Calculating profit: A historical perspective on the development of capitalism

Abstract

The paper introduces the notion of different methods of calculating and analysing profitability as signatures of capitalism at different stages of development. Its point of departure is BryerÕs thesis of the capitalist mentality, which is subject to theoretical and empirical critique and developed in new directions. Interactions between the development of the productive forces and the socialisation of capital ownership jointly impact on these signatures, such that profit calculations are historically contingent. Aspects of feudalism, particularly restrictions on usury impacted upon accounting calculation, retarding their development. In the industrial revolution calculations reflected the scale and scope of specialised investment in plant, whilst the progressive socialisation of capital prompted a separate set of calculative practices. It was only in the twentieth century, with the unification of large scale industry and finance capital that the modern notion of profitability as return on capital employed finally developed.

Construction of research articles in the leading interdisciplinary accounting journals

“…The articles we analysed show that articles with both simple and complicated structures are published. An example of a simple, easy to follow structure, is the AOS article by Toms (2010a), who uses only five of the classified sections: Abstract; Introduction; Profitability: a theoretical re-examination (Theory); ROCE calculations: empirical evidence (Results); and Conclusions. Toms (2010c) is equally frugal in his AAAJ article, again only using a minimum number of sections, namely: Abstract; Introduction; Strategy, value theory and accounting; Conceptual framework; Discussion; and Conclusions.…”

Fair value vs conservatism? Aspects of the history of accounting, auditing, business and finance from ancient Mesopotamia to modern China

“…36 W&B (2007) regard DEB as very significant, citing several previous authors, although they do not include Bryer's (e.g. 2006) purported Marxist restatement of DEB's Sombartian significance, which however appears to be unsupported either by reading Marx (Macve, 1999) or by the archival evidence (Toms, 2010;Fleischman & Macve, 2012 'positive feedback system'. 39 These issues can now perhaps now more fruitfully be redebated in the wider context of parallels and contrasts with the successful development of the economy in late Imperial China and emerging evidence of the limits of the 'duality' that can be found in its bookkeeping and accounting, which tends to reinforce scepticism about the claims for the significance of DEB in the West (Goody, 1996, Chapter 2; Hoskin & Macve, 2012;Yuan et al, 2012;Hoskin et al, 2013).…”

Double entry and the rise of capitalism: keeping a sense of proportion?

“…This might seem a nuanced point, but do we conclude that DEB gives rise to capitalism as suggested by Sombart (1915) andBryer (2005), or that it is down to the factors that Dean, Clarke and Capalbo (2016) A counter argument that accommodates the dimensions of capitalist mentality and industrial organisation introduced by Dean, Clarke and Capalbo (2016) is the view that accounting and accounting change are the effects, rather than the causes of capitalist, or indeed any other form of economic development. According to this view, accounting evolves in response to the development of the asset base and changes in capital ownership (Toms 2010, Toms & Fleischman 2015, and in that sense could be described as a proportionate phenomenon in history.…”

“…Certainly an appealing feature of medieval business practice in this respect was that custom and practice evolved such that Catholic Thomist and feudal principles of fair or just prices were well known and the methods of establishing value equivalence were similarly based on customary profit rates at transaction level (Toms, 2010; see also Grassby, 1969, Tawney, 1926. By contrast with such regular trades, evolving over long periods, in observable commodity type products, at the centre of the GFC were newly devised, thinly traded, complex and difficult to value assets, which were often traded over the counter, most notably, collateralised debt obligations.…”