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Accounting for Capitalism

Summary:
I read Michael Zakim’s new book Accounting for Capitalism: The world the clerks made last week. I saw Tyler Cowen’s brief review on Marginal Revolution, and Cowen included the following excerpt from the book A single block fronting Wall Street in 1850 was thus home to seventeen separate banking firms, as well as fifty-seven law offices, twenty-one brokerage houses, eleven insurance companies, and an assortment of notaries, agents, importers, commission merchants, and, of course, stationers.  A rental market for office “suites” developed apace “fitted up with gas and every other convenience,” which also included newly invented “acoustic tubes” that allowed managing partners to communicate with porters in the basement and clerks in the salesroom without ever having to leave their

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I read Michael Zakim’s new book Accounting for Capitalism: The world the clerks made last week. I saw Tyler Cowen’s brief review on Marginal Revolution, and Cowen included the following excerpt from the book


A single block fronting Wall Street in 1850 was thus home to seventeen separate banking firms, as well as fifty-seven law offices, twenty-one brokerage houses, eleven insurance companies, and an assortment of notaries, agents, importers, commission merchants, and, of course, stationers.  A rental market for office “suites” developed apace “fitted up with gas and every other convenience,” which also included newly invented “acoustic tubes” that allowed managing partners to communicate with porters in the basement and clerks in the salesroom without ever having to leave their desks…

All this office activity spurred a flurry of technological spillovers that included single standing desks and double-counter desks, sitting desks featuring nine or, alternately, fifteen pigeonholes, and drawers that could or could not be locked.  “Office chairs capable of swiveling and tilting became available as well, together with less costly “counting house stools” that lacked any upholstery.  Paperweights, check cutters, pen wipers (the woolen variety being preferable to silk or cotton, which tended to leave fibers on the nib), pencil sharpeners, rulers, copying brushes, dampening bowls, blotting paper (less important for absorbing excess ink than for protecting the page from soiled hands), wastepaper baskets, sealing wax (including small sticks coated with a combustible material ignited by friction and designed to be discarded after a single use), seal presses, paper fasteners, letter clips (for holding checks while entering them into the daybook), writing pads, billhead and envelope cases, business cards, receiving boxes for papers and letters, various trays (for storing pins, wafers, pencils, and pens), and “counting room calendars” spanning twelve- or sixteen-month cycles — all became standard business tools.  So did the expanding inventory of “square inkstands,” “library inkstands,” and “banker inkstands” designed with narrow necks which prevented evaporation and shallow bodies that kept the upper part of the pen from becoming covered in ink, thus avoiding blackened fingers and smudged documents.


He then added thatThere is then a whole other paragraph about the different kinds of paper that developed and their importance for clerical work.  This is perhaps the most thorough book I know on the importance of “small” innovations, and it is also a useful book on the history of accounting.”


The impact of small technological changes and the history of accounting, however, are not the central concerns of the book. Zakim’s book is more about the subtitle “the world the clerks made.” It is business history, but it is more on the cultural history part of the business history spectrum than the technological, accounting, or economic history parts of the business history spectrum. Zakim is not trying to explain changes in technology or accounting, their spread, or their impact, or even changes in the number of clerks and the functions they served. Instead, he is interested in the changes in thepeople perceived the economy and their place in it. Those are interesting questions, nevertheless, I found the book frustrating.


Capital and capitalism are words that have multiple definitions, but Zakim doesn’t define how he is using them, and their meaning is not made clear by the context. Often the use does not seem consistent with any of the common uses of the terms.

Here are some of Zakim’s statements about capitalism:


“Anyone could become a capitalist, Americans were told, a possibility that acted as a “spur to exertion to the very news boys in our streets,” as did the popular intelligence that the great majority of the country’s businessmen had “commenced life behind a desk or the counter.” This did not mean, however, that everyone actually became a capitalist, It did mean, however, that everyone became capital---or what we so casually refer to as “human capital” today---rendering their own lives the subject of utility and enterprise.” (Zakim page 7)


“The individual became an asset worthy of the highest credit rating in a cash fraternity born of the axioms of purchasability and personhood. He became human capital.” (Zakim page 70)


“This perpetuum mobile of life under capital---of dialectics at a standstill”---continues to induce bouts of chronic fatigue and irritable bowels, panicked concerns with one’s diet fed by a vast catechism of self help literature, and the body mass ratios of exercise routines including performances of manual labor at the local cross fit gym. Surely too, the treadmill desks of today are worthy successors to Dr. Halsted’s equestrian exercise chair of 1846. Both mediate between our humanity and the exigencies of the market, seeking to ameliorate the fraught relationship between “Mammon and Man” that proves to be the common denominator of capitalism’s reinvention of itself.” (Zakim page 194)


“Pen and paper already engendered such a virtual reality, which was the condition for capitals transmigrations from place to place, and form to form, passing between its merchant, industrial and financial incarnations, and then back again, imbuing the human imagination with the same values of fungibility. The history of capitalism is not, then, about the economic origins of society, but about the expressions that economy assumes in society, about how capital acquired consciousness.” Economists call this process “cognitive regulatory capture.” (Zakim page 197)


Capital and capitalism appear frequently, but Zakim does not say what he thinks those words mean, and it is not clear how his use fits with common uses of the terms. Within economics capital is often used to mean two different things. The most frequent use is as a factor of production. Undergraduate students are taught that output is a function of land, labor, capital and technology. In this context capital is anything that has been produced to enable more production in the future. It includes factories, office buildings, and equipment. It also includes things like roads, bridges, and ports. In addition, it includes knowledge and skills that people have obtained that enable them to be more productive, which is referred to as human capital. I’m pretty sure Zakim’s use of “human capital” is not the same as economists.  Capital is also used, especially in discussions of finance and banking, to refer to the stake of the owners of a business. For instance, after the last financial crisis there was a lot of discussion about increasing capital requirements at banks to discourage excessive risk taking and provide a cushion in case some loans or investments go bad.The Marxist view of capital, as best I recall, is distinct from but related to both of these definitions of capital. I can't tell you what capital is for Zakim, only that it is important.


The book alternates between the sort of concrete descriptions that Cowen highlighted and the less concrete statements about capitalism, like those I have included here. Consequently, I found the book interesting but somewhat frustrating. It is not clear to me what it means to say that “capital acquired consciousness.” I don’t think it is what economists call cognitive regulatory capture, but it may be similar to it.


If you are interested in learning about the evolution of information technology and its impact of business and the economy I would suggest that you might take a look at JoAnne Yates Control Through Communication: The Rise of System in American Management , Margaret Levenstein Accounting for Growth: Information Systems and the Creation of the Large Corporation, or Josh Lauer Creditworthy: A History of Consumer Surveillance and Financial Identity in America. You may also find some of the chapters in Daniel Raff and Phil Scranton (editors) The Emergence of Routines: Entrepreneurship, Organization and Business History interesting as well.


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