History of accounting shows what happens when numbers are ignored
From Louis XIV to Lehman Brothers, history serves up lessons on the need to balance the books, yet grand visions all too often get in the way
Even among practitioners of the much-mocked profession, a brand new book about the history of accountancy is unlikely to stir much interest - yet it should, because it is really interesting.
Jacob Soll's The Reckoning: Financial Accountability and the Making and Breaking of Nations does what it says on the tin. In other words, he shows the crucial role played by the development of accountancy in the management and indeed mismanagement of government and businesses.
In Hong Kong, we seem to be going backwards in the process of achieving accountability
Soll points to Luca Pacioli, a Franciscan friar and mathematician, as the father of the first system of double-entry accounting (for those at the back of the class, this simply means the process of comparing income and expenditure in a single set of accounts).
In 1494, Pacioli elaborated the benefits of this form of accounting and provided a systematic method of implementing it, although leading European merchants had in effect been practising similar accounting practices for almost two centuries.
Jean-Baptiste Colbert, finance minister to Louis XIV, took things to another level in the 17th century by bringing double-entry bookkeeping into the realm of public affairs. This orderly arrangement of the nation's coffers was invaluable to King Louis as he strove to enhance his own and his country's role in the world.
The aftermath of Colbert's efforts would leave even a novelist hard pressed to contrive a more perfect example of the chasm between providing the means of fiscal management and the reality of how these means can be cast aside. After Colbert died, Louis allowed his authoritarian tendencies even fuller expression, unhindered by the restraints of his faithful servant. The king viewed his mission to be more important than the resources available to achieve it.
The state's coffers were rapidly depleted, with the king tolerating no criticism. Accountability was not a word that had any meaning for this absolute monarch.