parameters in directions as broadly based as Foucauldians. For the latter, the revision of Marxist theory to confront new stages of capitalism and new technologies appears almost an obligation. In todays world, the fragmentation of traditional economic determinism is reflected by the labor-process literature emanating from Bravermans classic (1974) and by the intraMarxist dialogue featured in the special issue of Critical Perspectives on Accounting (Vol. 19, No. 5, 1999). I will not attempt to situate Rob on the continuum I have attempted to describe here.

The point I am trying to raise here is that, in a primarily economic analysis of Carron, a typical economic rationalist might find greater interest in a wider variety of practices than might a typical Foucauldian or Marxist scholar. I would be the last to suggest that any of us are typical representatives of the worldviews from which we emanate. If nothing else, just our willingness to cooperate in a tripartite undertaking of this genre may label us outliers. However, it is my sentiment that Foucauldians and Marxists focus more extensively on certain themes which for economic rationalists are all-important and contribute, albeit not equally, to the big picture. For Foucauldians, the attribute most privileged would be accounting as providing the knowledge necessary for the organization to have the power to control labor, whether it be the managerial corps or the lowest-echelon worker. For Marxism, a key theme would be the subsumption of labor and a top-down deployment of power to generate economic surplus to benefit the capitalists who own the means of production. Through our collaboration, my co-authors have highlighted the importance of these aforementioned components of Carrons management in my mind. Hence, I will use the remainder of this section to describe what I have come to learn. Labor Control: Richard, privileging labor control as the genesis of modern management, might find at Carron a prototypical environment that anticipated later developments at venues such as the Springfield Armory and the U.S. transcontinental railroads. However, in the absence of labor standards that ordered people about, his verdict on Carron would be that the degree of labor control in evidence there was insufficient to constitute a managerial control system of the modern type. Still, Foucaults disdain of the search for origins suggests that a variety of origins, perhaps more accurately referenced as false starts, furnishes the genealogy for elements in the contemporary world. Perhaps the Carron experience will qualify here as did the beginnings of double entry bookkeeping in the fourteenth century (Macve, 1996). We have already seen some aspects of labor control that would impress an economic rationalist who would view them as part of a broader toolkit of managerial techniques. In particular, we have seen the articulation of responsibilities from the position of Carrons general manager through the lowest of the companys servants. Typical was the accountability of the gatekeeper to pledge his wages to prevent the pilfering of coal by the miners (GD 58/6/1/12, 1772). We have seen how Caron management, albeit in the absence of formally articulated labor standards, knew what constituted the work potential of good operatives. Commencing in July 1785, premiums were paid to colliers who produced more than what was considered an average annual yield (GD 58/2/3/1, Resolution #804). A 1784 resolution of the General Court (GD 58/2/3/1) instructed Gascoigne to compel internal and external managers to reduce the number of employees in their charge to maintain full employment amongst those who remained. Hours of attendance and punctuality were to be rigidly adhered to.

The colliers were the operative class upon which the greatest amount of attention was focused. In the early years, colliers were brought in from Shropshire because of the shortage and relative inexperience of Scottish miners. The English operatives were enticed away by the promise of extraordinarily high wages, which Carron management sought to reduce as the domestic product was trained. Needless to say, given these wage levels, the productivity of the imported labor was carefully scrutinized. Scottish miners, meanwhile, were bound to their mines and masters in a state of virtual serfdom until well into the 1780s. When Carron decided to abandon its lease of the Kinnaird coalfield in 1781 (GD 58/2/3/1), the biggest issue in the transfer of property back to the lessor was the whereabouts of colliers bound to the mine. There was a memorandum entry in 1764 about nine miners bound to Thomas Dundas, the owner of Quarole, who were absent from the coalfield and for whom Carron as lessee would be held responsible (GD 58/8/1, Resolution #44). Prior to the termination of the lease, when Carron was operating both Kinnaird and Quarole, the managers of both were expected to be in attendance when the pay reckoning was done in order to guarantee the company was getting full value for its wage expenditures (citation). Ultimately, the clearest manifestation of Carrons management to operationalize labor control was the lengthy process in which pay tickets were introduced as a device to insure conformity to productivity norms. The program was originally instituted in June 1778 (GD 58/2/2/1, Resolutions #596, #799), but implementation was slow in coming because Gascoigne apparently did not view it as a pressing priority. In May 1781, Resolution # 670 of the General Court eliminated the practice of an internal subcontractor to sign for the pay of his men in something resembling the butty system, though not referred to as such (GD 58/2/2/1). Now, individual workers had to sign for their pay under the watchful eye of an upper manager who had knowledge of their productivity during the pay period. Still the system did not operate fully as expected as evidenced by Resolution #785 in August 1784 when Gascoigne promised that the system would be amended (GD 58/2/3/1). Unfortunately, the details were not provided in the minute book. It appears that had Carrons general manager moved more resolutely in instituting a pay-ticket regime, the company might have been more favorably viewed by scholars of the Foucauldian persuasion. The Subsumption of Labor: As I will subsequently discuss, the exploitation of labor for the sole purpose of realizing greater capitalist profits is not a premise with which I concur. However, my new awareness of this Marxist theme has heightened my sensitivity to the process by which the reduction of labor cost, whether through the slashing of wages or the speeding up of work requirements, is detrimental to the well-being of workers. My earlier work on Carron did not raise the issues of how the wage slaves at Carron suffered living standard reductions, especially during the years of crisis in the 1760s and 1770s. The tone of the fledging firm towards its labor force was clearly presaged in the following remarks that founding father Garbett penned to founding father Cadell in July 1759, the first year of operations (ACC 5281, box 28, folder 1):

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now if they will be content with sending only 2 men each you see we shall be able to employ at least six Scots men & clever fellows are picked in the country. I hope another time we can do without help from England but at present it will behoove us not to make the Englishmen jealous or suspicious that we intend to do without them as soon as we can, for there will be a Cry against us & we shall not be able to get Furnace men & Forgemen. (July 14th 1759) [ACC 5281, Box 28 (1)]. The subsumption of labor was likewise reflected by the rapidly changing attitude Carrons management had towards its skilled labor force. As early as 1763, the Carron General Court was in the process of reducing the high wages of colliers imported from Shropshire and replacing them where possible with Scottish labour (GD 58/2/1/1, Resolution 1). Resolution #94 (GD 58/2/1/1, February 1773) of the General Court foreshadowed the replacement of workers with apprentices who would be content with lower wages. Having depended upon experienced English workers in its initial struggle to establish the Scottish works, the Carron proprietors seemed anxious to rid themselves of the high labor cost through the breach of the promises made to them as inducements to trek to the wilds of Scotland. Wages were cut; rent-free domiciles ceased to be rent-free (GD 58/2/2/1, Resolution #691); and coal previously available for the taking was now charged out (GD 58/2/2/1, Resolution #691). Correspondence between partners came to evince the firms policy of replacing costly English labor with cheaper Scottish labor and never reflected any concern about the displaced workers now left high and dry (GD 58/2/1/1, 1763). In 1770, there was a short-lived, wildcat strike of the Carron miners, many of the details of which or the issues involved are not voiced in the archive. All that we know of it was that the company had the power to force the colliers back to work but with an additional stipulation to their conditions of employ that if any of them, individually or collectively, were to leave the job, the amount of 100 marks would be forfeited from their pay (ACC 5381, box 53). The minutes read that the strike was an honourable peace, albeit on the companys terms. Once again, the records succeeded admirably in suppressing the voices of the downtrodden who would not have seconded managements opinion about the settlement. POINTS OF REBUTTAL AND CONFLICT I find it difficult to take issue with Rob and Richard because the Neoclassical view of business development is so broad, at least in the economic sense, that it subsumes the specific directions taken by the critical paradigms. Thus, a natural response to Richard, wedded to the importance of labor control above all other methodologies of modern management, and to Rob, reciting that the exploitation of labor is part and parcel of the capitalist mentality, would be, why, of course, isnt that economically rational? Even though I have collaborated previously with Foucauldian scholars, I have never fully comprehended why management techniques could only be modern if they featured labor

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control to the exclusion of other manifestations of effective management. Why were the Boulton & Watt engineering and material standards of a lower order of significance than the labor control standards that once carefully formulated and articulated in 1802, were inadequately revisited and revised; hence, judged a one-off. Edwards, Boyns, and Anderson (1995) questioned this form of reductionism more eloquently that I, but with the same lack of fundamental understanding of the Foucauldian argument.4 My other major bone of contention with Foucauldian scholarship is reflected by the title of Ezzamel, Hoskin, and Macves penetrating review (1990) of Johnson and Kaplans Relevance Lost (1987). The article is called in part Managing It All by Numbers. I believe what the authors were here ascribing to Johnson and Kaplan specifically and to economic rationalists generally is the belief that, if accounting were to generate accurate numbers, correct business decisions would follow forthwith. Perhaps what they were saying is that historically the account numbers have been such rubbish that any correct business decisions resulting from them would be accidental. I, for one, do not subscribe to the mindset that has been attributed to us. Rather, I too am skeptical of the accounting numbers but am perhaps a bit more optimistic that the errors are not so humongous as to distract entrepreneurs from adopting appropriate courses of action in most instances. More importantly, accounting serves notice on managers and workers alike that their actions are being monitored and calculated and that they are accountable as a result. Perhaps such sentiments make me secretly a Foucauldian, yearning to come out of the closet. Turning now to a Marxist critique, I am alienated by Robs attribution of every managerial innovation to Marxist philosophy and forecast whilst at the same time secretly admiring his dedication to his cause. In previous work, I have written of him that he has submitted all accounting related institutions to a Marxist scrutiny, ranging from feudalism (Bryer, 1994) to the FASBs conceptual framework (Bryer, 1999). However, he has now gone me one better with his Marxist accounting history of the world, parts one and two (Bryer 2000a, b). Seriously, however, it is difficult for me to fathom how some of the following points are evidence of Marxian theories of capitalism and capitalists any more than they are reflections of Adam Smiths (1776) conceptualization of the invisible hand pushing entrepreneurs in the direction of their economic self-interest:
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control of the valorization process identification of the use of accounting to create a calculative mentality as Marxs managerial accounting replacing high-priced labor with lower-priced (sometimes with deskilling) substitution of technology (capital) for labor a capitalist mentality dedicated to the subsumption of labor the socialization of capital improvements in Carrons accounting systems

Hoskin & Macve, (2000) have attempted to argue for a broader interpretation of their framework.

12

installation of a managerial hierarchy holding managers accountable piece rates as the form of wages most compatible with capitalist modes of production

The key Marxist point of the subsumption of labor has been cast into an economic rationalist context by theorists and historians. Nobody ever accused Frederick Taylor of being a Marxist; yet, his brand of scientific management featured a routinization of tasks, a speeding of labor, and a deskilling of craft expertise. Sidney Pollard (1963-64), in analyzing the coming of the BIR, maintained that the capital for industrial enterprise was obtained by driving lower-class living standards down to the subsistence level. Robs commentary on Carron is quite concerned with the change in the co-partnership arrangement from a socialized capital pre-1786 to a more family-oriented ownership under the Staintons and the Dawsons in later years. He attributes the deterioration of the accounting, particularly the financial reporting, to this de-socializing transition. In my view, there are several questions that need to be answered. First, was the early partnership really that harmonious? Garbett complained to Cadell, Jr. in 1767 about the lack of assisting partners willing to take up residence at Carron. There seemed to be a surfeit of gentlemen partners, unwilling to make the sacrifice (ACC 5381, box 29, folder 1). Also, what does this have to say about the capitalist mentality? The suit brought against Garbett by the other partners in 1770 (ACC 5381, box 29, folder1) further brings into question the degree to which Carrons partnership was socialized in the early days. One wonders if the capitalist mentality and the control of the valorization process which Marxist ideology stresses as emanating from socialized capital would have saved Carron had it not been for the rather happy development of the Carronade. The Marxist view of technology suggests that technology is vital for those imbued with the capitalist mentality to capture the valorization process and, hence, to subsume labor. I have my doubts as to whether history bears out this rather conspiratorial view of technological advance. Whilst it is true that necessity is the mother of invention, I would suggest alternatively that invention is frequently fortuitous but that entrepreneurs under appropriate circumstances are able to harness technology to reduce labor costs and thereby to advance their individual best interest in a Smithian sense. Rob seemingly feels that the Short View is a script for the Marxist vision of the coming of the BIR. However, I would be concerned that the theories espoused in it were only theory, and that the evidence does not exist to assume that much of it was actually put into practice. Both the Neoclassical and the Foucauldian views of the Carron phenomenon, especially its accounting methodology, would be tempered by the concern that, at such an early time in the BIR, it was a one-off, which was not even sustained by the company itself after 1786.

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II

THE FOUCAULDIAN VIEW5 RICHARD MACVE

NEW CALCULABILITIES AND NEW ACCOUNTABILITIES THE BIR OR ELSEWHERE? Why would one seek explanations for accountings development that go beyond the simple and general economic rationalist view that accounting technologies illustrate a form of social Darwinism whereby practices that are fit for purpose are tried out in changing conditions tested in the fiery furnace of business competition and, if successful, become more widely disseminated and survive until conditions change or even more efficient techniques evolve? The Marxists say that to focus merely on the techniques of accounting, while crucially important,6 fails to reveal the underlying changes in the social relations of production that industrial capitalism (complemented by the increasing socialization of the owners capital) brought about; and that the accounting changes were, at the least assisting, and
The label is Lofts (1995): I adopt it for convenience rather than through commitment to defending Foucault lock, stock and barrel (cf. Hoskin, 1994; Bhimani, 1999; Hoskin & Macve, 2000). 6 I do not discuss further here how far Marx himself can be held to have thought accounting to be important (cf. Macve, 1999; Bryer, 2005d). It has been shown that Engels was familiar with accounting practice from his own business experience and Marx consulted him about this (e.g. Chiapello, 2004). Nonetheless the phrases that Bryer cites from Marx (1978: 211-12; 1976: 952,955) cannot bear the weight he would put on them. In particular ideal carries no approbation: it merely means abstract: and while no-one could deny that accounting recapitulates the process of production this has nothing to do with capitalism as such: Marx continues the sentence by saying that it becomes ever more necessary the more the process takes place on a social scale and loses its purely individual character; it is thus more necessary in capitalist production than in the fragmented production of handicraftsmen and peasants, more necessary in communal production than in capitalist (1978:212emphasis added). He is simply not interested in how accounting (book-keeping) achieves this recapitulation under capitalism. As argued in Macve (1999), Marxs purpose here is not to establish what a Marxist capitalist accounting either is or should be, but, in the context of analysing the intricacies of the labour theory of value, and on the basis of his analysis of the function book-keeping serves in both pre-capitalist and capitalist economies, to determine whether or not it is productive, i.e. whether the costs incurred for book-keeping are transferred into the value of the commodities produced. Marx here determines that (like other non-production overheads) they are not: they are a deduction from the total yield (1978, p.212). Marxs view on the pre-eminent importance of bookkeeping in communal rather than capitalist production was taken up by Lenin (1918 Ch.5, section 4): Accounting and controlthat is mainly what is needed for the "smooth working", for the proper functioning, of the first phase of communist society. All citizens are transformed into hired employees of the state, which consists of the armed workers. All citizens become employees and workers of a single countrywide state "syndicate". All that is required is that they should work equally, do their proper share of work, and get equal pay; the accounting and control necessary for this have been simplified by capitalism to the utmost and reduced to the extraordinarily simple operationswhich any literate person can perform of supervising and recording, knowledge of the four rules of arithmetic, and issuing appropriate receipts. When the majority of the people begin independently and everywhere to keep such accounts and exercise such control over the capitalists (now converted into employees) and over the intellectual gentry who preserve their capitalist habits, this control will really become universal, general, and popular; and there will be no getting away from it, there will be "nowhere to go". The whole of society will have become a single office and a single factory, with equality of labor and pay. I conclude that there is (and can be) no Marxist theory of capitalist accounting and his own silence on the issue speaks volumes. Of course Foucault in turn does not mention accounting in his own surveys of the new practices of social control (Hoskin & Macve, 2000): but (unlike Marx) he was simply not familiar with such practices.
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(in Bryers version, where they are the rational expression of the capitalist mentality) essentially driving and enabling these more fundamental changes that go beyond just business success. But that raises further questions. Marxs explanatory focus was primarily on modern Britain in the 19th century when Britain, in the second stage of the BIR, still led the industrial and capitalist world and the US was still a relative backwater. But other historians (e.g. Chandler) have argued that an equally if not more important revolution than the various stages of the industrial revolution was the managerial revolution the revolution whereby giant businesses could be created with organizational forms (ultimately perfected in the line and staff organization of the M form divisional organization (Roberts, 2004) that comprised interrelated layers of managerial hierarchy, themselves accountable to increasingly anonymous and atomized capital and other external stakeholders, who in turn found themselves operating within their own structural relays.7 Can we determine on the basis of accounting and other archival evidence the correctness of these rival interpretations of the crucial historical discontinuities and their significance in the creation of the modern (now increasingly globalized) business world? THE FOUCAULDIAN CASE Foucauldian historians have been exploring the significance of key US sites, such as the Springfield Armory and the early railroads, and in particular the influence there of the cadre of top graduates of the US Military Academy (at West Point, NY), after it had been reformed by its new Superintendent, Sylvanus Thayer, from 1817. These top graduates formed the army Corps of Engineers but many of them went out into nonmilitary governmental (federal and state) and civilian fields. And here Foucault enters the picture: for the new educational disciplines (both in the divisions of knowledge itself and through the new pedagogical techniques that changed how students learned to learn and the structures within which they learned) have been seen as exemplars of the new forms of control that operate through new knowledge and through a new calculability (calculable persons in calculable spaces, Miller and OLeary, 1987) which is primarily grammatocentric (combining the practices of writing, examining and grading), and thereby become internalized and penetrate the soft fibres of the brain. For Foucault, these new internalized systems of controlin contrast to the earlier regimes that operated primarily through publicly paraded forms of glory and punishment inflicted on the bodyquietly order us about (quoted by Megill, 1979). In the management sphere, they are seen as ways of creating new performance and accountability measures that are directed, not so much at the traditional objects of accounting, such as the honesty of and the results achieved by identified individual accountable stewards (Macve, 2002), but now at statistical populations of employees (from workers to managers) within large structures, where it is their performance and deviation from norms that makes them visible both to themselves and to those above, around and below themand primarily through the accounts.
Chandler finds the origins of this divisional form of organization on the early US railroads. For a critique of his explanation for this breakthrough see e.g. Hoskin & Macve, 2005.
7

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This grammatocentric control initially took a variety of forms, which ultimately coalesced in the late 19th century and early 20th century in large organisations such as DuPont in the US which famously operated by its DuPont formula, i.e. calculating Return on Capital Employed (ROCE) across its divisions and analysing the drivers of this metric.8 Particular early features included the introduction by a West Point graduate, Daniel Tyler, at the Springfield Armory (identified by Chandler as the first significant single-unit business organization) of detailed time standards for piece working and piecerates (based on extensive observation and measurement) alongside the enforcement for the first time of a standard-length working day.9 On the early-mid 19th century US railroads (which were not primarily manufacturing organizations but which Chandler identified as the first significant multi-unit organizations) further West Point graduates (and in particular Herman Haupt on the Pennsylvania Railroad from 1849 to 1856 (Hoskin & Macve, 2005)) introduced organizational specifications and detailed accounting and costing routines that enabled precise and continuous planning and control at all levels from the operating to the strategic. However, this Foucauldian explanation leaves both a theoretical and an evidential challenge. Why did these breakthroughs occur primarily in the US in the early/midnineteenth century, well after the BIR had taken hold with unparalleled economic success? And does the detailed accounting and other archival evidence that survives actually bear out this story? On the first dimension, the Foucauldians trace the influences further backderiving from the revolutionary reforms to French higher education in the Napoleonic era and in particular the dominance of the Grandes coles such as the cole Polytechnique and their redefinition of specialist knowledge (in particular in mathematics and engineering) in training the elite top-managers of the French state (Hoskin & Macve, 1988)that were in turn literally imported to the US via Thayers elite West Point, which was modelled on the cole Polytechnique. The theoretical argument here is that the new accounting and related organizational structures are not a phenomenon driven primarily by the imperatives of changing business needs (whether at the economic rationalist level of improving efficient decision-making and
i.e. ROCE = Profit/Capital Employed = [Sales / Capital Employed * Profit/ Sales]. This primary analysis can then be cascaded further downwards. [This is not the same as Marxs formula for ROCE, which Bryer (2005a) explainsbut it is the one that fits DEBs recording of profit and net assets. While rational economic decision-making does not necessarily require overall maximisation of DuPonts ROCE (i.e. it is the marginal ROCE that must be at least adequate even if it reduces the overall average), improvement is achieved by maximising the marginal addition to each of the sub-ratios, so that ceteris paribus an increase in sales is advantageous provided the marginal rate of profit on sales remains adequate. It is a paradox of Marxs formula (ROCE = surplus value/productive wages * productive wages/constant capital) that it requires capitalists to maximise the marginal contribution to the first sub-ratio, but minimise the marginal contribution to the second sub-ratio (given that it is an increase in the denominator (fixed capital) that is relentlessly to be pursued if the power of labour in social relations is to be weakened.)] 9 That precise labour standards carefully calculated on the basis of detailed and painstaking observation (comparable to later Taylorist time and motion studies) are not the only criterion of a Foucauldian accounting discipline is set out at length in Hoskin & Macve (2000). The significance of labour practices such as piece-rate payment and internal contracting is also discussed in Fleischman & Macve (2002).
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organizational control; or at the Marxist level of providing the essential tool for realizing the capitalist aim of maximising ROCE by controlling the valorization process through subsumption of labour and the transformation of labour into capital, so that labour no longer controls the means of production). To be sure, the Foucauldians see the new practices and emerging discourses as having as their residue a further vital economic transformation (Chandlers rise of the visible hand of administrative coordination increasingly replacing the invisible hand of Smithian competition) and a transformation of social relations within new webs of control: but while the potential economic and social transformations form part of the array of conditions of possibility within which the new calculabilities and accountabilities have perhaps their most dramatic effect, the motivations and practices themselves originate primarily from outside the economic and profit-pursuing sphere.10 There is a cultural change not just a change in accounting technology.11 As to the evidential challenge, clearly the Foucauldians story is at risk of being undermined if the forms and uses of accounting and of organizational structuring and control that they see as belonging particularly to the post-West Point US can be found earlier in the BIR (Hoskin & Macve, 2000). This has been a prime motivation for earlier collaborative ventures with Fleischman (as economic rationalist) into the UK archives of Boulton & Watt and of the Northeast mining industry (Fleischman et al., 1995; Fleischman & Macve, 2002). But in each case the researchers have been conscious of the silencing of a potential alternative third voice: that focussing on the transformation of the labour process and its effect on the social relations of production which is why we see as so important this new venture to approach the Carron story and archive from all three perspectives, including the Marxist perspective on accounting which Bryer has done so much in recent years to promulgate. What then is a Foucauldian looking for at Carron? Essentially one is approaching the archival evidence in the spirit of Popperian falsification: can evidence be found there of the crucial developments towards the latest stage of the modernity of accounting and organizational control that the Foucauldians have maintained occurred only much later and outside the UK evidence which would thereby disprove their main hypothesis?12

10

Theoretically the Foucauldian view goes beyond the Marxist commodification of labour power and its need to control itself in the economic sphere (e.g. make the labour/leisure trade-off) to the new way in which labour (and management too) is treated as itself a machine that internalises the productivity norms and disciplines itself beyond the economic sphere to create the coordinated time and productivity management of the modern organization 11 Corresponding to Fleischmans point in this regard, one might distinguish vulgar from many more modern Marxists by whether they emphasise the social relations of production or the social relations of production. 12 This justification for a research programme of this kind is explored more fully in Fleischman & Macve, 2002. It contrasts with Bryers approach which appears to be satisfied with proving that the evidence is consistent with Marxs theory of the BIR (which does not ipso facto exclude it from being consistent with either economic rationalist or Foucauldian or indeed any other possible approaches and therefore cannot prove Marxs theoryto learn anything from the archive one needs to know how it would differ under Marxs theory).

17

My role here therefore is not so much to comment on what can be found in the way of sophisticated accounting and control mechanisms at Carron and there is a truly impressive amount but to ask what is still missing in the archival evidence and where there are still silences. My co-authors set out many of the details of what has been found so far13 and what they see as its significance in supporting their respective arguments: that Carron exemplifies what can be achieved by the rationality of practical businessmen in the pursuit of profit; or alternatively that it demonstrates in action the Marxist theory of the way that the driving capitalist mentality found its expression through accounting planning and control (particularly via control of the valorization process through tracking ROCE and through the subsumption of labour) and thereby represents an early and extraordinarily powerful exemplar to illustrate Marxs theory of how this historical stage of industrial capitalism changed economic and social relations both between and within the spheres of labour and capital, as well as generating the very technological innovations (such as the Carronade) that transformed the scale and capabilities of that industrial capitalism, thereby creating the BIR.14 My approach is therefore a more cautious one than that of my co-authors. I see what they see written in the archives, but I interpret it differently. For me Carron is indeed an exciting and impressive archive, which opens our eyes yet further to the scale of organizational and accounting treatment achieved almost 150 years before the first serious English-language texts on cost and management accounting. However, amid the enthusiasm such a rich archive must inspire, it is important to remember that what is still not there may be even more interesting than what is.15 ECONOMIC RATIONALIST AND MARXIST CONTRIBUTIONS Pollard was wrong to denigrate the (non-) contribution of accounting to management in the BIR. That has been the major discovery made by the economic rationalist historians such as Fleischman and his colleagues, and J.R. Edwards and his colleagues, in recent years. Businessmen and industrialists did, inter alia, make careful cost calculations and did keep careful and accurate accounting records, often by DEB, that tracked the performance of their various operations. In this regard, Carron is particularly interesting. It is a very early multi-unit operationa vertically integrated industrial complex of mining, forestry, forging, manufacture and salesoperating on a number of sites (i.e. the mines and forests as well
13

The sad state of many of the surviving Carron books of account in the National Archives of Scotland means that further research must await the outcome of the valiant efforts currently being made by the conservators to stabilize and restore them wherever possible. 14 I do not attempt to address here the vast historical literature on the BIR (Marxist and non-Marxist) which, inter alia, problematizes the basic concept and its time-frame, traces different speeds and extents of changes in production technology, organization, finance and government policy in different spheres, and questions the overall welfare gains and losses and their distribution (see e.g. Floud & McCloskey, 1994). 15 I am not referring here to the fact that, as with all archives, even the factual picture given can never be complete, given the accidents of survival and preservation. Rather I shall focus on issues of interpretation and overinterpretation of what is there, and of the silences that must be heard even when the archive appears to speak most clearly and loudly (cf. Hoskin & Macve, 2000).

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as the main Carron works and the London warehouse). From the beginning, it had problems of managerial and labour control that went beyond what could be seen by the masters eye;16 and the need for action (and accountability) at a distance was reinforced by the absence of most of the partners, who were based in Birmingham and elsewherea long way away. It is in this context that we must view Carrons accounting system. On the basis of the archival evidence we have been able to examine to date this included a full DEB set of books17 from an early date (possibly from even before 1764 when we have the first surviving Day Book (i.e. waste book)18 although the system was successively improved as business expanded (e.g., again by Gascoigne from 1769). The DEB was integrated with the cost records in that results were analysed by different departments (e.g. mines, furnaces, forges, products and the London Warehouse).19 As with other, later, businesses it is more difficult to know what significance should be placed on such integrated results e.g. Hoskin & Macve (1996) have argued with regard to the US Lowell mills in 1848, and based on the firmly expressed attitude of the mill agent in correspondence, that the existence of fully analysed profits and losses over individual mills and of detailed, precise calculations of the unit costs of production within the DEB ledgers reflect more of a mercantile mentality of accountability to distant owners (in Boston) for every last penny spent, and the need for checks on the accuracy of calculations, rather than a concern with production and pricing decisions. One cannot take the surviving accounts themselves at face value (Hoskin & Macve, 2000). There is also the impressive range of other cost and management accounting activities, some routine (e.g. weekly production reports in quantities, requests for results by each sett of Men in the mines), some perhaps more ad hoc to be found in the archives of correspondence e.g., between Cadell senior (in Birmingham) and Cadell junior (partner in residence at Carron in the early years) or from Garbett (also in Birmingham),20 such as budgets; other ad hoc reports; estimates for pricing, make or buy etc.; departmental performance reporting; labour control. Fleischman and Parker originally drew attention to these (1990; 1991; 1997) and both Dick and Rob have now expanded on them in this paper and in Bryer (2005d).

16

Carron first lit the blast furnaces on 1 January 1760. Campbell (1961, p.65) says 615 men were employed by November 1761, in addition to temporary labour engaged on carting and on the vessels: and though it was planned to reduce labour considerably, William Cadell said when things are reduced to their narrowest compass the necessary people employed by the Carron Company will never be under 300. 17 i.e. waste book, journal, cash book, ledger and trial balances (albeit labelled differently by the NAS archivists) Macve, 2005). 18 Resolution #60 of the General Court of 1763 provided for the bookkeeping systems overhaul (GD 58/2/1/1). 19 However we have not yet been able to carry out the necessary calculations to conclude how transfer prices and periodic inventory prices were arrived at, i.e. whether they were estimated or based on detailed calculation from, and therefore integrable with, the DEB accounting balances. Such work probably needs to await the restoration of the relevant Day Books (i.e. Waste Books (Macve, 2005))restoration which itself may now prove to be impossible. 20 The reciprocal archive in Birmingham still awaits investigation.

19

It is also clear that the partners were particularly concerned to reduce costs. As Campbell (1961) explains, the original scale of the works and the investment therein was overambitious (perhaps due to Roebucks scientific enthusiasm outstripping his business acumen) and the resulting cost burden threatened frequently to bankrupt Carron until it was rescued by the Carronade.21 Moreover, the business model for the establishment of Carron was based on competitive cost advantage in respect both of labour costs (cheap Scots labour to replace the initial expensive English labour) and of transport costs (the access to the East Coast sea routes, similar to Newcastles advantage in the coal industry). In a business culture where it seems to have been common to share technological and management information with competitors, the partners were also anxious to know if their business was measuring up on interfirm comparison of costs of different activities and products. What does the Marxist interpretation add to this economic rationalist analysis and evidence gathering of how sensible business people approached necessary business problems? Before we begin we must remember that Marx himself thought that capitalist businessmen (and the political economists such as Smith and the state institutions and milieu that favoured them) were suffering from a profound illusion as to the source of profit which it took Marxs own analysis to be the first to reveal and which once revealed called for a radical, indeed revolutionary, social, economic and political agenda (praxis).22 Thus in interpreting Robs analysis we have to remember that whenever Rob calls a businessman a good Marxist he means (given the illusion) that he is a thoroughgoing capitalist. Rob identifies a number of elements at Carron that taken together prove Marxs theory of the BIR as having been a capitalist revolution at all levels. Primary to the role of accounting is the focus on the ROCE. Rob explains a Marxist analysis of economic factors that drive the capitalists maximisation of ROCE23 and how the capitalist is accountable for its achievement and in turn must hold his employees accountable for it. The capitalist, accountable in his turn to social capital, faces the necessity to control the valorization process through subsumption of labour and to find ways to increase the productivity of labour through improved technological advance, which in turn consolidates the ever-growing proportion of capital versus labour in the factors of production and reinforces the changes in social relations whereby capital confronts labour. The corollaries of this theory are first that capitalism creates technological advance (here, in particular the Carronade) and second that fully-fledged DEB accounting is required to show, at the overall level, the capital and the return (profit); and in respect of costs to show in particular the charge for depreciation24 and interest
21

It has frequently been observed that attempts at costing become more strenuous when companies face financial crises, an early example being Wedgwood (Hopwood, 1987) 22 Recent reinterpretations have tended to focus on emphasising how well Marx analysed the dynamic and enduring strengths of capitalism rather than on how it should, could or perhaps inevitably will be overthrown (e.g. Desai, 2004; cf. Bryer, 2005e). 23 See e.g. Desai (2004) for the arguments over Marxs analysis of how capitalists respond to the problem that competition in turn has the tendency to drive down the rate of profit. 24 However, in Bryer (1999a) it is argued that depreciation should be based on replacement cost of assets (see Macve, 1999 for further discussion).

20

without which the capitalist cannot either measure the cost of capital being used or correctly state the amount of capital remaining employed (i.e. net of accumulated depreciation). Integrated DEB is also needed to track accurately progress through the individual circuits of capital. This approach, as Fleischman observes, helps us to focus on important issues that are generally absent from rational management history and texts, namely the realities of the history of labour control. As Rob, following Marx, explains, capitalists and (apparently) free wage labour enter into a contract for the exchange of wages for labour power: thereafter they continue to struggle over both the wages (e.g. pay for idle time and extent of perks such as free coal, housing etc., at Carron25 elsewhere coupled with the abuses of trucking/Tommy shops) and the conversion of labour power into actual labour and productivity (length of the working day; intensity of work; substitution of machinery for labour etc.). Valuable though these insights are, my major critique must be that Rob has overintepreted the Carron archive, whereby the fully fledged capitalist mentality, exemplified as he sees it through its accounting system, is made to appear to have emerged in a fully developed and modern state, like Athena emerging fully-formed from the head of Zeus. Carrons accounting is indeed impressive extremely impressive for its time. But it remains of its time, with much significant development still to come.26 POINTS OF REBUTTAL AND CONFLICT First, the economic rationalist view. For the reasons given above, I do not so much disagree with the economic rationalist interpretation as find it incomplete. It is not therefore my purpose to dispute what Fleishman sees in the Carron archive but to urge caution in interpreting what its purpose was. Any history of financial and management accounting has to confront the Coase (1938) argument (reinforced e.g. by Yamey, 1949 and Wells, 1978) that the value of routine, ex post, full-costing accounting is necessarily of extremely limited value for business decision making and control. DEB may systematise the routine and reduce the scope for error and fraud: but it does not ipso facto improve the inherent information quality of the numbers (Ezzamel et al. 1990). So how can it be that businessmen are continually lured by accountings promise of objectively revealing their costs and profit? Some imperfect signal may be better than nothing:27 and in the context of Carron where action at a distance was necessary, there was in addition a natural inclination on the part of those who wished to justify their remaining absent to rationalise their position by arguing that business issues needing their attention could be made transparent through the accounts and other reports. However,
25 26

As also in the Newcastle and Durham mines (Fleischman & Macve, 2002) Compare e.g. Yameys (1977) account of the evolution of company accounting conventions. 27 As Fleischman puts it: the errors are not so humongous as to distract entrepreneurs from adopting appropriate courses of action. This second-best argument is developed further in Fleischman & Macve, 2002.

21

as Fleischman has observed elsewhere (e.g., Fleischman and Parker, 1997), there are several similar instances of initial enthusiasm for accounting and costing dying away (unless rekindled by some crisis as e.g., at Wedgwood; cf. Gascoignes call in 1769 in the Short Viewfor for strict discipline and economy in the use of capital in the present situation of the Company). How useful it was was a cost/benefit issue, but not one where it is easy to specify ex ante what the costs and benefits would be: hence Robs and my concern that the economic rationalist argument is in danger of tautology accounting routines survive because they are best in the circumstances, but we can only infer that they are best because they survive. It is in this sense only that economic rationalism is such a general explanation that it can embrace both Marxism and Foucauldianismbut it is then so general that it explains nothing at all. From the Foucauldian perspective accountings inherent limitation as a tool of entrepreneurial decision-making and control is why its offer of objectification becomes fully accepted only when it becomes one of the central routines that are necessary to bind together the large, diffuse, bureaucratic organizations of later managerial capitalism (e.g. Kay, 1993). But Development of accounting routines and also of new conventions that become accepted as better ways of measuring results and managerial performance go hand in hand (e.g. Yamey, 1977). But we do not find this yet at Carron. As to Robs supposedly Marxist argument for the centrality of accounting and ROCE, this is directly challenged by the Coase/Yamey/Wells arguments. If capitalists needed accurate and objective measures of ROCE and of costs such as depreciation (including proper allocation to different processes and products) in order to realize their capitalist mentality in action and take control of the valorization process, they would not and could not find it in accounting, whether by DEB or otherwise.28 Inspection of the Carron archive reinforces this view. While the partners do make reference to hopes e.g. of achieving at least 10% return on the capital laid out there is no evidence of systematic depreciation charges to arrive at the periodic capital employed.29 Even when charges for wear and tear are introduced and debited to production accounts, they are not used to write down assets or establish depreciation provisions, but are instead transferred from general charges.30 Even following the Short View in 1769 (which Bryer (2005d)
This argument is expanded in Macve, 1999: cf. Bryers response (Bryer, 1999b). In first Balance Book (i.e. journal) [GD 58/4/11/1] 1/8/66: Buildings account stated at Works and Buildings which Account comprehends the whole of the Expence of establishing the Ironworks the partrs. of wch. is referred to amount 38599.4.3. Qua. Coaliery. advance to this date including Interest 3152. 11.8 Coalworks: Kinnd. Coaly. advance to this date including Interest 12330. 17.2. 30 GD 58/4/11/1(?): Saturday 18 July 1767 The following Works must be Dr. to General Expenses for Tear & Wear from 31 January to 31 July 1767. year as p W:B.3465 Blast Furnaces No. 1&2 90 a month 540 Ditto No.3 30 180 Air Furnaces 14 84 Great Forge 18 108 Plating Forge 9 54
29
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surely correctly attributes to Gascoigne), while that incoming new broom identifies by how much Carrons capital assets are overstated, we find subsequently that, far from taking a big bath as new CEOs are nowadays wont to do, Gascoigne allows the accumulated losses to be capitalized again (perhaps to preserve the partners stated capitals on which they receive their contractual 5%pa).31 The manipulations of reserves in the Stainton-Dawson period Rob attributes to a desocialization of capital. But Carron had always been an essentially family business (like most leading British businesses of this period and indeed until after the First World War): it was just that the actors and families changed. And the link between socialization of capital and transparent accountinghowever desirable for stimulation of public saving and investment as trumpeted by modern securities regulators and accounting standard settersis historically tenuous. The most famous accounting frauds and deceptions are those that have been wreaked on a widely socialized capital, and the apogee of secret reserve accounting in the UK was the Royal Mail case of 1929 (Baxter & Davidson, 1977) which led to its finally being outlawed in the 1948 Companies Act; and it is in 20th/21st century America that Enron and now Shell have been misrepresenting their profits and capital. In summary there is no evidence from the Carron archive that the businesss owners and mangers used their accounts to calculate, or hold anyone accountable for, the achieved ROCE. It is equally ahistorical to identify them as calculating residual income.32 True they recognised the need to attempt to exceed the 5% return on their capital that was part
Iron at the mill Cast Iron Nailery Kinnaird Coaliery Qua: Coaliery 10 6 3 4..3..4 4..3..4 188..6..8 60 36 18 25 25 1130

Qua: Coaliery Dr. to Interest 6 months on advance at 31 Jan 1767 3333..17..2 on 3500 87..10 Kinnaird Coaliery 12179..7..3 on 12,000 300.. 387.10 31 January to 31 July 1767. (Interest on blast furnaces and air furnaces is first charged to their ledger accounts in the 1769 Stock Book, after Gascoigne had taken over (GD 58/4/20/1)) 31 Accounting for fixed assets remained erratic, e.g. in the Balance Book [GD58/4/11/3] Buildings etc.: These stay at figures similar to 30/6/74 analysis till 30/6/80 (but with a reallocation of various items from Blast furnaces to Air Furnaces of c 12k at 30/6/77; thereafter BFs creep up again by c. 3k per half year till back at 61k on 30.6.78, and c. 63k by 30.6.80 [Total 114k]). Then Branch 1 Blast Furnaces and Dependancies written down from c.63k to 43k at 31.12.80 and Air Furnaces from c17k to 10k. (In Stock Book 5 these write-offs appear in the asset accounts at 1 Jul 1780 and form part of a total written off to P&L of 43358.15.6 (ref 169) at that date.) This might perhaps represent a big bath by Stainton after taking over from Gascoigne. Branch and Miscellaneous Articles Buildings are written down from 16k since beginning to 9.6k at 30/6/83. Thereafter all stay much the same with total around 67k. 32 Residual income can be seen as an alternative way of calculating ROCE. But it also requires an accurate calculation of the capital employed (not just invested) if the calculation of the interest charge is to be correct: and as argued above, Carron did not account accurately for its fixed capital.

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of their contractual return as partners:33 but notions of exceeding the opportunity cost of capital go back to antiquity.34 Marx (who had an excellent knowledge of ancient history, e.g. de Ste. Croix, 1981) would not have made such an error. In the sphere of economic calculation, Rob also argues that capitalists would be concerned to calculate how increasing the proportion of machine capital in production would serve further to subsume labour.35 However, we see no such calculations at Carron. Where we do see calculations at this period of relative productivity versus relative cost (for example in the Newcastle mines), they are of new machines versus existing horses, not men (Fleischman & Macve, 2002).36 We must also consider the 1769 Short View, which Rob regards as setting out clearly the capitalist mentality of management.37 To be sure, it calls for much tighter cost control and appeals for a much tighter grip to be taken on Carrons management. But as Fleischman observes, there is little evidence that the rhetoric of Gascoigne the would-be displacer of the incumbent managing (Cadell junior) was lived up to by Gascoigne when he became the top manager in situ. More seriously, for the Marxist perspective, Gascoignes version of managerialism as set out in the Short View was not that of modern managerial capitalism. He was advocating centralisation (in himself) not delegation. He saw Carrons problem to be the lack of central control and he was
33

Smith (1776, Book I, Chapter 9) remarks that while the maximum legal rate of interest had been fixed at 5% in Queen Annes reign (i.e. in 1714), since the time of Queen Anne, five per cent. seems to have been rather above than below the market rate. He adds: In Scotland, though the legal rate of interest is the same as in England, the market rate is rather higher. People of the best credit there seldom borrow under five per centThere are few trades which cannot be carried on with a smaller stock in Scotland than in England. The common rate of profit, therefore, must be somewhat greater. The wages of labour, it has already been observed, are lower in Scotland than in England. The country, too, is not only much poorer but the steps by which it advances to a better condition, for it is evidently advancing, seem to be much slower and more tardy. 34 e.g. the Roman agronomist Columellas notorious calculation of the profitability of investment in viticulture (Macve, 1985). 35 As Fleischman argues here, such substitution need not exhibit any more than a neoclassical profitmaximising approach (optimising over the marginal productivity of different productive inputs). 36 Bryer (2005d) discusses the introduction of longwall mining at Carron. It was a feature of the Newcastle mines that they retained the bord and pillar method, which gave greater flexibility to individual miners and less opportunity for managerial surveillance of the mining gangs or (later) substitution of machines for labour (Fleishman & Macve, 2002). Further investigation is needed of whether this was simply profit-maximising given e.g. the geological conditions. Only if the geology was against longwall mining being preferable at Carron would Bryer be able to demonstrate the overriding force of the compulsion to subsume labourwithout that the decision cannot be distinguished from simple economic rationalist opportunism through efficiency/profit maximisation. 37 While it may be seen as presaging an understanding of Marxs circuits of capital it is closer in its identification of the three phases of traders, manufactureres and warehousemen to Smiths (1776, Bk. II, Ch.5) analysis: A capital may be employed in four different ways: either, first, in procuring the rude produce annually required for the use and consumption of the society; or, secondly, in manufacturing and preparing that rude produce for immediate use and consumption; or, thirdly, in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted; or, lastly, in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them. A vertically integrated operation such as Carron gives us an early example of combining all these employments of capital.

24

arguing that everything should flow from the mainspring (to be himself), not for delineating lines of authority and accountability down and through the organization.38 Rob (following Armstrong, 1994) challenges the Foucauldians for failing to recognize the distinction between action controls (through procedures and practices) and results controls like those offered by DEB and ROCE. But this is where the Foucauldian accounting historians have already gone beyond Foucault: following the analogy of the educational development of the written examination, as implemented at West Point, what begin as supplementary practices and action controls become seen as and internalized as totalised objective performance measures which provide results controls of the most powerful kind (e.g. Hoskin & Macve, 1994) ) and which have to be continually refined as each successive stage of objective measurement is shown in turn to be inadequate (e.g. Yamey, 1977). Similarly they define the economic categories needed to analyse business and economic success whether by conventional mainstream economics (Hoskin & Macve, 1993) or by Marxism (e.g. Chiapello, 2004). Finally, there is the Carronade. As Fleischman observes here, without this deus ex machina it appears no amount of sophisticated bookkeeping and accounting would have rescued Carron. Rob argues here that this invention was itself the product of the capitalist mentality and the drive to substitute machinery for labour. However, while economic (and many other) conditions are crucial for the adoption and dissemination of new technologies, and indeed for the amount of R&D effort that goes into exploring them, however much one may want an invention, and for whatever reason, there can never be any guarantee that it will work, until it actually does. In history invention must be, at least partly, exogenous to motives: and simple economic advantage will generally supply sufficient motive. Conclusions: To return to my starting point, my concern is primarily with the adequacy of theoretical and historical explanations. For the reasons given, I find neither the economic rationalist nor the Marxist explanations of the power of modern accounting and its genesis to be adequate. In the Marxist case the fundamental argument made by Marx that businessmen (and everyone else) were suffering from an illusion as to the true source and nature of capitalist profit-making makes it that much harder to know what one would expect to find in the records of capitalist businessmen that would prove Marxs analysis: the accounting records are themselves part of the illusionary apparatus (Macve, 1999).39 As to the evidence: when I visit the Carron archive I do not see either the tell-traces of the evidence that Rob sees there as supporting his Marxist theory, or sufficient modernity to supplant the need to overlay the economic rationalist approach with the insights that
38

One may contrast the careful delineation of multiple line and staff responsibilities on the American railroads in the 1850s: they were advocated on the early British railways too but not implemented there (Hoskin & Macve, 2005). Note also that Carron bound its senior managers into an ownership mentality by requiring them to hold shares (as e.g. did Ambrose Tibbats); it is not clear that below that level the managers were much more elevated than foremen or butty-men. 39 Whether or not they had an inchoate perception of the capitalist imperative to enhance extraction of surplus value from labour by intensifying industrialization, they can only have perceived this through the fog of what their accounts were telling them, not from any illumination to be found there.

25

Foucault has given us into how modern regimes of truth and control in the business sphere as elsewherehave become established. What we all three see at Carron is a lot of extremely impressive accounting and reporting activity for such an early date in the BIR:40 and what we all three share is an overriding belief that accounting is a vital and generally overlooked ingredient of the history of the modern corporation and of its current organization, strategy and control.41 Quite how it has become and remains so important is what we are still exploring in our respective ways: and at this stage, we must leave the reader to decide which line of enquiry (or combination of them) seems likely to be the most fruitful. Whatever the decision, we all remain committed to confirming that our theories mesh with the historical and archival evidence. III THE MARXIST VIEW ROB BRYER

CAPITALIST ACCOUNTABILITY AND THE BRITISH INDUSTRIAL REVOLUTION Dare to be a Daniel, Dare to stand alone; Dare to have a purpose firm, Dare to make it known. (The refrain from a 19th century Revivalist hymn by Bliss quoted in George Orwell, The Prevention of Literature, Polemic, January 1946). I am very grateful to Dick for introducing me to the arts of archival work and the Carron collection, and to him and Richard for help in collecting materials to enable us to reappraise and extend the work of Fleischman & Parker (1990; 1991; 1997), both here and in Bryer (2005d) and Macve (2005). We have had many useful discussions. Like my colleagues, I have learned much from this project, and I hope to learn more in future joint ventures. My piece is necessarily somewhat longer than my collaborators, as I must outline Marxs neglected theory, and because they make more criticisms of me than they do of each other! To tell the Marxist accounting history of Carron I have written a stand-alone paper (Bryer, 2005d). Two aims of this paper are to fill gaps in our knowledge of Carrons accounts from its earliest days to around 1850 and to correct the errors and misconceptions that I subsequently found abounded in the currently accepted history. The latter alone, as it turned out, would have justified re-examining Carrons story in detail. My major aim, however, in accepting Dicks invitation to join the project, was to
Some historians have dated the beginning of the BIR to the first firing of Carrons furnaces on 1st January 1760 (Floud & McCloskey, 1994, p. 244). Edwards & Boyns (responding to Hoskin & Macve, 2000) remind us of the variety of purposes that accounting serves. Their warning to Hoskin & Macve not to focus exclusively on one purpose should also be read as a warning to Bryer not to focus solely on attempting to identify accounts as revealing accountability for ROCE. That said, each of us is entitled to argue our own case for what makes for full modernity within the constellation of accounting practices. 41 e.g. Roberts (2004) (The Economist Best Business Book of the year) barely mentions accounting other than (in passing) as a taken-for-granted information routine.
40

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use Carrons accounting history to further test the explanatory power of Marxs theory that the cause of the BIR was class conflict leading to the overthrow of the feudal by the capitalist mode of production (Bryer, 2005a). In this theory, in which there is a vital role for accounting in driving social and technical change, class conflict produced revolutions in social relations, mentalities and accountability, replacing feudal accountability for directly appropriated surplus labour with capitalist accountability for indirectly appropriated profit. Bryer (2005d) tests Marxs theory and concludes there is plentiful evidence in Carrons archive supporting his view that successful businessmen during the BIR were capitalists who used factories, machines and accounts to hold managers and other workers accountable for the circulation of capital, just as they do today. A major initial research question for me was whether Dick (following Campbell) was right that Carrons financial accounts were a shambles (Fleischman and Parker, 1990, p.214). Theoretically, it matters to me whether a company is using DEB, whether it integrates its management and financial accounts, whether it keeps an accurate track on its capital throughout it circuits, whether it holds its managers and workers accountable for capital and this is the source of my enthusiasm. For me, DEB expresses the capitalist mentality and its obsession with the rate of return on capital that it implements through conventional modern accounting (Bryer, 1993a, 1999a, 2000a). Repeated visits to the archive and careful searching eventually revealed an integrated double entry system linking departmental management accounts with the firms financial accounts. To me it reveals an important difference between the Marxist and the Neoclassical and Foucauldian perspectives.42 I will argue later that because of their theoretical commitments, neither Neo-classicists nor Foucauldians really care what system of bookkeeping and accounting Carron used. Dick claims that his economic rationalism is broader than Marx and Foucault, but he really cares only for economic decisionmaking, where entrepreneurs display their rationality in complex calculations outside the accounts by forecasting costs and revenues and comparing alternatives. Foucauldians really care only for detailed labour standards. By contrast, in Marxs theory all aspects of the accounts are relevant to understanding the calculative mentality, the social relations they signature, and the accountability relationships and processes they reveal. Bryer (2005d), therefore, provides a wide-ranging and detailed analysis of a large quantity of evidence, only a small fraction of which I can present here. As important (not more important) to me is the theoretical framework we use to find and understand the data in the archives.
42

We have established that Carron used DEB, but it we do not know when this began, or how extensively Carron integrated its financial and management accounts. In the ledger from 1768 [GD58/4/20/1] are integrated departmental profit and loss accounts and double entries closing the accounts at the end of each six months and creating the balance sheet through the Stock Account (Bryer, 2005d). A minute of the General Court in 1763 [GD 58/2/1/1, Resolution 60] required monthly departmental accounts, apparently down to product level (each separate article distinctly). Gascoignes Short View of 1769 called for them again, and the first two Balance Books [GD 58/4/11/1&2], beginning from 1766, appear to constitute the DEB journal (see Bryer 2005d; Macve, 2005). The Cash Book [GD58/4/21/1] dating from 1760 is actually also an early form of ledger, but we do not know whether it was part of a complete DEB system. Further work awaits the restoration of the Day Books (i.e. Waste Books) that survive (but mostly in a desperate condition) from 1764, that contain the detailed workings and calculations underlying the journal and ledger entries. In particular, we wish to establish whether Carron derived its transfer prices and inventory prices for the six-monthly accounts by detailed calculation from the ledger costs (Macve, 2005)..

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THE MARXIST CASE Theoretical-historical background: To understand Carrons accounting history we need a general theory of accounting history we can test. Several of my papers argue that Marxs theory of the transition from feudalism to capitalism gives us just such a theory (Bryer, 2000a, 2000b, 2005a, 2005b). This section gives a brief introduction. The essence of Marxs theory is the idea that the capitalist mentality was revolutionary because it demanded control of production to maximize the accounting rate-of-return on capital employed. This is the distinctive feature of capitalist control that he called the real subsumption of labour (Marx, 1976b, p.304). According to Marx, the spread of the capitalist mentality and social relations unleashed competitive pressures that forced enterprise to continuously increase labour productivity and labour intensity to earn extra surplus value (Marx, 1976b, p.436), that is, positive residual income (Bryer, 2005a). To get these excess returns, capitalists are always tempted to cut wage rates to below subsistence and to lengthen the working day, but, if these are given, the rate of surplus value can be raised only[by] a change in either the productivity or intensity of labour (Marx, 1976b, p.646).43 The result of capitalist control was, therefore, constant revolutions in the process of production (Marx, 1976b, p.1035). Manufacturing capital circumvented the guilds, expanded and refined the age-old systems of putting-out and handicraft workshops, but this only allowed it to control the product of labour - the commodity - and not the valorization process, the process of producing profit. The workshop remained a manufactory; it had not yet become a modern machino-factory. At first, therefore, the capitalist leaves the mode of working by the individual for the most part unchanged (Marx, 1996, p.365), just formally subsumes the workers who are accountable only for the means of production and the production of commodities as things, that is, for use-values and exchange values. However, the important difference was that the owners were now capitalists. Even from the beginning, therefore, they sought relative surplus value and, within certain limits, succeeded (Marx, 1996, p.327). They economised on the means of production by using them collectively; they increased the intensity and productivity of labour and cheapened production by ever-finer divisions of labour and closer supervision of production. However, in the manufacturing workshop capital is constantly compelled to wrestle with the insubordination of the workmen (Marx, 1996, pp.372-373), using factories and machines, first in engineering, iron making and textiles, where technological breakthroughs allowed them to take control of key elements of production and increase labour intensity and productivity. Within these industries capitalists seizelabour power by its very roots (Marx, 1996, p.365), that is, seize control of the valorization
43

Marx defines the rate of return of capital as the product of the rate of surplus value or relative surplus value, (the ratio of surplus value to productive wages), and the value composition of capital (the ratio of variable capital, productive wages, to constant capital, capital embodied in commodities - fixed assets, stocks, etc). The problem for the capitalist is to invest in constant capital to increase relative surplus value by more than the increase in constant capital reduces the rate of return on capital (Bryer, 2005a).

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process. Machines in particular shift the balance of power in favour of capitalists because they do not simply help labour, they replace it: [w]hat was the living workers activity becomes the activity of the machine (Marx, 1976b, p.704). Consequently, for Marx, the development of machines is not the result of detached inquiry, but is rather the historical reshaping of the traditional, inherited means of labour into a form adequate for capital (1973, p.694). However, within Marxs theory, another critical weapon in the economic subordination of workers is accounts, because he knows that their primary function is helping capitalists control the valorisation process (Bryer, 2005b, 2005e). Thus, he thought, it was preeminently in this sense - which pertains to the valorization process as the authentic aim of capitalist production - that capital as objectified labour (accumulated labour, pre-existent labour and so forth) may be said to confront living labour (immediate labour, etc.) (Marx, 1976b, p.994). From the simplicity and transparency of the workers accountability to persons for things under formal subsumption, under real subsumption the worker becomes accountable for capital itself, that rises up on its hind legs in the shape of management that uses the accounts to face the worker and confront him (Bryer, 2005a). We shall see later that Carrons partners well understood this key principle. Accounts make a vital contribution to the capitalists control of valorization because within Marxs theory capitalism is an exploitative mode of production with superiors (investors) who derive a surplus from the labour of subordinates (wage workers, including senior managers). From Marxs viewpoint, the management control problem arises because workers sell, but retain control over their labour power, their ability to work (Marx, 1976, p.271). Clearly, when superiors can programme the workers labour - when they can accurately predict the outcomes of specified actions - they can tell workers what to do and monitor their work, use action controls (Anthony, 1965). In practice, however, the costs of supervision are high even for programmable work and subordinates usually make non-programmed decisions where the relationship between their actions and the outcomes is uncertain or unobservable. Typically, therefore, the superior must rely on the subordinates judgement in deciding precisely what labour to perform. With non-programmed decisions, where workers sell only their labour power, superiors can only monitor results and they must use results controls (Anthony, 1965). Accounting is hegemonic from Marxs perspective, therefore, because it reports objective results to shape non-programmed decisions, the essence of most work (and certainly that of management, supervision and technically skilled labour), in the interests of capital (Bryer, 2005b). How does a superior (the principal) use accounts to make a subordinate (the agent) behave in the principals interests when the agent must make non-programmed decisions? As the relationship is exploitative, the principal demands and, if necessary, extracts an objective account and explanations of performance. This motivates agents to take decisions and actions to achieve targets. The principal, therefore, controls the agent because the agent knows the principal will judge an objective measure of performance against a target (for example, against a required return on capital); will scrutinise the

29

agents explanations of the results; and will hand out punishments or rewards. This role for accounting is consistent with the common meaning of the English word control - the ability to call to account, reprove (a person). In short, control is the ability to hold an agent accountable. In developed capitalism, the principal is what Marx calls total social capital, investors considered collectively, that has the power to demand accounts and the means to make informed judgements about an agents performance and explanations; and it has the power to impose punishments and rewards.44 Enmeshed in a subordinate position, having to produce and explain accounts constrains the agents choice of behaviours (plans, decisions, actions, inactions), i.e. they hold the agent accountable for his or her labour power. In non-programmed situations, to satisfy the principal - to avoid punishments and get rewards - agents must engage in planning and taking any necessary corrective actions to achieve targets. Accounts are therefore also useful to agents, but in their case to discharge accountability, either by demonstrating their achievement of the target results or, if not, persuading the principal that their plans and actions were reasonable. Therefore, when an agent makes accounting calculations (for example, makes forecasts and comparisons of costs, profits, capital, and calculates net present value, etc), we need not see these calculations as rational economic decisions where the agent and principal supposedly optimise their economic welfare. We also do not need to see them as subjective psychological decisions. Rather, following Weber, but changing what we mean by rational, we can see them as rational social decisions, that is, technically rational means of discharging the subordinates social accountability. The capitalist mentality at Carron: From Marxs perspective, Carrons distinctive feature is its remorseless articulation and imposition of the capitalist mentality through its accounts and systems of accountability for capital. What is the capitalist mentality? We find a clear exposition in A Short View of the affairs of Carron Company, January 28th 1769 [GD 58/4/1/1, Short View hereafter], an important report that other historians have merely noted. It gives us a stark and detailed statement of what Carron was all about, exploiting labour for profit. Bryer (2005d) shows it is highly probable that the author was Charles Gascoigne, the son-inlaw of Samuel Garbett, one of Carrons founding partners, and managing partner through the 1770s and 1780s. If so, the Short View shows that he and the other partners around him had a thoroughly modern capitalist mentality. The Short View argued that the key to Carrons success was for the partners to take control of the valorization process by installing a managerial hierarchy, improving the accounting system, and by really subsuming its labour using technology and strict control of traditional perquisites to create wage labour. It argued that the prime duty of the
44

I use the terms socialised and social capital to describe a continuum from recognisably social to what Marx called total social capital (e.g., Marx, 1988, p.23). Both socialised and social capitals pool capital. Socialised capital involves pooling across a limited number of investors for limited purposes. Capital becomes social by losing its identity with its owner, but with socialised capital, there are restrictions on who can invest in the capital and its purposes - on the transferability and the uses of capital.

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supreme manager - the object for which he should be accountable - was to control the circulation of capital through three phases - in the market as traders; through production as manufacturers; to the market and back as money, as warehousemen: In the use of these powers I distinguish the Business of the Company as a moving body into three classes, strictly dependant upon, and progressive of, each other, viz As Traders who find Capital and all Materials for Manufactures, at certain & saving Rates & prices. As Manufacturer, who take in the rough Materials, & deliver the Value of Goods made at such prices as will pay Rents, Repairs, the rough Materials & Utensils, & all charges of manufacturing45 & leave a Workmans Subsistance behind. And as Warehousemen who buy the Goods from the Manufacturer at the values above condescended upon, & who sells them again to the Countrey at living Prices. Which in my opinion comprehends the whole System of their Body, and in the classes he may personally act, or in the first Instance by means of proper & well chosen Assistance (p.11). In short, the supreme manager should control capital through Marxs circuit of capital, from money - through commodities - back to more money, or M-C-M (Bryer, 1999a); take control of all the capital movements, the process of producing profit, by a mixture of action and results controls, mainly the latter. He ought then to use these powers to produce Regularity & Profittby a general Arrangement of all the capital movements - as well in Money, Credit, Reputation & Frugality, as by the more minute attention to the Manufacture, & Sales (p.12). The supreme manager should hold himself accountable to the partners collectively for the financial results, for his plans and for his accounting calculations, and then hold his subordinates accountable to him: [The manager]will hold up a true Mirror by which they [the partners] may see what has been done, & reflect to them in Execution (p.19). [He should]demonstrate what is worth following & what is not &will carefully examine & show as well the Causes, and Effects of unprofitable Branches. [He]will lay down for the Approbation of the Copartnery Plans for the Conduct of the Works & undertake to carry such as they approve into Execution.
45

By rents, the author presumably meant the landlords notion that a tenant farmer must produce at least two rents - one for the landlord and one for the tenant. In Carrons case, it meant sufficient surplus to pay the rent of the land used in production and the rent to the partners for their capital (or to banks for loans, etc). As we shall see later, consistent with modern accounting, Carron charged production overheads to the cost of production.

31

[He]will introduce System Regularity & Steadiness in the Business, judicious Frugality in the Manufacture & punctuality in the Warehouse;retrench the enormous Abuses in all Cash Matters, & remove the many useless Dependants & Servants (p.18). The Short View had no doubt that holding managers accountable for profit in each branch was a prime function of the accounts. And on the head of the Accounts, I mean to offer the out Lines of a Modell, whereby they may be kept in such a manner that the Profitt & Loss shall be most readily distinguished in the Progress of each Article, whether in the 1st 2nd or 3rd Class of the Business, & in the revisal of them (p.26).46 The aim of the authors Modell was to transfer products between the branches at the actual prices they cost plus the produce of manufacture, the profit: how necessary it is that all the articles of expense, upon the materials that comprise the manufacturing part of the Business should be stated at actual prices they cost, before any Computation can be formed of the produce of manufacture itself - or in other words, that the Business of [the] 1st Class - ought to be distinctly separated from that of the 2nd and 3rd (p.39). An essential element in real subsumption - remov[ing] the many useless Dependants & Servants - and taking control of profit making, was extracting and refining workers knowledge: As a manufacturer he should be thoroughly Master of the Principals & acquainted with the Basis, on which the business depends, he ought to have a mechanical Eye and Conceptions with Acuteness sufficient to distinguish the merits & source of Execution in the Workmen whereby to profitt by their Experience; and the solidity of their opinions whereby to cull the sensible & masterly Efforts of each of them, from their superficial Whim & Fancys. He should be manly to support his Authority & Orderly that he may establish it - and he should be cool to maintain his Weight among them (pp.13-14).47 The Short View naturally stressed that cheap wage labour, the raw material for real subsumption, existed in abundance around Carron (p.45). For full accountability for capital, the financial accounts that report the total circuit of capital must integrate with the management accounts that report the subsidiary circuits. That is, the profits of the parts must be visible and sum to the profit of the whole. The ideal for social capital is integration using DEB as it automatically accounts for the
46

Revisal means auditing: The act of revising; a revision, re-examination; looking over or examining again (Shorter Oxford English Dictionary on Historical Principles, Vol.2, p.1821). Unfortunately this modell has not survived. 47 Bryer (2005d) shows that Gascoigne used this principle to good effect in designing boring machinery.

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effects of all events and transactions on net assets (assets and liabilities) and equity (capital), including the effects of production. As a widely understood method, partners, shareholders and auditors of DEB accounts find it easier to trace transactions and events through familiar pathways. Many leading firms of the BIR did integrate their accounts using DEB (Boyns, Edwards and Nikitin, 1997). Consistent with the social nature of its capital and its commitment to the rate-of-return on capital mentality, so did Carron (Bryer, 2005d). Accountability for capital: Part 2 of the Short View discussed the State of the Companys Estate and Accounts. The key role of the accounts was to hold the supreme manager accountable to the partners for the rate of return on the capital employed: Before I decend into any further particulars of the other works - I shall resolve to adhere steadily to this Rule - that they are but secondary objects & that they ought in the present situation of the Company - to be pushed on, or to be given up According now to the Capital they take up, & the Profitt made upon that Capital (p.48).48 Concern with the rate of return on capital was not new within Carron. In April 1764, the General Court minutes noted that the making of anvilswillyield a handsome profit without requiring any considerable addition of Capital and resolved to make them [GD 58/2/1/1, p.133]. In a letter to E. Roebuck on 10th November 1766, Cadell junior forecast that the profit at Carron would be 12,500 (the sum of the profits of the Blast furnaces 8,000, Air furnace 1,000, Slitt Mill 1,000, Forge 1,000 and Kinnaird 1,500). He calculated that the expected residual income rate of return was 10% on capital employed after deducting a notional interest charge [ACC 5381, Box 28 (1)].49 In a letter to Garbett of 18th July 1767, he suggested that in the long run Carron should expect at least Ten Per Cent for the money it imploys. [ACC 5381, Box 28 (1)]. In October 1767, Garbett wrote to Cadell junior of the Chief Dependancies for a Return of our Money & a Compensation for the prodigious hazard we have risked [ACC 5381, Box 28 (1)], linking together the capitalists obsessions with risk and return on capital. The above and other evidence is consistent with Marxs theory where the function of financial accounts is to allow capitalists to calculate the overall rate of return on capital, but according to Fleischman and Parker Carrons pre-1786 financial statements were a shambles (1990, p.214). Bryer (2005b) shows that this is far from the case; that Carrons partners used financial and integrated departmental accounts (that made systematic depreciation charges) to hold subordinate managers and other workers accountable for the total circuit of capital, the sub-circuits of capital and the cost of
48

Richard suggests that by the saying he would apply the rate of return on capital employed in the present situation the Short View meant this as only a temporary rule. However, he more likely meant, given its by then huge capital base, that Carron should apply this rule from then on, as we shall see it did. 49 That Cadells forecast was wrong - Carron made a loss of 10,000 in 1767- does not support Campbells view that its accounts were haphazard, as Pollard thought (1965, p.229).

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production. Bryer (2005d) also shows that by the cost of production Carron meant, effectively, target cost, or Marxs money value of socially necessary labour time [e.g., GD 58/2/3/1, pp.25-26, 120].50 Carron charged its mines with interest on the capital advanced in 1767 [GD 58/4/22/4], and from 1769 calculated the six-monthly residual income on the all-important blast furnaces and air furnaces [GD 58/4/20/1, p.8], for Marx the epitome of the capitalist mentality. Carrons archives contain abundant evidence of accountability in action. For example, evidence that Carrons partners consciously confronted its managers and workers with the accounts whose mentality they wanted them to adopt, comes from a memoranda of Cadell junior in 1760 concerning the Weekly Account Blast Furnaces No. 3 & 4: the Honour & Interest of the Inspectors ought to be concerned in the Expenses of what is under their care being some moderate & the produce as large as possible& that they may show clearly how these particulars stand, and if they found it practicable to give in weekly accounts it would be very satisfactory to us, & by having the Expence & produce so frequently & strikingly before their eyes, it might make them do every thing possible to moderate the one & increase the other.& I hope they would get into the habit of considering both these particulars with the same Anxiety as if the transaction was their own (AC 5381 Box 29/1: 1760 1801). Another example is Garbett urging Cadell junior in May 1766 to load responsibility for the different branches on the superintendants, to make them accountable whether they achieved glory or infamy [ACC 5381, Box 28 (1)]. The critical importance of accounts in allowing Garbett to control from a distance is evident in a letter to Cadell junior on July 11 1767. I am now with yr favr of the 30th June with the Acct for May it would be a satisfaction if the Monthly Acct were sent as soon as possible - as I am generally impatient to know the worst [ACC 5381, Box 28(1)]. Garbett drew the link between the accounts and his appraisals in various letters [e.g., ACC 5381, Box 28 (1), July 16th 1767, p.215; October 18th 1767]. Carron did not always punish all malefactors with dismissal (e.g., Mr Matthews, a blast furnace superintendent, mentioned by Dick), but it regularly dismissed those it could afford to lose, and devised other punishments and incentives for those it could not (such as Mr Matthews) [e.g., ACC 5381, Box 28 (1), May 23, 1767; see also July 21, 1767]. Controlling the valorization process: accounting in the war with labour: Though Carron could and did hold its subordinate managers and clerks accountable, the real battleground was controlling its Scottish workers, that is, shaping a disciplined army of wage workers (Whatley, 1997, p.70). Bryer (2005d) shows that Carron made huge strides towards achieving this capitalist aim by using accounts, machines and other
50

Bryer (2005d) shows that Carron often sought information about its competitors processes and costs to help it understand and achieve the socially necessary cost of production. There is no evidence supporting Dick and Richards view that Carron shared technical and management information with competitors. It often surreptitiously acquired its information, and kept its technical processes secret.

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investments in its works to push back the frontiers of control of the valorization process in what was inevitably a long and often bitter class war. Some early modern historians of Scotland believed that 18th century Scottish workers were (as the Short View optimistically put it) docile. However, the evidence is that the transmission of the work ethic and the control and effective management of labour were particularly acute problems (Whatley, 1997, p.69), probably due to the general resentment of authority roused by the brutality of the Scottish enclosure process. Scottish wages were lower than English, but labour costs could be higher because of inefficient working practices irregular attendance and a tendency to mix work with play, drunkenness, theft of perquisites and workers informal collective agreements about output and pay (Whatley, 1997, p.71) - particularly their tendency to act collectively. Carron had many problems controlling its Scottish workers, particularly with what it liked to call embezzlement or theft. To get beneath this interested interpretation, we must recognise that workers in the 18th century often supplemented or significantly multiplied their money wages by appropriating the means of production and the products (Linebaugh, 1991). Carron employed many miners, but whereas local Lairds often struggled to make money from their pits, Carron did because it injected the greater vigour (Duckham, 1976, p.37) of the capitalist mentality. For example, Cadell junior minutely examined Carrons and his own mining operations down to the last detail, even to the cost of a humble sharpening tool (Watters, 1998, p.18). However, more than this, Carron introduced technical improvements from England, including railways, horse-driven pumps, longwall mining, etc., to increase productivity, and it worked harder at controlling its labour. Scottish miners were legally serfs, bound to their masters for six full days work a week for life, who could fine, beat, torture and imprison them for absconding, and the courts could fine coalmasters for refusing to return a runaway (Hatcher, 1993, pp.311-312) [e.g., GD 58/8/1]. Carron undermined the traditional system of serf labour by employing wellpaid, free English artisan labour alongside Scottish serfs and wage labourers [GD 58/2/1/1]. In addition to action controls, in August 1764 the Company turned to accounts and results controls. The General Court Resolved that the overseer of every Coal and Ironstone Work shall keep an acct as near as the Circumstances will allow, of the Gain and Expense by each sett of Men [GD 58/2/1/1, Resolution No. 264, p.147]. Encouraged by the high returns it offered, another strong wind of change that Carron blew threw its mines was the more dangerous English longwall system that spread quickly after 1760 (Whatley, 1997, p.47). In contrast to the traditional Scottish stoop and room system, the longwall method left very little coal and therefore little natural roof support. Bryer (2005d) argues that driving this change was the capitalist mentality and its accounting calculations that demanded ever-lower labour costs per unit of output [e.g., Remarks on working of Kinnaird Coal of 15th July 1768, ACC 5381, Box 28 (1)]. Richard says, Only if the geology was against longwall mining being preferable at Carron would Bryer be able to demonstrate the overriding force of the compulsion to subsume labour, but this does not follow as Carrons calculations showed the longwall technique would produce excess returns. Longwall mining was always preferable to capitalist where geological conditions, engineering expertise, and the workers allowed it because it dramatically cut labour costs per unit of output. The technique, new to

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Scotland, came from Shropshire, where the coal and seams were suited to it, and the seams were regular at Kinnaird, which made it a good pit to start with (Duckham, 1976, p.40). Most Scottish seams were not so regular, and Scottish miners resisted it, but as Whatley says, English mining engineers were frequently consulted, [and]longwall workingspread quickly after 1760 [because it] was a cost-saving Shropshire technique (1997, p.47; see also Duckham, 1976, pp.40-41). Other evidence that Carron was well aware of the cost advantages of the English system is John Beamounts demonstration in one his Answer[s] to the Carron Company Queries Aprile 14th 1770 of the sensitivity of cost to output [ACC, Box 28 (2)]. Controlling labour costs preoccupied the Companys management. For example, Carron made extensive use of piece rates [e.g., GD 58/6/1/1, p.26; GD 58/2/1/1, p.49; GD 58/2/2/1, p.91]. Marx thought the piece wage is the form of wages most in harmony with the capitalist mode of production (1996, p.555). Their attraction lay in the fact that [o]nly the working time which is embodied in a quantum of commodities determined beforehand and experimentally fixed, counts as socially necessary working time and is paid as such (Marx, 1996, p.552). We did not find any evidence that Carron constructed detailed labour standards using time and motion studies (cf. Fleischman and Parker, 1990, p.217), although it did conduct production experiments [Remarks on working of Kinnaird Coal, 15th July 1768, ACC 5831, Box 28 (1)]. However, it regularly made normative judgements and calculations about the amount a diligent, good worker, or workmen of the same Strength, could earn when it set pay rates and calculated output levels [ACC 5381, Box 28 (1), 1776; ACC 5381 Box 29 (1), December 1766, July; GD 58/2/3/1, p.518; GD 58/2/3/1, Resolution 804]. In March 1770, Gascoigne proposed a system of accountability for cash payments in each department, many of them for labour [GD 58/2/1/1]. In June 1778, the company resolved to tighten accountability for the costs and quality of all its work introducing a system of pay tickets and checking the quality of work before payment [GD 58/2/3/1, Monthly minutes, Resolution 596]. Gascoigne tightened the system again in May 1781 to make it bear on all individual workers by eliminating pay tickets for sub-contracting undertakers [GD 58/2/3/1, p.415]. Evidence that Carron actively used the system is, for example, that in 1784 the management committee looked over the pay tickets for the month of July [GD 58/2/1/2, Resolution 785, p.505]. Carron had serious problems producing cannon of acceptable quality because it could not hire enough artisan labour. Bryer (2005d) provides evidence supporting the hypothesis that the capitalist aim of controlling the valorization process underlay the invention by Carrons arch capitalist, Charles Gascoigne, of new boring technology and the Carronade, a revolutionary gun.51 Given the scarcity of artisan labour, Carron had to use wageworkers in the production of cannon, causing it problems that it solved in ways consistent with the dictates of the capitalist mentality. Carrons problem was that existing technology required artisans to cast cannon with a core, a hole in the middle that they often struggled to bore acceptably true. This meant that the cannon were heavy to withstand the forces they would inevitably encounter from inaccurate barrels, and were
51

I put invention in quotation marks because several people could lay claim to the ideas (see, Bryer, 2005d).

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therefore difficult to handle. To make acceptable cannon without skilled labour, Carron had to develop boring machinery. Thus, Gascoigne wrote to John Smeaton (the wellknown engineer-inventor) on 10th April 1775 asking for help in designing a boring machine for Carron that a Scots workman, an unskilled worker, could use: [We] have no Experience of Boring from the Solid or how the Guns may answer but if you would write us that a Machine & Apparatus can be constructed to bore from the Solid with any tolerable degree of Expedition & of that Simplicity as to make a Straight & fair Bore, with a Scots workman. We will certainly make a trial of it & put your design in Execution as soon as possible [GD 58/6/1/14: Letter Book 1774-1775, emphasis added]. Carron did not use Smeatons design, but adapted the horizontal mill invented for brass cannon boring by Johann Maritz of Burgdorf, Switzerland in 1715 (Jackson and de Beer, 1973, p.73). Bryer (2005d) shows that this provided the technical basis to invent the Carronade, a revolutionary new lightweight gun that played an important part in retaining British control of the seas, saved Carron from financial ruin, and laid the foundations of its future success. De-socialising capital: Bryer (2005d) also examines the role of accounting in concentrating Carrons ownership from the 1790s, the de-socialisation of its capital, when the company became a family firm. In the currently accepted history, following the appointment of Joseph Stainton as managing partner in 1788 until the 1850s, the company fell victim to a particularly able and unscrupulous family of managers, whose depredations have become classic (Pollard, 1965, p.20). Bryer (2005d) shows that this ad hominem argument overlooks the fact that Joseph Stainton exploited a contradiction in Carrons system of corporate governance between full disclosure and insider control of the accounts, to hide the real value of the company from passive investors to encourage them to sell too cheaply to him and his family. I hypothesize that when Carrons capital became less social, its managing partners lost their capitalist zeal and the company stagnated, but we need further research on this question. NEOCLASSICAL AND FOUCAULDIAN CONTRIBUTIONS Theoretical wars: Accounting historians who badge themselves as Neoclassical or Foucauldian have made seminal contributions to the empirical foundations of our subject (Bryer, 2005a). My problem with their work is not what they find. My problem is with their theories, as they tell us nothing about the origins or roles of the accounts we actually see. It is fashionable to argue that no one really fits these theoretical categories; that there is a growing consensus all viewpoints have something to offer (e.g., Loft, 1995; Funnell, 1996; Fleischman and Parker, 1997). However, as the theories contradict each other on fundamental issues, compromise does not seem tenable.

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The Neoclassical view (in whatever guise) is that driving the modern accounts we find in leading BIR firms (typified by Carrons) was the entrepreneurs need for information for economic decision-making (see, for example, Pollard, 1965; Boyns, Edwards and Nikitin, 1997; Fleischman and Parker, 1997). This is the idea that entrepreneurs chose methods of accounting to help them make decisions to maximize their expected utility (or minimize transactions costs, agency costs, etc). This explanation is unhelpfully tautological because it is not possible to observe expected utility (or transactions costs, agency costs, etc.). Implicitly to get around this problem, Boyns, Edwards and Nikitin, for example, say that in order to face up to greater competitive pressures resulting from industrialisation, and the problems posed by the development of larger, sometimes vertically integrated businesses, those managing them had a need for improved accounting systems to enable them to exercise control (1997, p.179). The obvious questions are, why did managers need improved accounting systems to exercise control - where did the need come from, and how do we observe it? - and what is control? The economic rationalists do not attempt direct answers to these questions. Instead, they point to the changes in the environment, the increasingly complex processes of production and competition, but where this complexity came from, and the role of accounting in producing and controlling it, they do not ask. They take the BIR for granted and assume that whatever accounting we find in the archives was a rational response for the user. Furthermore, they either assume that capitalists have the power they need to enforce control over labour, or they assume that Weber, a charter member of the Neoclassical tradition (Fleischman and Parker, 1997, p.275), adequately dealt with this problem. This, however, gets us no further forward. Webers explanation of the importance of accounting to capitalist control relies on the rationality of using expected cash flows in accounts, an idea that does not adequately explain the history and practice of modern accounting (Bryer, 2000a). Foucauldians argue, against the Neo-classicists, that we should understand accounts as a disciplinary technique, but we must be aware that Foucault intended this idea to covera wide variety of methods of watching and controlling (Loft, 1995, p.198), and he says nothing about accounting. Certainly, accounting can be seen as one of the techniques of surveillance and control of individuals in a business organisation (Loft, 1995, p.198). Moreover, Its peculiar characteristic, as Loft says in terms that in outline are identical to Marxs view, is that it replicates the production processes and makes them visible on paperand in monetary termsenabling its control (1995, p.198). Exactly how Foucauldians think it does this, however, is unclear. Whereas in Marxs theory capitalist accounts discipline using results controls requiring the agent to produce calculations, reckonings and explanations of the movements of capital in anticipation of punishment or reward, Foucaults disciplinary techniques envisage only action controls. As Armstrong pointed out, In Foucaults various accounts, disciplinary regimes were concerned with moulding the actual details of individual conduct, whereas Methods are not specified within accounting systems, only results (Armstrong, 1994, p.31). They do not use these words, but, uniquely among Foucauldians, Hoskin and Macve effectively argue that Foucaults notion of disciplinarity provides the key to understanding the uniqueness of modern accountings basis in results control. To reach this conclusion,

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they stand Foucault on his head by redefining his idea of disciplinarity to mean accountability for results: 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). To Hoskin and Macve, therefore, disciplinarity means knowing - that is, the creation of an objective account - and exercising power - that is, holding the agent accountable, judging and handing out punishment or reward. To hold an agent accountable (to discipline him or her) means setting written targets and making written judgements of performance against those norms, etc.. Hence, on the face of it and in simple English, the power-knowledge interrelation (Hoskin and Macve, 2000, p.95) simply means accountability. That is, having expert knowledge of performance (what norms are achievable and how to discipline agents so that they behave appropriately) and the power to punish and reward. If the agent internalises the norms, etc., accepts them as his or her own, so much the better for the principal. So, what is new? Hoskin and Macve claim their view of accounting as disciplinarity is new, but when we see that they mean results control is new, it becomes clear that although, as Richard says, they have gone beyond Foucault, in doing this they have reinvented the accounting equivalent of the wheel. Apparently not recognising this, Hoskin hitches accounting onto the Foucauldian disciplinarity bandwagon to claim that the invention of accountability is one sign of a profound transformation, beginning from around 1800one of whose consequences is indeed the modern system of financial reporting, management accounting and auditing (1996, p.266). He says that before 1800 accountings focus was stewardship concerned only with responsibility for duties for things, that is, action controls for use-values (including rights, money, etc). He thinks that only after 1800 did accounting begin to focus on human accountability, concern for current and future performance (Hoskin 1996, p.266), that is, on results controls for financial performance. Though, as Marx argued at length, this change did take place, it is not correct to say that results control was absent from accounts before the nineteenth century (cf. Hoskin, 1996, pp.275-276). For example, 18th century English landlords used them when they let their farms for capitalist ground rent (Bryer, 2004). Bryer (2005d) shows that Carrons partners and managers made extensive use of results control. Richard concludes, What we all three see at Carron is a lot of extremely impressive accounting and reporting activity for such an early date in the BIR: and we all three share is an overriding belief that accounting is a vital and generally overlooked ingredient of the history of the modern corporation and of its current organisation, strategy and

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control. Dick agrees. Though it would be nice to agree about something, I do not think even this is right. Carrons accounts are very impressive and vital to a Marxist, but they are neither in the Neoclassical and Foucauldian theories because they do not explain why Carrons partners sought accountability for capital measured according to modern practice. This gaping hole in their theories is the source of all my problems with their interpretations of Carrons accounting and their criticisms of Marxs theory and me. POINTS OF REBUTTAL AND CONFLICT Though my collaborators support very different theories, they unite in their criticisms of Marx and my use of his theory but, in my view, they reveal misunderstandings or dubious positions rather than weaknesses in his theory or its ability to explain Carrons accounts and story. We have no disagreements over the facts. I deal with each collaborators points (with some overlap) more or less seriatim. Dick surmises that a typical economic rationalist might find greater interest in a wider variety of practices than might a typical Foucauldian or Marxist scholar. He claims the idea of economic rationality is so broadthat it subsumes thecritical paradigms! He means that we can simply say that labour control and the exploitation of labour are economically rational. This is true, but it makes the idea of economic rationality a tautology, true by definition. In other words, Dick implies that these aims are rational because a rational (i.e., successful) entrepreneur has them! In this way, the neoclassical framework can vaguely explain anything and therefore it explains precisely nothing. A curiosity of the Neoclassical position is that economic rationalists argue that entrepreneurs seek economic efficiency or greater gain, but they do not define these aims in terms of the modern accounting practices we find. Neoclassical theorists have gone to great pains to tell us how irrational conventional accounting is! To get around this, Neoclassical accounting historians and others (e.g., agency researchers) implicitly assume there is an invisible eternal truth or rationality underlying modern accounting techniques which, whatever the complaints of Neoclassical theorists, somehow got it right. Thus, Dick concludes, a corps of entrepreneurs who, in the absence of a costing literature or a university education, operated by the seat of their pants and frequently got it right. However, Bryer (2005d) shows that they did not operate by the seat of their pants, but followed a guiding philosophy, the capitalist mentality, that we find in the Short View and elsewhere. Dick says the Short View reflected many theories of modern management, but to me this simply means it anticipated many modern, i.e., capitalist practices. I am very glad to see Dick now taking accountability seriously (this is not a word we find in his earlier work, or one that other Neoclassical historians use clearly or consistently), but he writes as if this idea came from the Neoclassical framework! A fundamental question he does not ask is, if accountability for modern accounting categories is simply economically rational, why was it not popular before the mid-18th century amongst industrialists? There is evidence of its use by farmers in the early 17th century (Bryer, 2000b; 2005c). According to Dicks economic rationalism, this must

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mean that these farmers were more rational than most early 18th century manufacturers, whereas from Marxs perspective these manufacturers less sophisticated accounts reflected the reality of their still feudal social relations of production (Bryer, 2005a, 2005c). Richard of course agrees that accountability is important, but ducks the real question, which is what do early businessmen discipline workers and managers about? Whereas Neoclassical historians do at least have a theory of value (that, unfortunately, does not describe reality), as Foucauldians do not they cannot formulate an answer to this question. There is no Foucauldian theory of financial accounting, or of management accounting. What, for example, is its theory of depreciation accounting, revenue recognition, stock accounting, etc? Theoretically, I find it hard to take Foucauldians seriously when we are trying to explain modern accounting. How do Foucauldians explain Carron? As Dick says, to Foucauldians, Carron must be a false start, yet another example of the appearance of modernity without the substance, yet it was a huge success. Foucauldians appear to believe that if only Carrons partners had shared the disciplinarity discourse, the company would have been even more successful. Thinking of Carron this way, however, removes it from the realm of empirical history and leaves us with a counter-factual speculation that we can never prove or disprove. Against Marxs view, Dick speculates, Carrons future depended upon a dedication to quality rather than price he means rather than dedication to reducing costs, particularly the proportion of labour costs in its commodities. Evidence against Dick is, first, that his reference is to 1772 when Carron was in financial crisis and had serious problems with casting cannon. Most of the letter is about these problems, so Gascoignes comment that we hope to support our sales by the quality of our work rather than by underselling others (GD 58/6/1/12), could be promising to solve them. In fact, Bryer (2005d) shows he solved the quality problem with cannon by cutting labour costs. More likely, Gascoigne referred to the quality of the very great Variety of Bathstove fronts he promised to send, with which he began the sentence from which Dick quotes. The following sentence makes clear that Gascoigne did not intend to make quality Carrons competitive edge: We are, he wrote, ambitious to make our work as perfect as any body [GD 58/6/1/12]. In other words, Carrons quality would match that of its competitors, and it would then compete on price, but it did not intend to be a high quality producer. Dick cannot fathom how the Marxist labour theory of value (that he puts down as ideology) and Adam Smiths theory of competition (the invisible hand, which he implicitly lauds as science) differ on the main issues I discuss. I have explained elsewhere the many linkages we find between Marx and accounting. In Smith, however, we find nothing about accounting and the economic rationality of controlling the valorization process with factories, machines and accounts, with de-skilling wage labour, the socialisation of capital, the functioning of capitalist management and piece rate and other systems designed to ensure that the capitalists cost of production was at or below that socially necessary. Richard thinks Smiths four different ways entrepreneurs can employ capital fits better with the Short Views circuit of three phases than Marxs circuit of capital. However, Smith talks of the alternative ways businessmen can use their capital he can buy and sell raw materials, or manufacture commodities, or sell them to

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consumers, or act as a wholesaler - not, as Marx and the Short View did, as a complete circuit of three integrated phases.52 As the Short View said, I distinguish the Business of the Company as a moving body into three classes, strictly dependant upon, and progressive of, each other. Dick says in his closing remarks there is little evidence that Carron implemented the capitalist vision in the Short View in practice, and Richard agrees. They forget that according to Bryers interpretation of Marx (not challenged by Dick; I consider Richards criticisms below) Carrons use of modern accounts shows that it was capitalist from its birth and that it remorselessly implemented its mentality in every aspect of its business. Carrons other partners regularly praised Gascoigne for his many achievements in controlling the company for profit. Dick thinks that Marxs theory that the capitalist mentality drives technological innovation is conspiratorial, whereas he thinks innovation is really the result of fortuitous, appropriate circumstances, i.e., accidents of discovery that allow the capitalist to harness technology to reduce labor costs. However, this is Marxs theory if we add the observations that capitalists like Gascoigne were the first to exploit these opportunities, and they constantly sought to create them, hence the capitalists and Carrons fascination with the natural sciences and practical experiments. Dick wonders if the capitalist mentality and the control of the valorization process which Marxist ideology stresses as emanating from socialized capital would have saved Carron had it not been for the rather happy development of the Carronade. Nowhere do I say or suggest, as Richard puts it, sophisticated bookkeeping and accounting would have rescued Carron without the Carronade. I certainly argue that the evidence is consistent with the view that the capitalist mentality drove Carrons development of new boring technology and the invention of the Carronade, but nowhere do I (or Marx) suggest that this guarantee[s] that it [the invention] will work. The most vulgar Marxist could not think such a thing! Bryer (2005d) argues that the capitalist mentality had to seize upon the happy accident (all the necessary conditions for the breakthrough, including the financial need) to drive Carrons development of new boring technology and make the invention of the Carronade possible. Unsurprisingly given his theoretical predilections, the exploitation of labor for the sole purpose of realizing greater capitalist profits is not a premise with which [Dick]concurs, but if exploiting labour for profit was not the single, overriding purpose of Carron, what was? I have explained why I think we can say Carron set out to exploit labour to get their profits, and will say more below in my reply to Richard. Dick implies Carron did not pursue just profit because the partners wanted to concentrate control in family hands (Richard also thinks this). Certainly, as Bryer (2005d) shows, Carrons capital was not fully socialised and this explains the eventual manipulation of its accounts during the Stainton-Dawson era. However, because the partners wanted to maximize profits to themselves and their families rather than to capital in general does not mean they were not dedicated to profit. Dick questions whether we can say that Carrons capital was ever socialised when he asks, was the early partnership all that harmonious? He also says this because Carron sued Garbett for debt in the 1770s.
52

Adding the wholesaler shows us that Smith was writing about possible uses of capital, which are many, not its functions, of which there are, according to Marx and the Short View, only three.

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However, before the Stainton-Dawson era, the lack of personal harmony, or the personal war between Gascoigne and Garbett did not disrupt the cohesion of the capital or its dedication to profit because, as Bryer (2005d) shows, Gascoigne continued throughout to provide all partners, including Garbett, with full accounting information. Dick concludes with the surprising claim that Carrons accounting system was a one-off which was not even sustained by the company itself after 1786. First, though Carrons archives are exceptionally rich, he knows better than most that similar levels of sophistication existed in many other leading BIR companies (Bryer, 2005a). Second, he knows we do not know the history of Carrons management accounting from the 1780s, a topic now urgently in need of further research (Bryer, 2005d). Richards apparently most debilitating criticism of my work is that Marx thought that capitalists and political economists were suffering from a profound illusion as to the source of profit which it took Marxs own analysis to be the first to reveal. He is right about Marxs view of political economists, but wrong about his view of capitalists. If he were right about capitalists, Richard would also be right that this makes it much harder to know what one would expect to find in the records of capitalist businessmen that would prove Marxs analysis: the accounting records are themselves part of the illusory apparatus (Macve, 1999). He makes the same point in Macve (1999) that, if capitalists and their ideologues did not understand that unpaid socially necessary labour was the origin of surplus value, they could not use accounts to pursue it. However, first, although Marx thought political economists suffered from theoretical illusions, he knew from their accounts that businessmen only suffered from what he called practical illusions, which is why he was so interested in accounts as a corrective to the theories he analysed (Bryer, 2005e). As he said in one of a series of letters to Engels when he was working on Capital that asked about accounting, the theoretical rules are very simple and self-evident. But it is nevertheless just as well to have some inkling of how things look in practice. The method of businessmen is, of course, partly based on illusions and even greater than those of the economists; on the other hand it rectifies the latters theoretical illusions by means of practical ones (Marx and Engels, 1983, p.283). By practical illusions, Marx meant that he knew from their accounts that capitalist businessmen see costs instead of socially necessary labour, and profit instead of surplus value (1981, chapter 1). However, it was obvious to him, as it is in Carron, that through his accounts and his practical dealings, the nature of surplus-value impresses itself on the capitalists consciousness in the course of the immediate production process, as we were shown by his greed for the labour time of others (Marx, 1981, p.135). In other words, what else, other than an implicit, inchoate, inkling (to use Marxs word) of the labour theory of value, could explain the capitalists constant search for ways to reduce the labour content of commodities and services? Second, though Richard does not discuss here how far Marx himself can be held to have thought accounting to be important, in Macve (1999) he does. He claims there that

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when Marx says that The manner of bookkeeping does not of course change in any way the actual state of affairs booked, he denied accounting any role in constituting business reality (Macve, 1999, pp.592, 594). However, in the context, where Marx discusses accounting for repairs and wear and tear, he plainly means that capitalists could choose not to account for the realities of the circuits of fixed capital, but this would not change these realities. He did not say that capitalists do not use accounts to control these and other circuits. Like Engels the practical businessman, he knew that capitalists did use accounts to control capital (Chiapello, 2004; Bryer, 2005e). In Volume 2 of Capital Marx lays out the details of the circuits of capital, where he explicitly recognises the importance of accounting to capitalists in controlling the valorization process. He says that By way of bookkeeping, which also includes the determination or reckoning of commodity prices (price calculation), the movement of capital is registered and controlled (Marx, 1978, p.211).53 The function of bookkeeping was nothing less than the supervision and ideal recapitulation of the process [of production] (Marx, 1978, p.211).54 To determine selling prices and to recapitulate, that is, to see the movement of capital through production and its return from the market, Marx knew from Engels and his own research that capitalists turned to their books (Chiapello, 2004, Bryer, 2005e). He knew that where purchased and self-produced commodities are not changed into actual money [i.e., sold], they are converted into accounting money; in short they are used as exchange-values and the element of value they add to the product in one way or another is precisely calculated (Marx, 1976, p.952). He fully accepted that in the capitalists mind the value of the product is express[ed]more precisely as money of account (Marx, 1976, p.955). Certainly, as Richard says, by ideal recapitulation Marx means, abstractly, on paper. However, the issue, and what accounts have to do with capitalism, is the categories that underlie them and the mentality they embody. I argue we can find the categories of modern accounting as inchoate expressions of his labour theory of value, that capitalist accounts recapitulate the flow of capital through production and back from the market. Marx certainly thought that accounting would be more necessary under socialism and communism than capitalism, but this was because (as Lenin said) societys accountability mechanisms would multiply to include the currently economically disenfranchised majority. This thought, however, also shows that Marx did think accounting under capitalism was necessary for the minority that benefit from it. Richards view that Marxs theory has no direct accounting implications (Macve, 1999, fn. 12) underlies his criticism that I have over-interpreted the evidence by claiming that its accounts reveal the fully-fledged modern capitalist mentality and persistent attempts to implement it. In other words, my theory incorrectly predicts that a fully-fledged capitalist mentality necessarily means fully-fledged accounting. I agree with him that there was much significant development still to come in accounting particularly, the
53

Bookkeeping was not a term of abuse in the nineteenth century, having the same meaning as accounting today. 54 It is not relevant to Marxs meaning here that at this point in Volume 2 of Capital he discussed the general distinction between productive and unproductive labour, using accounting as an example of the latter, as he often digressed into important issues, and Volume 2 represented only his notes that Engels edited for publication. Whether Marx makes his statement about the role of accounting in capitalism in passing or not, Richard overstates it when he says that Marx was silent on capitalist accounting.

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appearance of detailed labour standards, but this does not mean either that Carrons capitalist mentality was not fully modern, or that my theory is defective (or both). Here Richard seriously under-interprets what I say. I say that Carrons partners shared the modern capitalist mentality, defined by modern conventional accounting, but that they struggled to implement it fully in the historical context where their capital was only partly socialised and their labourers were often feudal peasants that Carron struggled to turn into wageworkers. The necessary future developments in the social relations of production the development of the stock exchange, company formation on a grand scale, universal wage labour to allow fully-fledged accounting, took another century and more to emerge from the extended class struggle that erupted in the second half of the 18th century. Nevertheless, the mentality that drove them was fully modern and, where the social relations of production allowed, so were the accounts. So, for example, while as Richard says, in the accounting literature there are several instances of initial enthusiasm for accounting and costing dying away, this may show only that capitalist social relations, not yet firmly entrenched in institutional structures, degenerated to a more primitive form - as appears to be the case when Carrons capital de-socialised. Richard thinks that my link between socialization of capital and transparent accountingis historically tenuous, quoting the Royal Mail case of 1929. His history is tenuous. The surge of reserve accounting during the 1920s leading up to the Crash in America in 1929 arose because the British model, based on auditors as trusted insiders, failed first in the US and then in the UK when the size of companies and the share capital markets skyrocketed from the turn of the century (Bryer, 1993b; 2005f). The British model worked well in the 19th century, but limited the idea of transparency to mean only to the auditors, not to the public, because total capital was not yet fully social and to avoid the labour danger (Bryer, 1993b). The basis of the Securities Exchange Acts of 1933 and 1934 and the UK Companies Act of 1948 was public transparency to social capital. Richard doubts whether capitalists can control the valorization process using accounting, and goes so far as to suggest that Carrons partners did not even really try to track capital employed. He is right that in its balance sheets Carron did not systematically deduct depreciation to calculate the capital employed, but the Short View was precisely a detailed critique of this practice.55 Richard neglects to mention that the Short View rectified this failure in 1769 by systematically calculating the capital employed, and that Carron had another Stock account in which it did appear to make adjustments for fixed asset write-downs and provisions and excluded the partners notional interest. Bryer (2005d) shows that the partners understood that they should systematically depreciate their assets and track the capital employed, through the production of special balance sheets where necessary [GD 58/2/1/1, pp.474-475], and in the departmental accounts where from 1769 they did systematically charge depreciation [GD 58/4/20/1]. Certainly, the partners decided not to change the balance sheets they probably presented to their bankers and other prospective providers of capital up to the 1770s when they needed additional capital to survive. Furthermore, they only sporadically wrote down fixed asset
55

Richard is right that, according to my reading of Marx, capitalists should value and depreciate the replacement cost of fixed assets, but as this is expensive capitalists usually (i.e., when prices change relatively little) rest content with historical cost as the most cost-effective measure of the recoverable capital. We do not know how near Carrons fixed asset valuations were to replacement costs.

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in the balance sheets from the 1780s, but Bryer (2005d) shows that up to the StaintonDawson era they never deluded themselves. Stainton and Dawson, by contrast, did delude the other shareholders when they secretly made arbitrary write-offs to de-socialise Carrons capital. Richard claims there is no evidence that Carrons partners ever calculated the realised return on capital employed or held anyone accountable for it. Moreover, he thinks this even though the Short View made it a maxim of future behaviour; he wants evidence that Carron calculated this rate of return regularly. However, Richard underrates the significance of Carrons residual income calculations. He is right that writers in classical antiquity also understood the notion that interest was an opportunity cost on investment (cash outlay) in calculating a residual income (net cash flow). However, in the 18th century (and today) the point of calculating residual income was to find the accounting excess return over an opportunity cost return on the capital employed. Modern companies operating within total social capital measure the opportunity cost of capital using the required return on the market portfolio. Carron, operating in a context where perhaps only money capital approached full socialisation, calculated its residual income as the profit of enterprise after deducting an apparent 8% interest charge on the capital spent on constructing the blast and air furnaces [GD 58/4/20/1, pp.8, 15, 48].56 However, whatever the opportunity cost of capital, it remains true that, as Mepham comments on Robert Hamiltons 18th century accounting textbook, An Introduction to Merchandize (1777/9), such a calculation can substitute for calculating the accounting rate-of-return on capital employed (Mepham, 1988, p.63). Hamilton recommended calculating profit after charging for the opportunity cost of interest and recognised that accuracy required a detailed calculation of the capital employed in processes or products (branches of trade) during each period. He illustrated how to incorporate interest within the double entry system using cash venture accounts, as he apparently thought using accruals for detailed calculations of the capital employed by each branch would cause bookkeeping problems, even though he thought the calculations could be useful (Mepham, 1988, pp.65, 73-4). The idea of calculating profit after interest on capital was commonplace in the 18th century, and may have originated with partnership accounts (Mepham, 1988, pp.63, 67; Pollard, 1965; Bryer, 2005a).57 These accounting routines did not exist in antiquity, as Richard knows.58 In short, Carron did regularly calculate a rate of return on capital employed as a residual income at departmental and company levels, and it is clear from the archival evidence that the partners thought of their success and failure this way, and held their managers accountable for contributing to making the return as large as possible. Richard implies that Carron did not single-mindedly pursue rate of return on capital because not all the partners were dedicated capitalists, Roebuck in particular whom, following conventional historians, he thinks was an adventurous scientist who took
56

I say apparently, because some of the numbers in the Stock Book are barely legible. Carron charged a notional 5% on the partners capital. 57 I am grateful to Richard for discussions that clarified this point. 58 This would remain the case even if it were true that Carron accounted for its capital employed inaccurately, because Columella did not even try.

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unnecessary risks. Roebuck took risks, but this does not mean he was not a capitalist, and his much-criticised decision to build Carron on a grand-scale paid off as the company eventually developed enough successful products to take full advantage of the economies of scale his design of the plant bequeath it. In 1746, he formed a partnership with Garbett to make sulphuric acid (vitriol). He created a process for manufacturing vitriol on large-scale, gradually bringing down the price to one quarter of what it had been (Watters, 1998, p.2), a scale of cost reduction consistent with a serious capitalist intent. In 1760, Roebuck formed a partnership including John Glassford known as The Borrowstouness Coal Company. He had other businesses and farms at Boness (Watters, 1998, pp.28, 31) and one with James Watt to exploit his improvements to the steam engine. Many of his ventures ultimately failed, but this does not mean he had no real business sense (Norris, 1958, p.136). When Roebuck died, James Watt credited him with an intimate knowledge of business and manufactures as well as many scientific virtues (Watters, 1998, p.32), and there is evidence that he played an important role in the early years in managing the Company and in laying some of the foundations of Carrons ultimate success (Bryer, 2005d). Richard boldly declares that Carron did not calculate labour productivity and, where 18th century businesspersons calculated productivity at all, such as in the northeast collieries, they compared the productivity of machines with horses, etc. Although Hamilton did not say that manufacturers should calculate the productivity of day workers, he did suggest it as an option and, as Mepham says, he did have an interest in the evaluation of worker productivity (1988, p.58). Carron certainly cared about worker productivity. Right from the start, Cadell junior stressed that getting the most production from a given number of workers was a key to Carrons success: I really think the force of Labourers Moulders & in General are at present fixed nearly on as frugal a plan as we can expect and that [one of] the Grand points we have to aim at[is] That the Works & Workmen in Generall are steady in turning out a large quantity of Good Work [ACC 5381, Box 28, (1)]. Carron also calculated labour productivity. We saw that it made extensive use of piece rates that require the calculation of labour productivity to estimate the amount a good worker would earn. It calculated the increase in labour productivity from introducing longwall production at the Kinnaird colliery [Remarks on working of Kinnaird Coal, 15th July 1768, ACC 5381 Box 28 (1)]. Carron kept records of the output of individual nailers [ACC 5381 Box 29 (1)] and other workers, including miners. As importantly, Carron made many accounting calculations about its investments in technology that increased labour productivity in transportation improvements, automation, etc (Fleischman and Parker, 1990, pp.217-218). Implicitly at least, a key element in many such calculations would be its impact on labour costs per unit of output. For example, in 1765 the General Court resolved, in order to make our Fire Brick at a less expense as well as a better quality to erect a Wheel with a pair of Rollersfor grinding the Fire Clay [GD 58/2/1/1, pp.168-169]. Another example is that in late 1766 Carron introduced a new type of blowing apparatus using three-cast iron (later four) cylinders copied from Holland, providing a better draught, increasing output and cutting out the

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expense of regular repairs to the leather bellows of their predecessors (Watters, 1998, p.22), most of which were labour costs. When Richard says capitalists in the Northeast mines compared the productivity of machines and horses, he appears to mean they calculated the impact on the cost of production of replacing horses by machines. As the maintenance of horses was very labour intensive, and machines more productive, investment in machines would undoubtedly save labour cost per unit of output. Fleischman and Macve (2002) say that the mine owners and managers saw labour as a major cost to minimise, and show they made comparative extraction and profitability calculations and return-on-capital calculations, but they give few details. Richard says the Short View did not espouse modern managerial capitalism. He thinks Gascoigne was advocating centralisation (in himself) not delegation. However, Bryer (2005d) shows that the Short View spelled out an organisation structure that was simultaneously centralised and decentralised, just as they are today. The Short View argued for centralised control to take the view of and promote the collective interest of social capital arguing that power be vested in a Single hand by & thro whom they shall act in their Copartnery Capacity (p.7). It also argued for decentralisation to push this collective view and its implications down the organisation into production through the departmental and other accounts. Carrons records make it clear that Gascoigne held himself accountable to the collective, and held his departmental managers accountable to him for results this is what delegation means to a capitalist, the freedom to achieve the target results. Modern organisations also seek tight central control of capital while delegating the task of earning the required return to the divisions, departments, or whatever. However, Richard thinks that compared to a modern organisations emphasis on looser, i.e., results controls, Gascoigne wanted hands-on operational control, i.e., action controls, but the Short View makes it clear that, though he did want more hands on management, he wanted a mixture of results and action controls: He ought then to[pay] more minute attention to the Manufacture, & Sales - the whole should be depending on him, and all the Servants of the Company looking to him, as a Regiment does to the Frugal Man, or School Boys to their Master, so that there shall not be a Nail drove but thro him, & by his Connivance & Consent, thereby to enable him to be a general Check he should have the negative appointment if not the choice of the Tools, or Persons with whom he intends to work - the Partners all the while fixing the Extent of the Salarys, or other Encouragements to be given in the different Stations (p.12). This does call for more hands-on management, more minute attention to the Manufacture, & Sales, but we must remember that this was also a criticism of Cadell junior who Gascoigne was attempting to oust. However, Gascoigne also says that the servants should look to the manager as a role model (as a frugal man in the army in the field, as a teacher). That is, that nails could also be driven (i.e., actions taken) with his connivance, that is, by his tacit permission, when his eyes could not see, when he wants them to act as he would, to regard him as their exemplar. He also claimed only the right of veto in choosing tools and employees. Thus, while Gascoigne did want to increase the action controls, he also recognised some of their limits, particularly the need for

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encouragements to achieve results. We have seen that the Short View called for departmental profit and loss accounts. Under Gascoignes leadership Carron made extensive use of accountability for departmental results. Resolution No. 509 (1771) of the General Courtmandate[ed] position and performance statements for each department head (GD 58/6/4/2) (Fleischman and Parker, 1990, p.215), though not as the heads of full investment centres. However, as modern companies vary in their use of action controls, we cannot say that Carrons control systems made it pre-modern. As a Foucauldian, Richard believes that accounting fails to deliver control until it becomes one of the central routines that are necessary to bind together large, diffuse bureaucratic organizations or later managerial capitalism. Only then, he says, do organisations fully accept accountings offer of the objectification of business reality. He claims we do not find this at Carron, but it had many bureaucratic routines (job descriptions, reports and reporting relationships, regular meeting, analyses of issues, costs, alternatives, etc), and it did fully accept the objectification offered by accounts. To repeat, as Richard says, but in my view his Foucauldian theory does not explain, in Carrons archive we find lots of extremely impressive accounting and reporting activity. Accounting is, of course, the supreme bureaucratic routine for capitalists, as Weber acknowledged (Bryer, 2000a). Conclusions: Richard says I claim that a number of elements at Carron taken together prove Marxs theory of the BIR. Dick accuses me of passionate dedication to the Marxist paradigm. In fact, in Bryer (2005d) I soberly pull out and examine Carrons accounts to test Marxs theory. Having examined them, I conclude that its accounts, the uses it made of them and the mentalities they signatured, were those of modern capitalists, and I speculate that its zealous accounting underlay its success and its deserved prominence as an outstanding example of a BIR company. Marx would have been wrong if Carron had been successful and innovative and had displayed the capitalist mentality, but had not kept modern accounts. Carrons evidence does not prove Marx is right, but it is consistent with his theory across a range of data, and should encourage further Marxist histories (or attempted refutations) across a range of BIR companies.59 For example, Carrons accounting history suggests that we must seriously qualify Pollards view, shared by my collaborators, that The impersonal company was rare in the industrial revolution (1965, p.155). Families dominated the management of many leading BIR companies, but this did not necessarily mean they did not have the impersonal relationships of the modern joint stock company (Pollard, 1965, p.155). In Marxs theory, strongly supported by the Carron story, the basis of impersonal, i.e., capitalist, relationships is a well-functioning accounting system.

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Richard says to prove Marxs theory I must show how the archive would differ under Marxs theory, i.e., what we see there that we do not see with Neoclassical and Foucauldian theories, but this is what I claim to have done. To repeat, I argue (and many would agree on this) that these theories do not explain modern accounting categories, let alone deviations from them, but I argue (virtually alone, but undaunted), and provide evidence to support the conclusion, that Marx theory does.

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From what my colleagues say about Carron it seems to me that the Neoclassical and Foucauldian theories cannot satisfactorily explain its accounts or its history. Research under their banners has laid some solid empirical foundations, but they add little to our understanding of the real processes underlying accounting history. The archive contains no evidence that Carrons partners or managers used accounting to make rational economic decisions or that they chose accounting techniques on economic grounds. Given that they cannot test their theory empirically, one must wonder why, theoretically, avowedly Neoclassical accounting historians enter the archives. To Foucauldians, archives before the supposed modernity date-line of around 1800 are of interest only for the absence of detailed labour standards, for them the only modern expression of human accountability (e.g., Fleischman, Hoskin and Macve, 1995). Again, one must wonder why, other than to confirm this, a Foucauldian would go to Carrons archive, yet to someone who dares to look with Marxs eyes, it contains overwhelming evidence of results control for the circulation of capital well before 1800. My overall conclusion is that considering the wealth of supporting evidence in the Carron archive and the BIR costing literature (see Bryer, 2005a), it is time for accounting historians to give Marx a fair hearing. It is time to recognise the importance of Marxs classical economics as a logical and relevant theory to turn to for help in understanding the critical role of accounting in creating and sustaining modern industrial society. Richard does not seethe evidence that Bryer sees there as supporting his Marxist theory because in part, I think, he does not (yet) fully understand Marx theory, and because, from his apparently Foucauldian perspective, there is nothing to see. Bryer (2005d) provides a wealth of detail consistent with Marxs theory to open the eyes of those who dare to look. CONCLUDING REMARKS DICK FLEISCHMAN As the agent provocateur of this project, I have been accorded the honour by Rob and Richard to offer a few words in conclusion that express my opinions as to its successes and failures. Whilst the projects culmination did not see the three of us joining hands in a rousing chorus of Kum-Ba-Ya, relations were sufficiently cordial to allow us to hoist several pints to the memory of the Tolpuddle martyrs. Perspectives will vary widely not only on the part of the research participants, but also of the readership. A leading determinant of the individuals appraisal of this exercise is the approach one favours as meaningful academic debate. Rob feels most at home with passionate, in-your-face discourse, no quarter asked or given. Dick, by contrast, is more appreciative of the additive and synergistic properties of paradigmatic joint venturing. Richard, occupying a middle position, has been involved in cooperative ventures, but has been called upon to defend strongly (academic antler-clashing, as Keith Hoskin has called it) his Foucauldian grounding on several occasions. Economic rationalists, being more in the traditional mainstream, might feel less compelled to engage in heated dialogue (e.g., Johnson and Kaplan), although the multiple contretemps of my frequent co-author Tom Tyson belies a universal characterization on that point. Critical accounting historians are often called upon to pull their swords from their scabbards in

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defence of their paradigms. These characteristics are reflected in the current paper by the degree of acceptance each author is willing to accord the contributions of the others in the telling of the Carron story. Of course, acceptance is not a measure of the projects success or failure. Robs unwavering and passionate dedication to the Marxist paradigm is worthy of admiration. Richard and I have learned much from his knowledge. But, one might ask whether there was anything he was able to take away from the project since nothing of the Neoclassical or the Foucauldian interpretations of events impressed him as compelling. I would hope so. For an historian who had engaged neither in archival research or even in coauthorship, Rob took to both with infectious enthusiasm. As noted in my section, I have gained substantial insight as a result of this collaboration. Critical topics, such as the subsumption of workers and the processes of labor control, are much more prominently included in what I now find important in the Carron archive. At a much higher level of significance, it is my hope that readers will find here a study of greater analytical depth, which explores wider interpretive parameters than previous work on individual British Industrial Revolution enterprises. I believe I speak for Rob and Richard in hoping that it is a precursor to more collaborative and inter-paradigmatic work in accounting history. References Primary sources: The Scottish National Archives, Edinburgh: GD 58/1/6 GD 58/2/1/1 GD 58/2/1/2 GD 58/2/1/4 GD 58/2/2/1 GD 58/2/3/1 GD 58/2/3/2 GD 58/4/1/1 GD 58/4/10/3 GD 58/4/11/1 GD 58/4/11/2
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1771 1760-1774 1775-1812 1850-1879 1775-1812 1768-1785 1786-1813 1769 1865 1766-1767 1768-1769

Additional contract of co-partnery Minutes of General Court Minutes of General Court Minutes of General Court Copy Minutes of General Court Committee (Minute) Book No.1 Committee (Minute) Book No.2 A Short View of the affairs of Carron Company, January 28th 1769 (anon.) Miscellaneous accounts. Excerpts from Report on the Books of the Carron Company (asset, profit and loss, book-keeping &c) Balance Book60 Balance Book

The archivists labelling (and sometimes dating) of these and other account books in the catalogue is not always accurate (e.g. the first and second Balance Books are probably a journal also containing periodic final accounts, while later ones are just Trial Balances.) There are other supporting books such as Accounts Current ledgers; Petty ledgers; Invoice Books and Abstract Balance Books (Bryer, 2005d; Macve 2005).

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GD 58/4/11/3 GD 58/4/11/4 GD 58/4/11/5 GD 58/4/11/6 GD 58/4/11/7 GD 58/4/11/8 GD 58/4/20/1 GD 58/4/20/5 GD 58/4/20/6 GD 58/4/20/7 GD 58/4/20/8 GD 58/4/20/9 GD58/4/21/1 GD 58/4/22/4 GD 58/6/1/1 GD 58/6/1/12 GD 58/7/12-21 GD 58/8/1 GD 58/8/51 GD 58/8/55 GD 58/8/69 GD 58/8/87 GD 58/8/91 GD 58/14/1 GD 58/14/2

1773-1791 1792-1804 1805-1822 1823-1840 1840-1853 1853-1867 1768-1769 1780-1782 1783-1785 1785-1789 1789-1793 1798-1801 1760-61 1767-1769 1759-1761 1772-1773

Balance Book Balance Book Balance Book Balance Book Balance Book Balance Book Stock Book61 Stock Book Stock Book Stock Book Stock Book Stock Book Cash Book62 Day Book63 Letter Book Letter Book Litigation No.44 Balance sheets Letters General Court Minutes Miscellaneous Miscellaneous Account book of Quarole, 1759-1760 A volume of printed receipt forms relating to expenses at Quarole Colliery

The National Library of Scotland, Edinburgh: Acc.5381 Box 15 Box 28 Box 29 Box 53 The Cadell of Grange Papers 1770-73 1774-5 1776-7 Correspondence, 1759-69 Correspondence, 1770-1811, 1922-6, n.d. Memoranda, 1760-1801 Printed legal papers, 1770-81, 1898-1933. 1762-79

1. 2. 3. 1. 2. 1. 2. 1.

61

That is, DEB ledgers. GD58/4/20/2-4 (1772-1779) were inaccessible until recent restoration by the conservators, and are now awaiting our examination. 62 Later cashbooks are currently illegible/inaccessible (and this first cash book is actually a ledger but without any periodic balancing (Macve, 2005)). 63 The Day Books - which later appear to be the Waste Books referred to in other books - begin with GD58/4/22/1 in 1764, but are illegible or inaccessible. Macve was able to look at GD/58/4/22/4 and GD58/4/22/3 (which relates to 1769) during May 2004 (Macve 2005).

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