The Reckoning : Financial Accountability and the Rise and Fall of Nations

For centuries, the importance of financial accounting has been well understood. Essential to building businesses, states, and even empires, accounting has also helped leaders measure their power and craft their policies. When practiced poorly or neglected, accounting has contributed to cycles of destruction, as the 2008 financial crisis has made all too clear. In The Reckoning, award-winning historian Jacob Soll shows how the use and misuse of financial bookkeeping has determined the fate of entire societies. In the right hands, accounting has created social stability, good governance, and economic prosperity. In the wrong hands, good accounting practices have often been subverted, with disastrous results ranging from financial losses and debt to complete economic collapse. From the Medici bankers to the director of finances under Louis XVI, from the Industrial Revolution to the Stock Market Crash of 1929 and the Great Recession, The Reckoning demonstrates that civilizations are only as strong as their bookkeepers. A “brilliant” (Los Angeles Review of Books) history of accounting, showing how financial and political accountability has shaped the rise and fall of nations and empires Whether building a road or fighting a war, leaders from ancient Mesopotamia to the present have relied on financial accounting to track their state's assets and guide its policies. Basic accounting tools such as auditing and double-entry bookkeeping form the basis of modern capitalism and the nation-state. Yet our appreciation for accounting and its formative role throughout history remains minimal at best-and we remain ignorant at our peril. Poor or risky practices can shake, and even bring down, entire societies. In The Reckoning , historian and MacArthur "Genius" Award-winner Jacob Soll presents a sweeping history of accounting, drawing on a wealth of examples from over a millennia of human history to reveal how accounting has shaped kingdoms, empires, and entire civilizations. The Medici family of 15th century Florence used the double-entry method to win the loyalty of their clients, but eventually began to misrepresent their accounts, ultimately contributing to the economic decline of the Florentine state itself. In the 17th and 18th centuries, European rulers shunned honest accounting, understanding that accurate bookkeeping would constrain their spending and throw their legitimacy into question. And in fact, when King Louis XVI's director of finances published the crown's accounts in 1781, his revelations provoked a public outcry that helped to fuel the French Revolution. When transparent accounting finally took hold in the 19th Century, the practice helped England establish a global empire. But both inept and willfully misused accounting persist, as the catastrophic Stock Market Crash of 1929 and the Great Recession of 2008 have made all too clear. A masterwork of economic and political history, and a radically new perspective on the recent past, The Reckoning compels us to see how accounting is an essential instrument of great institutions and nations-and one that, in our increasingly transparent and interconnected world, has never been more vital. Whether building a road or fighting a war, leaders from ancient Mesopotamia to the present have relied on financial accounting to track their state's assets and guide its policies. Basic accounting tools such as auditing and double-entry bookkeeping form the basis of modern capitalism and the nation-state. Yet our appreciation for accounting and its formative role throughout history remains minimal at best-and we remain ignorant at our peril. The 2008 financial crisis is only the most recent example of how poor or risky practices can shake, and even bring down, entire societies. In The Reckoning, historian and MacArthur "Genius" Award-winner Jacob Soll presents a sweeping history of accounting, drawing on a wealth of examples from over a millennia of human history to reveal how accounting has shaped kingdoms, empires, and entire civilizations. The Medici family of 15th century Florence used the double-entry method to win the loyalty of their clients, but eventually began to misrepresent their accounts, ultimately contributing to the economic decline of the Florentine state itself. In the 17th and 18th centuries, European rulers shunned honest accounting, understanding that accurate bookkeeping would constrain their spending and throw their legitimacy into question. And in fact, when King Louis XVI's director of finances published the crown's accounts in 1781, his revelations provoked a public outcry that helped to fuel the French Revolution. When transparent accounting finally took hold in the 19th Century, the practice helped England establish a global empire. But both inept and willfully misused accounting persist, as the catastrophic Stock Market Crash of 1929 and the Great Recession of 2008 have made all too clear. A masterwork of economic and political history, and a radically new perspective on the recent past, The Reckoning compels us to see how accounting is an essential instrument of great institutions and nations-and one that, in our increasingly transparent and interconnected world, has never been more vital. Cover......Page 1 Title Page......Page 4 Copyright......Page 5 Dedication......Page 6 Contents......Page 7 Introduction......Page 10 CHAPTER 1: A Short History of Early Accounting, Politics, and Accountability......Page 22 CHAPTER 2: For God and Profit: The Books According to Saint Matthew......Page 42 CHAPTER 3: Medici Magnificence: A Cautionary Tale......Page 61 CHAPTER 4: The Mathematician, the Courtier, and the Emperor of the World......Page 88 CHAPTER 5: The Dutch Audit......Page 119 CHAPTER 6: The Accountant and the Sun King......Page 144 CHAPTER 7: The First Bailout......Page 164 CHAPTER 8: “Fame and Profit”: Counting on the Wedgwood Vase......Page 187 CHAPTER 9: Big Debts, Big Numbers, and the French Revolution......Page 228 CHAPTER 10: “The Price of Liberty”......Page 250 CHAPTER 11: Railroaded......Page 276 CHAPTER 12: The Dickens Dilemma......Page 294 CHAPTER 13: Judgment Day......Page 310 Conclusion......Page 333 Acknowledgments......Page 339 Notes......Page 344 Bibliography......Page 402 Index......Page 449 Cover 1 Title Page 4 Copyright 5 Dedication 6 Contents 7 Introduction 10 CHAPTER 1: A Short History of Early Accounting, Politics, and Accountability 22 CHAPTER 2: For God and Profit: The Books According to Saint Matthew 42 CHAPTER 3: Medici Magnificence: A Cautionary Tale 61 CHAPTER 4: The Mathematician, the Courtier, and the Emperor of the World 88 CHAPTER 5: The Dutch Audit 119 CHAPTER 6: The Accountant and the Sun King 144 CHAPTER 7: The First Bailout 164 CHAPTER 8: “Fame and Profit”: Counting on the Wedgwood Vase 187 CHAPTER 9: Big Debts, Big Numbers, and the French Revolution 228 CHAPTER 10: “The Price of Liberty” 250 CHAPTER 11: Railroaded 276 CHAPTER 12: The Dickens Dilemma 294 CHAPTER 13: Judgment Day 310 Conclusion 333 Acknowledgments 339 Notes 344 Bibliography 402 Index 449 EBC,Converted