Religion, capitalism and the rise of double-entry bookkeeping

Abstract

Max Weber and Werner Sombart inspired a famous debate about the following problem: what should be the (historical) basis nowadays for understanding the relationship between religion, capitalism and double-entry bookkeeping (DEB)? In their view DEB practically invented capitalism thanks to its religious basis. Recently, the debate was renewed by claiming that Roman Catholicism played this pivotal role. The article deals with all three main concepts in the relationship. It redefines capitalism, gives DEB its proper place in the past and present, and denies that Roman Catholicism as a belief system had something to do with DEB and capitalism. As an alternative, it proposes a new theoretical framework based on a modernization of the age-old Aristotelean Oikos versus Market thought, which was revived in Weber's Evolution der Hausgemeinschaft.

Keywords:

• accounting history
• business history
• capitalism
• double-entry bookkeeping
• religion
• oikos-market theory
• Max Weber

Acknowledgements

I thank the editor, John Richard Edwards, for his wise patience and, in particular, the two anonymous peer-reviewers for their extensive, critical and highly stimulating comments on an earlier draft of this text. I thank also Alison Fischer who corrected my ‘international English’.

Notes

1. It seems as if the subject has become ‘hot’ since several other related publications are published such as the representative of an American sect Rodney Stark (2006), which is not worth mentioning thanks to its purely propagandistic aims. His thesis is, that only devout Christians (medieval monks) brought us capitalism and the scientific revolution that powered it. The European Roman Catholicism has a different opinion. In May 2007, Pope Benedict XVI visited Brazil to fight its main competitor, American Protestantism, but condemning time and again ‘capitalism and Marxism as systems that marginalize God’. A variant of all this is the thesis that capitalism is a religion, see Ching-Wah Yip (2005). However, a quick look in relevant scientific literature presents also an ambiguous picture: Rosenberg and Birdzell (1986) repeated largely Weber even inclusive the DEB and Calvinism stories (ch. 4); Fischer (1996) is informative, but does not mention DEB, Weber, etc.; Braudel (1982, vol. 2, 572 ff.) is critical about all those ‘who overstep the mark’ in their lyricism about DEB; Muller (2002) is relevant for Weber, Sombart and religion, but not for DEB.

2. Here, of course, I cannot go into detail, while pointing to the usual definitions of fixed, circulating capital and, the day-to-day name of some stock of money (in whatever form) as capital. Capitalist is first used in 1792 for somebody ‘who has capital available for employment in reproductive enterprises’ and capitalism is used for the first time in 1854 (Oxford English Dictionary). It's clear, however, that a phenomenon can exist before there is a name for it. The new development was that earlier features with their own history were combined into a brand new framework. Apart from a few conceptual problems, Sombart listed its qualities rather appropriately and they are reproduced by Chiapello (2007, 278, 279). But it is, for instance, never proved how ‘a spirit … created economic organization’. Directly referring to Max Weber, the economic historian Joel Mokyr even acknowledged that there were numerous precedents, but ‘that Industrial Revolution meant the ever-growing physical separation of the unit of consumption (the household) from the unit of production (the plant)’ (Mokyr 2002, 120; see also Boltanski and Chiapello 2005, 154 ff.). About this separation see below.

3. Wirtschaft und Gesellschaft is referred to in this article as W&G, with the English translation Economy and Society as E&S.

4. See Derks (1989, 282–97). Weber's conservatism can be proved, because he defends the oikoidal position in most principal matters (see below). His liberal image in the USA is established by Talcott Parsons, Edward Shills, Reinhard Bendix a. o. who created Max Weber erroneously as an anti-Marx (Marx was a typical c. p. critic/analyst); in Germany in a reaction upon the ‘Roaring Sixties’, the same image is established in the writings of Wolfgang Schluchter, Guenther Roth, or Wolfgang Mommsen, which revived and strengthened the Parsons-tradition in the USA.

5. The criticism of supporters of this radical liberalism and free-trade since Richard Cobden (Corn laws, etc.) was concentrated in Germany since Friedrich List and supported by a large part of the conservative feudal lords with an extensive grain trade, Marxists of all corners like Lasalle, ‘normal’ conservatives (including Bismarck) who feared for a total undermining of the society through free and uncontrollable trade. In England used Disraeli ‘Manchester capitalism’ in a pejorative sense. At the moment, the term ‘Manchester–Liberalism’ is used as synonymous for ‘predator capitalism’ (‘Raubtierkapitalismus’). Anti-Semitic circles used it as synonymous for ‘Jewish capitalism’ since about 1870 (Doering 2004).

6. There are, of course, many kinds of monopolies also in earlier times. Bergier (1979, 123 ff.) wrote interestingly about the differences of the Italian and German business organisations of the fifteenth and sixteenth centuries. He concluded, first, that the Italian firms were organised in a decentralised way (main firm + autonomous branches), while the German firms were centralised. Next, as a structural innovation, the Germans emphatically formed cartels and monopolies. A few were also known in Italy (such as the monopoly of papal alum held by the Medici), but in Germany they became a structural element in the hands of merchant bankers: ‘a new concept in business strategy: they expressed the capitalist mentality of their members’. These monopolies were the result of deals between the state (emperor) and privileged bankers. Bergier also mentions that these monopolies were ‘the object of violent criticism and of suits … conducted by business circles … which had not absorbed the modern capitalist spirit’. The undermining of the market by means of monopolies, was felt very well as an aberration. That this should be typical for a capitalist spirit is only true for capitalism as defined in the main text. See also Weber W&G, 648; E&S, 1102 in which Weber showed a better view on the anti-market effects of monopolies in the oikoidal patrimonialism as Bergier. More than elsewhere, I suppose, in the German countries this relation state-capital-monopoly or state corporatism was practiced. For the eighteenth century see recently. Ogilvie (1997) or Kriedte (2007); for the twentieth century everybody knows the names of Krupp, Thyssen, Quandt, Flick and so on.

7. The oikos-market mechanism is analysed for the first time in my thesis (Derks 1986, 42–101, 413–56, 479–88, 640–54). It is followed by several other studies. See www.hderks.dds.nl. To study Weber's oikoidal analyses one can best start with chapter three of Weber, W&G, 212–33 or the chapters three and four of E&S, 356–85. The translation in the American edition is not very well (see below); for further study it is unavoidable to use the German original. One of the best introductions to Max Weber's theories and ambiguous language is still Bader et al. (1976). For the next discussion see his pp. 261–308.

8. Strongly inspired by Rodbertus (ca. 1850) and Bücher (ca. 1890), Weber, Polanyi, Finley and many others, continued until today with a debate about the Ancient Economy known as oikos-controversy. It is a pity that only classical historians with their supporters are interested in it. See criticisms on Weber/Sombart in Derks (1995, 193–96) and on Finley and supporters in Derks (2002, 701–35). For accounting practices in Roman times see Minaud (2005) who discusses Finley's approach rather superficial.

9. That Weber and Sombart often disagreed is demonstrated in a quarrel about exactly the interpretation of Alberti's ‘Famiglia’. See the very long note in Weber's well-known essay about the Protestant ethic and the spirit of capitalism (Weber 1934, vol. 1, 38–41). One is confronted here also with all the given dichotomies in a comparison between the Catholic Alberti and the Puritan Benjamin Franklin. Boltanski and Chiapello (2005, 59) state that their view of a ‘spirit of capitalism’ is ‘consistent with that of Werner Sombart or Max Weber. Sombart refers to Alberti ‘family government’. Weber supplies a preliminary description of the spirit of capitalism by citing … Franklin’. Apparently ‘business’ and ‘family economy’ are for them identical. In Idem (p. 100 note 4), however, they tell about differences between Sombart and Weber concerning Alberti.

10. For Weber's technical casuistry about Haushalten-Erwerben see Weber's W&G, 46–62 and E&S, 85–114. For Sombart's treatment of the Bedarfsdeckungsprinzip see Sombart, 1919, vol. 1, 49 ff., 63 ff, 183 ff. and for his Erwerbsprinzip, Sombart, 1919, vol. 2, 12 ff. 102 ff, 119 ff. etc.

11. Weber, W&G, 229. In English: ‘The capitalist enterprise, created by the household’ (E&S, 379).

12. Rechenhaftigkeit is a word which one cannot easily find in a present German dictionary. ‘Haft’ means among others ‘arrest’; somebody can be ‘haftbar’, in which case he has to give security for another, is ‘accountable’. See for the following Weber, W&G: p. 41. In E&S one translates ‘economic calculations’ although it concerns here the general ability to reckon: E&S, 79; Weber, W&G, 225, 227–30. It is already better translated with ‘sense of calculation’, E&S, 374, 376–81.

13. Rentabilität like rentability concerns the measured result of the relationship between the net-profit (Reingewinn) and the invested or original capital of a venture: a ratio of profit to capital, therefore, and not the profit itself. The other concept discussed here, capital account, is normally seen as part of the balance of payments of a country, the net result of public and private international investments flowing in/out a country. For a private firm it concerns something like an account stating the amount of funds and assets invested by the owner(s) or stockholders, including retained earnings. The translators of E&S (in this part Talcott Parsons himself) do not inform readers about the typical German background or ideological intentions of these concepts.

14. What is left from that debate is not only Aho's essay, but are also profound discussions about the tiniest details of Weber's biography by life-long Weber researchers like Wolfgang Schluchter, Günther Roth, etc. Furthermore, there are hesitating considerations of desperate theologians about the dark future of Christianity and Christian culture as given in Schluchter and Graf (2005). Here you can find near to nothing about capitalism, nor about a capitalist production or the Haushalt-Erwerb dichotomy, let alone about DEB, while it was a 100-year commemoration of the publication of Weber's Geist des modernen Kapitalismus (1904–5) written by the best German Weber-experts to date.

15. Yamey gave a sharp criticism of an earlier article of Aho (Yamey 2005). My comments below follow a different argument, but I agree with Yamey's views. The article reviewed by him is largely similar to Aho's chapter 7 in his new book; it concerns the alleged rhetorical and aesthetic qualities of DEB. To save space, therefore, it is not necessary to deal with that chapter again.

16. The author is inaccurate and clearly unfamiliar with foreign languages: he seldom attaches an ‘ä’ where it is necessary in German language (Aho 2005, 9, 52, etc.); the Latin formula on p. 42 must be ego te absolvo; the citation from Berman's book on p. 84 is at least on three places wrong; the title of Simon Stevin's book is nothing but Verrechting van Domeine (p. 90); Aho mentions Alberti's work Del Governo della Famiglia which seems to be written in 1443 in stead of about ten years earlier (pp. 6,7), etc.

17. There is no reason to underestimate the literacy of the merchants as Sombart did (Roover 1971, 89).

18. I do not discuss this last date: it concerns the independence of most colonial countries and the subsequent rise of non-Western countries and non-Western capitalism (Korea, Vietnam, Iraq, rise of China and India, etc.).

19. Highly interesting is Michael McKeon (2005) who from p. 7 onwards uses the polis-oikos relationship and Aristotelian theory to develop a much more complex household concept and practice including the state as family/household. This voluminous study (nearly 1,000 pp.) concerns mainly the English seventeenth and eighteenth centuries.