Slavery Gave Us Double-Entry Bookkeeping?

Editor’s Note: This essay is part of a Law & Liberty symposium on the 1619 Project.

How many types of capitalism are there? If one wants to play semantic games, I suppose there are as many as there are imaginable denotations of the word.

Matthew Desmond imagines there are good capitalisms, such as those in Norway, Thailand, and Brazil, where workers are protected in their jobs and employers are prohibited from hiring or firing as they choose; and bad capitalisms that leave employers free to make these decisions on their own with few or no restrictions.

To really understand Desmond’s contribution to the New York Times’s “1619 Project,” one has to realize that he is playing a semantic game of a very peculiar sort. In this game, facts and concepts are so much sand to be shaped into various piles of likes and dislikes according to what suits Desmond’s fancy. Thus he forms some into fairytale sandcastles over here, and others, into brooding keeps over there (the latter complete with gargoyles and circling vultures).

And the biggest, ugliest pile in Desmond’s sandbox is the one labeled American Capitalism, where some very choice grains have been plucked out and set before us.

The Bad, the Ugly, but not the Good

And here we meet, first and foremost, a very young and very brash first-generation son of poor immigrant Eastern European parents, one Martin Shkreli. Mr. Shkreli is presented not as a behavioral outlier but as the very ideal type of the American capitalist par excellence. This man is archetypal, we learn, because after gaining control of the patent of a life-saving drug, he did what every evil robber baron would obviously do: He raised its price by a whopping 56 times! Behold the face of American Capitalism.

His actions might have been sufficient for Desmond’s purposes, but Shkreli obliged him further by justifying what he did by invoking the rules of capitalism, giving Desmond the perfect Count Dracula to lead off his “just-so” story.

But, look here, some sand is left to the side. Let’s have a peek.

No mention is made of these particles: A hue and cry, by private and public persons alike, went up almost immediately when Shkreli initiated his pricing scheme. Nor are we told of the private firm that quickly intervened to address the outrage—voluntarily! And nothing is particularly made of the fact that Shkreli was convicted on charges brought by his own company for some of the severest trading violations in the world. Are these not things that happened in America, too? (See Jim Geraghty for more on what failed to be added to the American Capitalism pile).

Don’t awful things happen in Norway, too? Apparently not.

Not History but Discourse

The Desmond contribution to this majestic project of our Newspaper of Record has, it turns out, little to do with history per se. Desmond is not writing history but doing discourse theory, and thinks he is laying siege to the strategic high ground. It is an act of political warfare, and as such, openly embraces alternate constructs right down to how groups are defined and how facts are put before the reader, and in fact these are delivered up in an artful literary style worthy of the best fiction.

Under this way of seeing the world, relatively stable categories and definitions are for those who still believe in the goal of wertfrei research, “objectivity,” and source criticism. Hence, the definition of capitalism in the American context need not be accorded the same latitude as that given to Norwegian or Brazilian capitalisms because “it means just what I choose it to mean—neither more nor less,” to quote Humpty Dumpty in Lewis Carroll’s authentic fairy-tale. And so Desmond generously bestows on the piles labeled “good capitalisms” all the legal and political interventions respecting labor that he likes, while the political, social, and legal elements of the “bad capitalisms” are only permitted to count as so much evidence against them.

How could this be good history?

In fact, Desmond is not a historian, but a sociologist (at Princeton University) who practices a kind of “theorizing” that has become all too prevalent in the academy, even among historians. Here scientific objects are to be “constructed” and new counter-narratives produced from those constructions. It is just the sort of “post-structuralism” that Allan Bloom worried about in his book, The Closing of the American Mind (1987). Others have noticed this connection too—and not necessarily because they disapprove of it—but simply because the terms employed are so closely aligned. In this world, not just the categories but the facts are to be treated as interpretive constructs.

Re-Constructing the Facts

Thus Desmond would have one believe that Thomas Affleck’s Plantation Record and Account Book (1847-1848) is the true source of the main ideas behind capitalist management as implemented in the United States today. His prose flows artfully, and it produces many tantalizing comparisons to modern American practices, but Desmond fails to put before us a single shred of evidence that Affleck’s book was the source of later labor-management techniques.

A reader who was unfamiliar with the history of accounting might thus be led to the conclusion that such a basic practice as double-entry bookkeeping was an innovation “whose roots twist back to slave-labor camps.” It just isn’t so. Curiously, in making this claim, Desmond has unwittingly gone contrary to one of the early pioneers of his field who was also an important precursor to his own brand of discourse theory.

Werner Sombart had accepted the undeniable fact that double-entry bookkeeping constituted the crowning achievement of late medieval and early Renaissance capitalism in Italy, brought to its essential perfection by Luca Pacioli in 1494. “The very concept of capital,” Sombart wrote of this development, “is derived from this way of looking at things; one can say that capital, as a category, did not exist before double-entry bookkeeping.” (See the classic collection of original texts in Lane and Riemersma, Enterprise and Secular Change {1953}, p. 38.)

Plantation managers did not invent the managerial or accounting techniques employed in the North; they adopted already established practices, and those methods were in fact in deep tension with their own feudal self-image. One need only consult Eugene Genovese’s 2005 The Mind of the Master Class (or the excellent post by Phil Magness here). Such disjunctures must be understood and explained before we proceed to “construct” new categories.

I was particularly offended by the cavalier way Desmond brushed aside the always careful and meticulous scholarship of Alfred Chandler as merely the defense of a “more comforting origin story.” Chandler’s works are clearly encamped on ground that the new “historians” or “sociologists” of capitalism want so desperately to occupy. Yet Desmond makes no attempt to engage with Chandler’s sources or even to critique his categories. He simply offers up an opinion about motive. That ought not to be the way one “constructs” new subjects. Real history has at the very least, to understand something of the thoughts and motives of those who lived in a particular time and place.

So why did the planters imitate the age-old methods of enterprise? Might it be the slow and relentless squeeze on profit margins inflicted by the ever-increasing costs of enforcement and the policing of slaves? One should look here to Jeff Hummel’s important 2012 essay, “Deadweight Loss and the American Civil War.”

Plantation slavery was hardly a model of success, as Desmond’s own description of the periodic crises of mortgaged planter debt ought to have made clear to him. Placing slavery at the heart of his definition of American capitalism in the face of such evidence to the contrary, thus begs us to ask: Why?

Taking Exception

And here I need to take issue with the Cato Institute’s Jonathan Blanks’s characterization of the various conservative and libertarian responses to Desmond as so much “overreaction.” To play fast and loose with received categories; to redefine concepts for political ends without any clear or direct engagement with their textual and factual precursors—is to encourage resentments and promote group enmity.

Do you consider yourself to be a friend of freedom? Would you be a champion of all who seek a better life and a chance at self-improvement? Do you favor open and free markets? Do you support the peaceful exercise of liberty in thought and deed? Are we now to accept that such terms once considered synonymous with free enterprise in America are code for racism, oppression, and brutality?

Building his little sand castles the way he does, Desmond appears to be inviting just that kind of leap.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on October 02, 2019 at 14:32:25 pm

Really appreciate this article by Hans Eicholz. I m not an accountant, but I have in my library a book called "Capitalism and Arithmetic: The New Math of the 15th Century" by Frank. J. Wetz which I read a very long time ago. My husband is an accountant and can tell you everything you need to know about double-entry bookkeeping--and he learned his trade back in the days of the big-ledgers and adding machines.

I agree with much of what Eicholz says, and very much like his paragraph. But, I wish people would not confuse Capitalism, however it is defined or practiced, with Free Markets. Capitalism is not married to a free market, although it can shack up with one if traders so choose. But they could easily enter into an alliance with a socialist or communist or fascist or any other type of system, and often do. Often at the same time as they are dallying with a free market system.

The term does not imply any kind of moral code consistent with true Liberty, which is not freedom from any kind of control, or license. America's founders defined Liberty as Freedom, meaning absence of external control plus Independence, meaning self-control and/or self-government and/or self-reliance & self-restraint. Imbedded in its definition, as you see, is the Principle of Reciprocity, a.k.a. The Golden Rule.

Which is why John Adams defined Liberty as "a power to do as we would be done by" in a letter to his friend Hezekiah Niles in 1819. And the Declaration of Independence tells us government's purpose is to protect the Liberty of the People.

So, to be a truly free market, whether you are a mom & pop store or the largest multi-national corporation on the planet, you will not lie, cheat, steal or otherwise cause harm to your investors, your employees, your suppliers, your customers. You will not buy and sell politicians or governments. You will do this because it is the only way to make sure you do not violate the Liberty of the People.

Even Adam Smith, the 18th Century Scottish moral philosopher considered to be the father of modern economics, thought so. He did not believe markets should be unregulated. In "The Wealth of Nations" he said that markets should be free of regulation excepting only what is necessary to protect the consumer. I think this means he would favor anti-trust laws and oppose hostile take-overs, consolidation of corporations for the purpose of controlling the market, government subsidies and bail-outs, laws favoring one industry or corporation over others, polluting the environment and manufacturing harmful products.

That is because he believed that the Laws of Nature are identical to the Laws of God. Living in harmony with them was Smith's idea of the Invisible Hand. If the marketplace does not follow this principle, it will not and can not be free.

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Standing Fast
on October 02, 2019 at 14:59:11 pm

I very much agree with you on this point exactly. The main issue was just to show how conveniently malleable is Mr. Desmond's use of the word "capitalism," even more so, I might add, than traditional Marxists. We are dealing with a very different sort of theorist here.

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Hand Eicholz
on November 21, 2019 at 01:18:28 am

Double-entry bookkeeping and modern accounting methods? Forget their origins in late Medieval Italy; they were developed on the slave plantation to further the institution of slavery. Modern human resources management did not come about in the late 18 as a way improve workplace productivity and improve worker welfare. No, human resources was born on the southern slavery plantation and without the institution of slavery, it never would have existed.

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on December 28, 2019 at 14:57:32 pm

Nope. But why this is wrong, and why it is important to get the history right is a point I will deal with in another post.

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Hans Eicholz
on December 28, 2019 at 18:37:46 pm

This is in reply to hubbub:

The historical record does not support your contention that double-entry bookkeeping came out of the slave-owning southern plantations in America. They may have taken it further than the Italian Renaissance, but they didn't invent it. Also, modern human resource management is not a bookkeeping operation. It doesn't matter if they are used together to keep track of things, it is about using people as if they were cogs in a machine.

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Standing Fast
on September 03, 2020 at 17:58:15 pm

[…] and 70s, nevertheless, “progressive” they could have thought themselves to be on the time, are actually counted among the apologists of capitalist exploitation, by allegedly offering a extra pleasing portrayal of enterprise practices within the late 19th […]

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.