smith, marx or foucault in understanding the early british industrial revolution? a re-examination...

8/14/2019 Smith, Marx or Foucault in understanding the early British Industrial Revolution? A re-examination of management

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Smith, Marx or Foucault in understanding the early BritishIndustrial 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.

* 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: [email protected]

Paper reference number: 90481

This version: 14thMarch 2005

AbstractArchival historical work has been re-evaluating the role of accounting and early management practice inthe BIR. Interpretations have been offered both by economic rationalist (or Neoclassical) historians andby Foucauldian historians. Recently Bryer has argued for a Marxist accounting and management historyin 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-examinethe 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 vicissitudesthat afflicted the co-partners in establishing the capitalisation of the business on a sound footing and inorganising an effective management structure; the introduction of free wage labour into a region whereserfdom was still prevalent; and the technological breakthrough of the invention of the Carronadesincecomparable 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 thedifferent ways in which the Neoclassical, Foucauldian and Marxist frameworks serve to illuminate thearchival evidence for the developments that took place at Carron, and the significance of the role of itsaccounting.

# We would like to thank the staff at the National Library of Scotland, George IV Bridge, Edinburgh, andat the National Archives of Scotland, West Register House, Edinburgh, for their help and hospitality,

particularly Linda Ramsay, Head of Conservation, Thomas Thomson House, Edinburgh.


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INTRODUCTION

Getting the story straight

The Carron Company, formed in 1759 to exploit the coal and iron-ore of centralScotland, features in the textbooks as an outstanding example of large-scale enterpriseduring the British Industrial Revolution (BIR) (for example, Pollard, 1965; Mathias,1983; Berg, 1994). Despite Carrons importance and the large number of its records thatsurvive, historians have not examined its accounts in any detail. Campbell (1961)discusses Carrons financing and its accounts, but he gives limited details; gives noreferences 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 accountingspecialist (Bryer, 2005a). Fleischman and Parker (1990, 1997) identified elements ofmodern 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 BritishIndustrial 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 Carronsarchives. Our agreed aim was to isolate differences between Neoclassical, Marxist, andFoucauldian 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 re-examine its accounting, management, and labour histories.1

The Neoclassical and Foucauldian views of accounting history are well known anddiscussed, but the Marxist view is not. Rob has therefore written up the Carron materialin detail from his Marxist viewpoint as a stand-alone paper (Bryer, 2005d), which thisjoint paper draws upon and discusses.2 In what follows, after a very brief outline of themain features of Carrons early history, each participant outlines his involvement in theproject, assays the evidence he considers important, and states what he thinks we learnfrom Carron. Each then evaluates the contribution of the other two frameworks andfocuses 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 thechronology of ideas) to enable a more targeted critique of the others. As the sponsor ofthe 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 inScotland 1759 and its first blast furnace was fired on 1 st January 1760. Initial partners

1 Richard made a preliminary visit, but was unfortunately ill when Rob and Dick visited the NationalArchives of Scotland and the National Library of Scotland on 10th-11th July 2003. Richard visited on 3rd4thDecember 2003; Dick, Rob and Richard visited on the 25th-27th May 2004; Rob visited on the 17th-24th August 2004 and from 27th September to 1st October 2004; and Rob visited with Richard from 29th-30thNovember 2004. We are grateful to David Oldroyd (Newcastle University) for advice accessing thisarchive.2 Available from Rob Bryer on request.


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included Garbett, Roebuck and his brothers, and the Cadells (senior and junior). OnlyWm. Cadell junior was resident at Carron and he managed the business. Following acritique of his management in A Short View of the affairs of Carron Company, January28th1769 [GD 58/4/1/1],3 addressed to the partners, Gascoigne (who had married intoGarbetts family) supplanted him in March 1769. The company had always been short ofcapital and faced a further financial crisis in 1772. The partnership restructured itself as achartered company in 1773. In 1778, the company successfully introduced theCarronade, a revolutionary lightweight gun that contributed greatly to Britains navalsuperiority, and saved the companys finances. After Gascoignes departure to flee hiscreditors, from 1787 to 1873 Stainton and Dawson managed the company virtually as aprivate fiefdom, leading to a major lawsuit by aggrieved shareholders in 1864 and thepayment 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 CarronCompany archive. In that instance, my purpose was an attempt to rehabilitate BritishIndustrial Revolution (BIR) cost accounting from the severely negative evaluation of thenow late Sidney Pollard (1965, 1990). The Carron archive was a revelation, perhaps asmuch for the sophistication of its costing methodologies in the years immediatelyfollowing the founding of the enterprise as for its disappearance in subsequentgenerations of management. Also singular in the Carron story was the chronology ofthese 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. Morerecently, I have participated in a number of papers in which my coauthors and I haveurged archival joint venturing in order to test whether differing paradigms couldcontribute additively and synergistically to our understanding of key events in accountinghistory (Fleischman et al., 1996; Fleischman & Tyson, 1997; Fleischman, 2000;Fleischman & Radcliffe, 2003). I have had opportunity to cooperate with leadingFoucauldian 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 fora tripartite investigation of the Carron records, thus combining representatives from thethree 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 completeexchange of all information gleaned. Our mutual understanding was that each wouldwrite about those aspects of the archive that each found the most compelling and, at the

3 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 felteither 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 allottedspace rehashing the details of the economic rationalist position that can be found inFleischman and Parker (1990, 1997). However, it needs to be confessed that the archivalvisit that led to the Carron article was very brief (three days to the best of myrecollection) as it was but a single stop on the more general BIR project to re-evaluate itsmanagerial accounting. Consequently, a number of errors and omissions were allowed tointrude upon that analysis. The most serious was the inattention I paid to the financialstatements 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 havefocused much more extensively on these aspects of the record keeping than time orinterest permitted me, either two decades ago or even now. I very much applaud theirsuperior attention to the detail of the financial accounts, in part because they havecorrected the errors occasioned by my dependence on Campbell (1961) for conclusionsabout the financial accounting side of operations. I might also aver on behalf ofeconomic rationalists who are more attentive to financial accounting methodology thatmy relative lack of concern is atypical. For example, a major focus of Edwards earlypaper on Cyfarthfa (1989), for example, was the integration of the costing and financialrecords at this Welsh iron-producing giant.

The discussion that follows is divided into three main sections: (1) an articulation ofthose aspects of the Carron archive than an economic rationalist would find mostcompelling; (2) those features of the record where the Marxist/labor-process andFoucauldian paradigms have contributed in a meaningful way to expanding ourunderstanding of the Carron story; and (3) a commentary on areas of disagreement in ouranalyses of either the importance or lack of significance of certain factors that contributedto 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 1780whereas Carron was founded in 1759. Other major players in the BIR iron industry, suchas Coalbrookdale and Cyfarthfa, predated 1780, but none manifested the sophisticationreflected by the costing and managerial instincts of Carrons founders. The Carronexperience lends credence to the hypothesis that the genesis of BIR managementemanated from a corps of entrepreneurs who, in the absence of a costing literature or auniversity commerce curriculum, operated by the seat of their pants and frequently got itright. It also evinces how quickly costing expertise can dissipate, as was the case atCarron after the founding generation passed from the scene in 1786.


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The aforementioned costing significance extended to a wide variety of managerial aspectsthat far transcend the labor control mechanisms that Foucauldians, particularly Hoskinand Macve, privilege in their search for the genesis of modern management. Mostobviously, and perhaps what would be most apparent in a nascent costing system, wasexpense control. The Carron founders tracked product-line costs very carefully,including the allocation of overhead (general charges) according to a predeterminedformula (GD 58/2/1/1, Resolution #73, 1763). The differential costs of raising coal, ironore, and ironstone in various mineral fields were tracked and subsequently reflected intransfer prices to the blast furnaces (GD 58/2/4/1). Department managers were madeaccountable for expense control in their individual operations on a weekly basis (GD58/2/3/1, Resolution #1, 1768; Resolution #319, 1770). Expense data were utilizedextensively 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 theleasing 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 standardcosting system in several components of its operations. Transfer prices of raw materialswere at standard (GD 58/6/4/4). Whilst labor standards were not articulated to please aFoucauldian, Carrons management had sufficient knowledge to anticipate what a goodworkman should produce in a day (ACC 5381, box 29, folder 1, 1768). When thecompany reduced piece rates for holing from 4d to 3d per yard in 1766, it was estimatedthat 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 inthe various mineral fields (GD 58/6/4/1; ACC 5381, box 28, folder 2). There were atleast 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 inFleischman and Parker (1990, 1997).

In summation, it appears that Carrons management had a good handle on the firms day-to-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 Carronsmanagement 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 divorcepresent 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 anhistorical narrative is brought more into the picture if linkages to contemporary practicecan be made. However, care must be taken to avoid the thought that currentmethodologies represent best practice. Johnson and Kaplan (1987) conveyed thismessage forcefully on behalf of economic rationalists everywhere.


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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 fromtop to bottom. Managerial responsibilities had been clearly delineated amongst thepartners as early as 1762 (Campbell, 1961). A May 1766 letter from Garbett urged theresident manager Cadell to place the different branches of the business completely on theshoulders of their superintendents for better or worse, glory or infamy (Acc 5381, box28, folder 1). Managerial performances were critiqued, sometimes in unflattering terms,as with the case of Mathews whose general management of the coaling operation wascalled shocking by Cadell (ACC 5381, box 28, folder 1).

As of 1768, approximately 20 managers were ordered to generate weekly reports (GD58/2/3/1, 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 1772required 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 themanagerial corps (GD 58/2/3/1, referencing Resolution #754).

Records were maintained that would allow for the comparison of job performance. Mostregular were the blast furnace accounts, which recorded the inputs and outputs of the fivefurnaces kept in blast during times of full production. One of these account books for the1790s (GD 58/6/4/4) has survived. The respective performances of the managers ofKinnaird and Quarole, Carrons two major coalfields, were compared (citation).

Likewise, data exist for the respective output costs of two ironstone managers in the early1770s (GD 58/6/4/1).

With the crisis of Carrons cannons failing at proof at Woolwich, the firm establishedresponsibility for subsequent trials, particularly of the Carronade. Whereas thewarehouse keeper was generally responsible for the quality of Carrons products, theborer of each individual cannon was made responsible as of December 1772 (GD58/2/3/1). Perhaps this shift in accountability contributed to the greater success of theCarronade and the salvation of the company. It must be confessed, however, that there islittle 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 namedclerks were discharged in 1769 (GD 58/2/3/1). The institution of pay tickets forindividual workers in 1778 was ostensibly a labor control mechanism for minersparticularly, but the process was long in coming and there is no supporting evidence ofthe new policys effectiveness (GD 58/2/2/1, Resolutions #596, #799).

The accounting system at Carron was elaborate in comparison to other companies of thetime, and the partners expected it to be instrumental in controlling operations. Resolution


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#60 of the General Court in 1763 provided full articulation of how the various books ofaccount were to be kept. Resolution #65 specified that the pay for bookkeepers was to be25 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 hegemonyin the 1980s because of the inability by managerial accountants to identify which productlines were profitable. Carrons management two centuries before realized that theviability of its product lines was vital to its survival (GD 58/4/1/1, A Short View of theAffairs of Carron Company, 1769, p. 18, hereafter called the Short View). The Cadell-Garbett 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 (ACC5381, 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 in1765 for details). Carron was decades ahead of its time in allocating oncost to productivedepartments and structuring transfer prices to reflect the differentials in the cost of raisingraw materials.

Many venerated accounting histories (Garner, 1954; Urwick & Brech, 1964; Wells, 1978)advanced the theory that managerial accounting could not spread during the BIR becauseof the absence of a costing literature and a concomitant secrecy about operations topreserve competitive advantage. The Carron archive demonstrates clearly thatbenchmarking was prevalent in the BIR. In July 1768, John Gillies visited severalLancashire 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 paidnot only piece rates per ton but also for forward progress. A lengthy travel log of hisfindings exists in the Cadell papers (ACC 5381, box 29, folder 1). Mr. Mathews was sentto 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 toLancashire, London, and Yorkshire in 1770 (GD 58/2/1/1, pp. 232-233) and Bensontravelled 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 arereflected 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 uponwhich 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 qualityrather than price. Carrons management averred, we hope to support our sales by thequality of our work rather than by underselling others (GD 58/6/1/12). It was also statedin the Short View (pp. 52-53) that Carron should embrace a demand-pullmanufacturing approach characteristic of contemporary just-in-time manufacturingphilosophies and inventory systems.


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Carrons quality control methods were advanced for the times as evidenced by thefrequent 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 (GD58/2/3/1, Resolution #201). As Carron imported Shropshire colliers in its early days, thecontractual arrangements specified not-to-compete covenants in the event these workersleft the firms employ (ACC 5381, box 29, folder 1, 1767; GD 58/2/3/1, 1778). The irongiant even had environmental concerns about its abandoned ironstone leases, and inResolution #388 (GD 58/2/3/1, 1771), the firm determined to establish formal guidelinesfor future conduct in this area. The return of Quarole to its lessor in 1781 included anagreement 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 onpaper. One might wish, however, that there was greater evidence of the implementationof 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 byscholars of differing paradigmatic groundings. I do not feel with similar assurance thatthe thought is universal amongst my co-conspirators. I have gained much newinformation and new insights as a result of the experience. Two additional trips to theCarron 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 noarchival 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, tocorrect old errors that had resulting from my overdependence upon an economichistorian, and to increase my awareness of the steps taken at Carron to institute a double-entry bookkeeping system and to integrate the costing and financial records in thepreparation of financial statements.

Economic rationalism, in terms of looking at business enterprises strictly as economicentities, is broader, given that limited perspective, than either Foucauldianism orMarxism. At the same time, a Neoclassical approach is more reductionist in my viewthan Foucauldianism which, as a post-modernist philosophy, incorporates a wider varietyof discourses and kindred disciplines into the analysis (Loft, 1986; Hopwood, 1987;

Miller & OLeary, 1987). Marxists, again in my view, tend to approach accountinghistory in disparate ways. Some have retained the economic orientation of what hascome to be called vulgar Marxism; others have expanded their parameters in directionsas broadly based as Foucauldians. For the latter, the revision of Marxist theory toconfront new stages of capitalism and new technologies appears almost an obligation. Intodays world, the fragmentation of traditional economic determinism is reflected by thelabor-process literature emanating from Bravermans classic (1974) and by the intra-Marxist 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 haveattempted to describe here.


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The point I am trying to raise here is that, in a primarily economic analysis of Carron, atypical economic rationalist might find greater interest in a wider variety of practices thanmight a typical Foucauldian or Marxist scholar. I would be the last to suggest that any ofus 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 usoutliers. However, it is my sentiment that Foucauldians and Marxists focus moreextensively on certain themes which for economic rationalists are all-important andcontribute, albeit not equally, to the big picture. For Foucauldians, the attribute mostprivileged would be accounting as providing the knowledge necessary for theorganization to have the power to control labor, whether it be the managerial corps or thelowest-echelon worker. For Marxism, a key theme would be the subsumption of laborand a top-down deployment of power to generate economic surplus to benefit thecapitalists who own the means of production.

Through our collaboration, my co-authors have highlighted the importance of theseaforementioned components of Carrons management in my mind. Hence, I will use theremainder 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 atCarron a prototypical environment that anticipated later developments at venues such asthe Springfield Armory and the U.S. transcontinental railroads. However, in the absenceof 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 managerialcontrol system of the modern type. Still, Foucaults disdain of the search for originssuggests that a variety of origins, perhaps more accurately referenced as false starts,furnishes the genealogy for elements in the contemporary world. Perhaps the Carronexperience will qualify here as did the beginnings of double entry bookkeeping in thefourteenth century (Macve, 1996).

We have already seen some aspects of labor control that would impress an economicrationalist who would view them as part of a broader toolkit of managerial techniques. Inparticular, we have seen the articulation of responsibilities from the position of Carronsgeneral 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 bythe miners (GD 58/6/1/12, 1772). We have seen how Caron management, albeit in theabsence of formally articulated labor standards, knew what constituted the work potentialof good operatives. Commencing in July 1785, premiums were paid to colliers whoproduced 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) instructedGascoigne to compel internal and external managers to reduce the number of employeesin their charge to maintain full employment amongst those who remained. Hours ofattendance and punctuality were to be rigidly adhered to.


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The colliers were the operative class upon which the greatest amount of attention wasfocused. In the early years, colliers were brought in from Shropshire because of theshortage and relative inexperience of Scottish miners. The English operatives wereenticed away by the promise of extraordinarily high wages, which Carron managementsought to reduce as the domestic product was trained. Needless to say, given these wagelevels, 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 wellinto the 1780s. When Carron decided to abandon its lease of the Kinnaird coalfield in1781 (GD 58/2/3/1), the biggest issue in the transfer of property back to the lessor wasthe whereabouts of colliers bound to the mine. There was a memorandum entry in 1764about nine miners bound to Thomas Dundas, the owner of Quarole, who were absentfrom 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 bothKinnaird 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 itswage expenditures (citation).

Ultimately, the clearest manifestation of Carrons management to operationalize laborcontrol was the lengthy process in which pay tickets were introduced as a device to insureconformity 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 becauseGascoigne 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 forthe pay of his men in something resembling the butty system, though not referred to assuch (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 thepay 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 (GD58/2/3/1). Unfortunately, the details were not provided in the minute book. It appearsthat had Carrons general manager moved more resolutely in instituting a pay-ticketregime, the company might have been more favorably viewed by scholars of theFoucauldian 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 newawareness of this Marxist theme has heightened my sensitivity to the process by whichthe reduction of labor cost, whether through the slashing of wages or the speeding up ofwork requirements, is detrimental to the well-being of workers. My earlier work onCarron did not raise the issues of how the wage slaves at Carron suffered living standardreductions, 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 thefollowing remarks that founding father Garbett penned to founding father Cadell in July1759, 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 beable 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 willbehoove us not to make the Englishmen jealous or suspicious that we intend to dowithout them as soon as we can, for there will be a Cry against us & we shall notbe able to get Furnace men & Forgemen. (July 14th1759) [ACC 5281, Box 28(1)].

The subsumption of labor was likewise reflected by the rapidly changing attitudeCarrons management had towards its skilled labor force. As early as 1763, the CarronGeneral Court was in the process of reducing the high wages of colliers imported fromShropshire 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 Courtforeshadowed the replacement of workers with apprentices who would be content withlower wages. Having depended upon experienced English workers in its initial struggleto establish the Scottish works, the Carron proprietors seemed anxious to rid themselvesof the high labor cost through the breach of the promises made to them as inducements totrek 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 nowcharged out (GD 58/2/2/1, Resolution #691). Correspondence between partners came toevince the firms policy of replacing costly English labor with cheaper Scottish labor andnever reflected any concern about the displaced workers now left high and dry (GD58/2/1/1, 1763).

In 1770, there was a short-lived, wildcat strike of the Carron miners, many of the detailsof which or the issues involved are not voiced in the archive. All that we know of it wasthat the company had the power to force the colliers back to work but with an additionalstipulation 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 (ACC5381, box 53). The minutes read that the strike was an honourable peace, albeit on thecompanys terms. Once again, the records succeeded admirably in suppressing the voicesof the downtrodden who would not have seconded managements opinion about thesettlement.

POINTS OF REBUTTAL AND CONFLICT

I find it difficult to take issue with Rob and Richard because the Neoclassical view ofbusiness development is so broad, at least in the economic sense, that it subsumes thespecific directions taken by the critical paradigms. Thus, a natural response toRichard, wedded to the importance of labor control above all other methodologies ofmodern management, and to Rob, reciting that the exploitation of labor is part and parcelof the capitalist mentality, would be, why, of course, isnt that economically rational?

Even though I have collaborated previously with Foucauldian scholars, I have never fullycomprehended 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 theBoulton & Watt engineering and material standards of a lower order of significance thanthe labor control standards that once carefully formulated and articulated in 1802, wereinadequately revisited and revised; hence, judged a one-off. Edwards, Boyns, andAnderson (1995) questioned this form of reductionism more eloquently that I, but withthe same lack of fundamental understanding of the Foucauldian argument.4

My other major bone of contention with Foucauldian scholarship is reflected by the titleof Ezzamel, Hoskin, and Macves penetrating review (1990) of Johnson and KaplansRelevance Lost (1987). The article is called in part Managing It All by Numbers. Ibelieve what the authors were here ascribing to Johnson and Kaplan specifically and toeconomic rationalists generally is the belief that, if accounting were to generate accuratenumbers, correct business decisions would follow forthwith. Perhaps what they weresaying 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 subscribeto the mindset that has been attributed to us. Rather, I too am skeptical of the accountingnumbers but am perhaps a bit more optimistic that the errors are not so humongous as todistract entrepreneurs from adopting appropriate courses of action in most instances.More importantly, accounting serves notice on managers and workers alike that theiractions 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 thecloset.

Turning now to a Marxist critique, I am alienated by Robs attribution of everymanagerial 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 hassubmitted all accounting related institutions to a Marxist scrutiny, ranging from feudalism(Bryer, 1994) to the FASBs conceptual framework (Bryer, 1999). However, he has nowgone 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 areevidence of Marxian theories of capitalism and capitalists any more than they arereflections of Adam Smiths (1776) conceptualization of the invisible hand pushingentrepreneurs in the direction of their economic self-interest:

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

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


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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 economicrationalist context by theorists and historians. Nobody ever accused Frederick Taylor ofbeing 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), inanalyzing the coming of the BIR, maintained that the capital for industrial enterprise wasobtained by driving lower-class living standards down to the subsistence level.

Robs commentary on Carron is quite concerned with the change in the co-partnershiparrangement from a socialized capital pre-1786 to a more family-oriented ownershipunder the Staintons and the Dawsons in later years. He attributes the deterioration of theaccounting, particularly the financial reporting, to this de-socializing transition. In myview, there are several questions that need to be answered. First, was the earlypartnership really that harmonious? Garbett complained to Cadell, Jr. in 1767 about thelack of assisting partners willing to take up residence at Carron. There seemed to be asurfeit 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 suitbrought 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 inthe early days. One wonders if the capitalist mentality and the control of the valorizationprocess which Marxist ideology stresses as emanating from socialized capital would havesaved 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 withthe capitalist mentality to capture the valorization process and, hence, to subsume labor. Ihave my doubts as to whether history bears out this rather conspiratorial view oftechnological advance. Whilst it is true that necessity is the mother of invention, Iwould suggest alternatively that invention is frequently fortuitous but that entrepreneursunder appropriate circumstances are able to harness technology to reduce labor costs andthereby 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 comingof the BIR. However, I would be concerned that the theories espoused in it were onlytheory, and that the evidence does not exist to assume that much of it was actually putinto practice. Both the Neoclassical and the Foucauldian views of the Carronphenomenon, especially its accounting methodology, would be tempered by the concernthat, at such an early time in the BIR, it was a one-off, which was not even sustained bythe 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 thesimple and general economic rationalist view that accounting technologies illustrate aform of social Darwinism whereby practices that are fit for purpose are tried out inchanging conditions tested in the fiery furnace of business competition and, ifsuccessful, become more widely disseminated and survive until conditions change oreven more efficient techniques evolve?

The Marxists say that to focus merely on the techniques of accounting, while cruciallyimportant,6fails to reveal the underlying changes in the social relations of production that

industrial capitalism (complemented by the increasing socialization of the ownerscapital) brought about; and that the accounting changes were, at the least assisting, and

5 The label is Lofts (1995): I adopt it for convenience rather than through commitment to defendingFoucault 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 beimportant (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 weighthe would put on them. In particular ideal carries no approbation: it merely means abstract: and whileno-one could deny that accounting recapitulates the process of production this has nothing to do withcapitalism as such: Marx continues the sentence by saying that it becomes ever more necessary the morethe process takes place on a social scale and loses its purely individual character; it is thus more necessaryin capitalist production than in the fragmented production of handicraftsmen and peasants, more necessaryin communal production than in capitalist(1978:212emphasis added). He is simply not interested in howaccounting (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, inthe context of analysing the intricacies of the labour theory of value, and on the basis of his analysis of thefunction book-keeping serves in both pre-capitalist and capitalist economies, to determine whether or not itis productive, i.e. whether the costs incurred for book-keeping are transferred into the value of thecommodities produced. Marx here determines that (like other non-production overheads) they are not: theyare a deduction from the total yield (1978, p.212). Marxs view on the pre-eminent importance of book-keeping 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 properfunctioning, of the first phaseof communist society. Allcitizens are transformed into hired employees of the

state, which consists of the armed workers. All citizens become employees and workers of a singlecountrywide state "syndicate". All that is required is that they should work equally, do their proper share ofwork, and get equal pay; the accounting and control necessary for this have been simplifiedby capitalism tothe utmost and reduced to the extraordinarily simple operationswhich any literate person can performof supervising and recording, knowledge of the four rules of arithmetic, and issuing appropriate receipts.When the majorityof the people begin independently and everywhere to keep such accounts and exercisesuch 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 therewill be no getting away from it, there will be "nowhere to go". The whole of society will have become asingle office and a single factory, with equality of labor and pay. I conclude that there is (and can be) noMarxist theory of capitalist accounting and his own silence on the issue speaks volumes. Of courseFoucault 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 justbusiness success. But that raises further questions. Marxs explanatory focus wasprimarily on modern Britain in the 19thcentury when Britain, in the second stage of theBIR, 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 importantrevolution than the various stages of the industrial revolution was the managerialrevolution the revolution whereby giant businesses could be created withorganizational forms (ultimately perfected in the line and staff organization of the Mform divisional organization (Roberts, 2004) that comprised interrelated layers ofmanagerial hierarchy, themselves accountable to increasingly anonymous and atomizedcapital and other external stakeholders, who in turn found themselves operating withintheir own structural relays.7

Can we determine on the basis of accounting and other archival evidence the correctnessof these rival interpretations of the crucial historical discontinuities and their significancein 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 theSpringfield Armory and the early railroads, and in particular the influence there of thecadre of top graduates of the US Military Academy (at West Point, NY), after it hadbeen 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 non-military governmental (federal and state) and civilian fields. And here Foucault entersthe picture: for the new educational disciplines (both in the divisions of knowledgeitself and through the new pedagogical techniques that changed how students learned tolearn and the structures within which they learned) have been seen as exemplars of thenew forms of control that operate through new knowledge and through a newcalculability (calculable persons in calculable spaces, Miller and OLeary, 1987) whichis primarily grammatocentric (combining the practices of writing, examining andgrading), and thereby become internalized and penetrate the soft fibres of the brain.For Foucault, these new internalized systems of controlin contrast to the earlierregimes that operated primarily through publicly paraded forms of glory and punishment

inflicted on the bodyquietly order us about (quoted by Megill, 1979). In themanagement sphere, they are seen as ways of creating new performance andaccountability measures that are directed, not so much at the traditional objects ofaccounting, such as the honesty of and the results achieved by identified individualaccountable stewards (Macve, 2002), but now at statistical populations of employees(from workers to managers) within large structures, where it is their performance anddeviation from norms that makes them visible both to themselves and to those above,around and below themand primarily through the accounts.

7Chandler finds the origins of this divisional form of organization on the early US railroads. For a critiqueof his explanation for this breakthrough see e.g. Hoskin & Macve, 2005.


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This grammatocentric control initially took a variety of forms, which ultimatelycoalesced in the late 19th century and early 20th century in large organisations such asDuPont in the US which famously operated by its DuPont formula, i.e. calculatingReturn on Capital Employed (ROCE) across its divisions and analysing the drivers ofthis 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 significantsingle-unit business organization) of detailed time standards for piece working and piece-rates (based on extensive observation and measurement) alongside the enforcement forthe first time of a standard-length working day.9

On the early-mid 19th century US railroads (which were not primarily manufacturingorganizations but which Chandler identified as the first significant multi-unitorganizations) further West Point graduates (and in particular Herman Haupt on the

Pennsylvania Railroad from 1849 to 1856 (Hoskin & Macve, 2005)) introducedorganizational specifications and detailed accounting and costing routines that enabledprecise and continuous planning and control at all levels from the operating to thestrategic.

However, this Foucauldian explanation leaves both a theoretical and an evidentialchallenge. Why did these breakthroughs occur primarily in the US in the early/mid-nineteenth century, well after the BIR had taken hold with unparalleled economicsuccess? And does the detailed accounting and other archival evidence that survivesactually bear out this story? On the first dimension, the Foucauldians trace the influencesfurther 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 colePolytechnique and their redefinition of specialist knowledge (in particular inmathematics 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 Thayerselite West Point, which was modelled on the cole Polytechnique. The theoreticalargument here is that the new accounting and related organizational structures are not aphenomenon driven primarily by the imperatives of changing business needs (whether atthe economic rationalist level of improving efficient decision-making and

8i.e. ROCE = Profit/Capital Employed = [Sales / Capital Employed * Profit/ Sales]. This primary analysiscan 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 rationaleconomic decision-making does not necessarily require overall maximisation of DuPonts ROCE (i.e. it isthe marginal ROCE that must be at least adequate even if it reduces the overall average), improvement isachieved by maximising the marginal addition to each of the sub-ratios, so that ceteris paribusan increasein sales is advantageous provided the marginal rate of profit on sales remains adequate. It is a paradox ofMarxs formula (ROCE = surplus value/productive wages * productive wages/constant capital) that itrequires capitalists to maximise the marginal contribution to the first sub-ratio, but minimisethe marginalcontribution to the second sub-ratio (given that it is an increase in the denominator (fixed capital) that isrelentlessly to be pursued if the power of labour in social relations is to be weakened.)]9That 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 Foucauldianaccounting discipline is set out at length in Hoskin & Macve (2000). The significance of labour practicessuch 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 realizingthe capitalist aim of maximising ROCE by controlling the valorization process throughsubsumption of labour and the transformation of labour into capital, so that labour nolonger controls the means of production). To be sure, the Foucauldians see the newpractices and emerging discourses as having as their residue a further vital economictransformation (Chandlers rise of the visible hand of administrative coordinationincreasingly replacing the invisible hand of Smithian competition) and a transformationof social relations within new webs of control: but while the potential economic andsocial transformations form part of the array of conditions of possibility within whichthe new calculabilities and accountabilities have perhaps their most dramatic effect, themotivations and practices themselves originate primarily from outside the economic andprofit-pursuing sphere.10 There is a cultural change not just a change in accountingtechnology.11

As to the evidential challenge, clearly the Foucauldians story is at risk of beingundermined if the forms and uses of accounting and of organizational structuring andcontrol that they see as belonging particularly to the post-West Point US can be foundearlier in the BIR (Hoskin & Macve, 2000). This has been a prime motivation for earliercollaborative ventures with Fleischman (as economic rationalist) into the UK archivesof 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 thesilencing of a potential alternative third voice: that focussing on the transformation ofthe labour process and its effect on the social relations of production which is why wesee as so important this new venture to approach the Carron story and archive from allthree 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 thearchival evidence in the spirit of Popperian falsification: can evidence be found there ofthe crucial developments towards the latest stage of the modernity of accounting andorganizational control that the Foucauldians have maintained occurred only much laterand 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 inwhich labour (and management too) is treated as itself a machine that internalises the productivity normsand disciplines itself beyond the economic sphere to create the coordinated time and productivitymanagement of the modern organization11 Corresponding to Fleischmans point in this regard, one might distinguish vulgar from many moremodern Marxists by whether they emphasise the social relations of production or the socialrelations of

production.12This 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 isconsistentwith Marxs theory of the BIR (which does not ipso factoexclude it from being consistent witheither economic rationalist or Foucauldian or indeed any other possible approaches and therefore cannotprove Marxs theoryto learn anything from the archive one needs to know how it would differunderMarxs theory).


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My role here therefore is not so much to comment on what can be found in the way ofsophisticated accounting and control mechanisms at Carron and there is a trulyimpressive amount but to ask what is still missing in the archival evidence and wherethere are still silences. My co-authors set out many of the details of what has been foundso 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 businessmenin the pursuit of profit; or alternatively that it demonstrates in action the Marxist theory ofthe way that the driving capitalist mentality found its expression through accountingplanning and control (particularly via control of the valorization process through trackingROCE and through the subsumption of labour) and thereby represents an early andextraordinarily powerful exemplar to illustrate Marxs theory of how this historical stageof industrial capitalism changed economic and social relations both between and withinthe spheres of labour and capital, as well as generating the very technologicalinnovations (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 theysee written in the archives, but I interpret it differently. For me Carron is indeed anexciting and impressive archive, which opens our eyes yet further to the scale oforganizational and accounting treatment achieved almost 150 years before the firstserious English-language texts on cost and management accounting. However, amid theenthusiasm such a rich archive must inspire, it is important to remember that what is stillnot 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 inthe BIR. That has been the major discovery made by the economic rationalist historianssuch as Fleischman and his colleagues, and J.R. Edwards and his colleagues, in recentyears. Businessmen and industrialists did, inter alia, make careful cost calculations anddid keep careful and accurate accounting records, often by DEB, that tracked theperformance of their various operations.

In this regard, Carron is particularly interesting. It is a very early multi-unitoperationa vertically integrated industrial complex of mining, forestry, forging,manufacture and salesoperating on a number of sites (i.e. the mines and forests as well

13The sad state of many of the surviving Carron books of account in the National Archives of Scotlandmeans that further research must await the outcome of the valiant efforts currently being made by theconservators to stabilize and restore them wherever possible.14I 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 ofchanges in production technology, organization, finance and government policy in different spheres, andquestions 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 becomplete, given the accidents of survival and preservation. Rather I shall focus on issues of interpretationand overinterpretation of what is there, and of the silences that must be heard even when the archiveappears 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 hadproblems of managerial and labour control that went beyond what could be seen by themasters eye;16and the need for action (and accountability) at a distance was reinforcedby the absence of most of the partners, who were based in Birmingham and elsewherealong way away.

It is in this context that we must view Carrons accounting system. On the basis of thearchival evidence we have been able to examine to date this included a full DEB set ofbooks17 from an early date (possibly from even before 1764 when we have the firstsurviving Day Book (i.e. waste book)18although the system was successively improvedas business expanded (e.g., again by Gascoigne from 1769). The DEB was integratedwith 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 beplaced on such integrated results e.g. Hoskin & Macve (1996) have argued with regardto the US Lowell mills in 1848, and based on the firmly expressed attitude of the millagent in correspondence, that the existence of fully analysed profits and losses overindividual mills and of detailed, precise calculations of the unit costs of production withinthe DEB ledgers reflect more of a mercantile mentality of accountability to distantowners (in Boston) for every last penny spent, and the need for checks on the accuracy ofcalculations, rather than a concern with production and pricing decisions. One cannottake 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 eachsett of Men in the mines), some perhaps more ad hoc to be found in the archives ofcorrespondence e.g., between Cadell senior (in Birmingham) and Cadell junior (partnerin residence at Carron in the early years) or from Garbett (also in Birmingham),20suchas budgets; other ad hoc reports; estimates for pricing, make or buy etc.; departmentalperformance reporting; labour control. Fleischman and Parker originally drew attentionto these (1990; 1991; 1997) and both Dick and Rob have now expanded on them in thispaper 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: andthough it was planned to reduce labour considerably, William Cadell said when things are reduced to theirnarrowest 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 NASarchivists) Macve, 2005).18 Resolution #60 of the General Court of 1763 provided for the bookkeeping systems overhaul (GD58/2/1/1).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 detailedcalculation from, and therefore integrable with, the DEB accounting balances. Such work probably needsto await the restoration of the relevant Day Books (i.e. Waste Books (Macve, 2005))restoration whichitself may now prove to be impossible.20 The reciprocal archive in Birmingham still awaits investigation.


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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 wasoverambitious (perhaps due to Roebucks scientific enthusiasm outstripping his businessacumen) and the resulting cost burden threatened frequently to bankrupt Carron until itwas rescued by the Carronade.21 Moreover, the business model for the establishment ofCarron was based on competitive cost advantage in respect both of labour costs (cheapScots labour to replace the initial expensive English labour) and of transport costs (theaccess to the East Coast sea routes, similar to Newcastles advantage in the coalindustry). In a business culture where it seems to have been common to sharetechnological and management information with competitors, the partners were alsoanxious to know if their business was measuring up on interfirm comparison of costs ofdifferent activities and products.

What does the Marxist interpretation add to this economic rationalist analysis and

evidence gathering of how sensible business people approached necessary businessproblems? Before we begin we must remember that Marx himself thought that capitalistbusinessmen (and the political economists such as Smith and the state institutions andmilieu that favoured them) were suffering from a profound illusion as to the source ofprofit which it took Marxs own analysis to be the first to reveal and which oncerevealed called for a radical, indeed revolutionary, social, economic and political agenda(praxis).22 Thus in interpreting Robs analysis we have to remember that whenever Robcalls a businessman a good Marxist he means (given the illusion) that he is athoroughgoing 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 ofaccounting is the focus on the ROCE. Rob explains a Marxist analysis of economicfactors that drive the capitalists maximisation of ROCE23 and how the capitalist isaccountable 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 thevalorization process through subsumption of labour and to find ways to increase theproductivity of labour through improved technological advance, which in turnconsolidates the ever-growing proportion of capital versus labour in the factors ofproduction and reinforces the changes in social relations whereby capital confrontslabour. The corollaries of this theory are first that capitalism creates technologicaladvance (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 facefinancial crises, an early example being Wedgwood (Hopwood, 1987)22Recent reinterpretations have tended to focus on emphasising how well Marx analysed the dynamic andenduring strengths of capitalism rather than on how it should, could or perhaps inevitably will beoverthrown (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 problemthat 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).


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without which the capitalist cannot either measure the cost of capital being used orcorrectly state the amount of capital remaining employed (i.e. net of accumulateddepreciation). Integrated DEB is also needed to track accurately progress through theindividual circuits of capital.

This approach, as Fleischman observes, helps us to focus on important issues that aregenerally absent from rational management history and texts, namely the realities of thehistory 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 extentof perks such as free coal, housing etc., at Carron25 elsewhere coupled with the abusesof trucking/Tommy shops) and the conversion of labour power into actual labourand productivity (length of the working day; intensity of work; substitution of machineryfor labour etc.).

Valuable though these insights are, my major critique must be that Rob hasoverintepreted the Carron archive, whereby the fully fledged capitalist mentality,exemplified as he sees it through its accounting system, is made to appear to haveemerged in a fully developed and modern state, like Athena emerging fully-formedfrom the head of Zeus. Carrons accounting is indeed impressive extremelyimpressive for its time. But it remains of its time, with much significant developmentstill to come.26

POINTS OF REBUTTAL AND CONFLICT

First, the economic rationalist view. For the reasons given above, I do not so muchdisagree with the economic rationalist interpretation as find it incomplete. It is nottherefore my purpose to dispute what Fleishman sees in the Carron archive but to urgecaution in interpreting what its purpose was. Any history of financial and managementaccounting has to confront the Coase (1938) argument (reinforced e.g. by Yamey, 1949and Wells, 1978) that the value of routine, ex post, full-costing accounting isnecessarily of extremely limited value for business decision making and control. DEBmay systematise the routine and reduce the scope for error and fraud: but it does not ipsofacto 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 thannothing:27and in the context of Carron where action at a distance was necessary, therewas in addition a natural inclination on the part of those who wished to justify theirremaining absent to rationalise their position by arguing that business issues needing theirattention could be made transparent through the accounts and other reports. However,

25 As also in the Newcastle and Durham mines (Fleischman & Macve, 2002)26 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 adoptingappropriate courses of action. This second-best argument is developed further in Fleischman & Macve,2002.


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as Fleischman has observed elsewhere (e.g., Fleischman and Parker, 1997), there areseveral 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 theShort Viewfor for strict discipline and economy in the use of capital in the presentsituation of the Company). How useful it was was a cost/benefit issue, but not onewhere it is easy to specify ex ante what the costs and benefits would be: hence Robs andmy concern that the economic rationalist argument is in danger of tautology accounting routines survive because they are best in the circumstances, but we can onlyinfer that they are best because they survive. It is in this sense only that economicrationalism is such a general explanation that it can embrace both Marxism andFoucauldianismbut it is then so general that it explains nothing at all.

From the Foucauldian perspective accountings inherent limitation as a tool ofentrepreneurial decision-making and control is why its offer of objectification

becomes fully accepted only when it becomes one of the central routines that arenecessary to bind together the large, diffuse, bureaucratic organizations of latermanagerial capitalism (e.g. Kay, 1993). But Development of accounting routines andalso of new conventions that become accepted as better ways of measuring results andmanagerial performance go hand in hand (e.g. Yamey, 1977). But we do not find this yetat 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 neededaccurate and objective measures of ROCE and of costs such as depreciation (includingproper 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 couldnot find it in accounting, whether by DEB or otherwise.28 Inspection of the Carronarchive reinforces this view. While the partners do make reference to hopes e.g. ofachieving at least 10% return on the capital laid out there is no evidence of systematicdepreciation charges to arrive at the periodic capital employed.29 Even when charges forwear and tear are introduced and debited to production accounts, they are not used towrite down assets or establish depreciation provisions, but are instead transferred fromgeneral charges.30 Even following the Short View in 1769 (which Bryer (2005d)

28This argument is expanded in Macve, 1999: cf. Bryers response (Bryer, 1999b).29 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 toamount 38599.4.3.Qua. Coaliery. advance to this date including Interest 3152. 11.8Coalworks: Kinnd. Coaly. advance to this date including Interest 12330. 17.2.30GD 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 July1767. year as p W:B.3465

Blast Furnaces No. 1&2 90 a month 540Ditto No.3 30 180Air Furnaces 14 84Great Forge 18 108Plating Forge 9 54


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surely correctly attributes to Gascoigne), while that incoming new broom identifies byhow much Carrons capital assets are overstated, we find subsequently that, far fromtaking a big bath as new CEOs are nowadays wont to do, Gascoigne allows theaccumulated losses to be capitalized again (perhaps to preserve the partners statedcapitals on which they receive their contractual 5%pa).31

The manipulations of reserves in the Stainton-Dawson period Rob attributes to adesocialization 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 WorldWar): it was just that the actors and families changed. And the link betweensocialization of capital and transparent accountinghowever desirable for stimulationof public saving and investment as trumpeted by modern securities regulators andaccounting standard settersis historically tenuous. The most famous accounting fraudsand 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/21stcentury America that Enron and now Shell have been misrepresentingtheir profits and capital.

In summary there is no evidence from the Carron archive that the businesss owners andmangers used their accounts to calculate, or hold anyone accountable for, the achievedROCE. It is equally ahistorical to identify them as calculating residual income.32 Truethey recognised the need to attempt to exceed the 5% return on their capital that was part

Iron at the mill 10 60

Cast Iron 6 36Nailery 3 18Kinnaird Coaliery 4..3..4 25Qua: Coaliery 4..3..4 25

188..6..8 1130

Qua: Coaliery Dr. to Interest 6 months on advanceat 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 fromBlast furnaces to Air Furnaces of c 12k at 30/6/77; thereafter BFs creep up again by c. 3k per half yeartill back at 61k on 30.6.78, and c. 63k by 30.6.80 [Total 114k]). Then Branch 1 Blast Furnaces andDependancies written down from c.63k to 43k at 31.12.80 and Air Furnaces from c17k to 10k. (InStock Book 5 these write-offs appear in the asset accounts at 1 Jul 1780 and form part of a total writtenoff to P&L of 43358.15.6 (ref 169) at that date.) This might perhaps represent a big bath by Staintonafter taking over from Gascoigne.Branch and Miscellaneous Articles Buildings are written down from 16k since beginning to 9.6k at30/6/83. 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 anaccurate 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:33but notions of exceeding the opportunity cost ofcapital 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 beconcerned to calculate how increasing the proportion of machine capital in productionwould serve further to subsume labour.35 However, we see no such calculations atCarron. Where we do see calculations at this period of relative productivity versusrelative cost (for example in the Newcastle mines), they are of new machines versusexisting horses, not men (Fleischman & Macve, 2002).36

We must also consider the 1769 Short View, which Rob regards as setting out clearlythe capitalist mentality of management.37 To be sure, it calls for much tighter cost controland 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-bedisplacer of the incumbent managing (Cadell junior) was lived up to by Gascoigne whenhe 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 ofmodern managerial capitalism. He was advocating centralisation (in himself) notdelegation. He saw Carrons problem to be the lack of central control and he was

33Smith (1776, Book I, Chapter 9) remarks that while the maximum legal rate of interest had been fixed at5% in Queen Annes reign (i.e. in 1714), since the time of Queen Anne, five per cent. seems to have beenrather above than below the market rate. He adds: In Scotland, though the legal rate of interest is the sameas in England, the market rate is rather higher. People of the best credit there seldom borrow under five percentThere 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 beenobserved, are lower in Scotland than in England. The country, too, is not only much poorer but the steps bywhich it advances to a better condition, for it is evidently advancing, seem to be much slower and moretardy.34 e.g. the Roman agronomist Columellas notorious calculation of the profitability of investment inviticulture (Macve, 1985).35 As Fleischman argues here, such substitution need not exhibit any more than a neoclassical profit-maximising 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 individualminers and less opportunity for managerial surveillance of the mining gangs or (later) substitution ofmachines 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 longwallmining being preferable at Carron would Bryer be able to demonstrate the overriding force of thecompulsion to subsume labourwithout that the decision cannot be distinguished from simple economicrationalist opportunism through efficiency/profit maximisation.37 While it may be seen as presaging an understanding of Marxs circuits of capital it is closer in itsidentification 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 andpreparing that rude produce for immediate use and consumption; or, thirdly, in transporting either the rudeor manufactured produce from the places where they abound to those where they are wanted; or, lastly, individing particular portions of either into such small parcels as suit the occasional demands of those whowant them. A vertically integrated operation such as Carron gives us an early example of combining allthese employments of capital.


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arguing that everything should flow from the mainspring (to be himself), not fordelineating lines of authority and accountability down and through the organization.38

Rob (following Armstrong, 1994) challenges the Foucauldians for failing to recognize thedistinction between action controls (through procedures and practices) and resultscontrols like those offered by DEB and ROCE. But this is where the Foucauldianaccounting historians have already gone beyond Foucault: following the analogy of theeducational development of the written examination, as implemented at West Point, whatbegin as supplementary practices and action controls become seen as and internalized astotalised objective performance measures which provide results controls of the mostpowerful kind (e.g. Hoskin & Macve, 1994) ) and which have to be continually refined aseach 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 businessand 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 exmachinait appears no amount of sophisticated bookkeeping and accounting would haverescued Carron. Rob argues here that this invention was itself the product of thecapitalist mentality and the drive to substitute machinery for labour. However, whileeconomic (and many other) conditions are crucial for the adoption and dissemination ofnew technologies, and indeed for the amount of R&D effort that goes into exploringthem, however much one may want an invention, and for whatever reason, there cannever be any guarantee that it will work, until it actually does. In history invention mustbe, 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 adequacyof theoretical and historical explanations. For the reasons given, I find neither theeconomic rationalist nor the Marxist explanations of the power of modern accounting andits genesis to be adequate. In the Marxist case the fundamental argument made by Marxthat businessmen (and everyone else) were suffering from an illusion as to the true sourceand nature of capitalist profit-making makes it that much harder to know what one wouldexpect 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 theevidence that Rob sees there as supporting his Marxist theory, or sufficient modernity tosupplant 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 Americanrailroads 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 byrequiring them to hold shares (as e.g. did Ambrose Tibbats); it is not clear that below that level themanagers were much more elevated than foremen or butty-men.39Whether or not they had an inchoate perception of the capitalist imperative to enhance extraction of

smith, marx or foucault in understanding the early british industrial revolution? a re-examination...

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