University of Southern California

The Reckoning
A Conversation with USC Professor Jacob Soll on his Groundbreaking New Book
May 15, 2014 • by News at Marshall

What does the fall in the stature and teaching of accounting have to do with the strength of a nation? According to a new book by Jacob Soll, professor of history and accounting at USC: everything. His book, “The Reckoning: Financial Accountability and the Making and Breaking of Nations,” which has received stellar reviews in major outlets including Bloomberg News and the Financial Times, examines how the waxing and waning of accounting and the use of double-entry bookkeeping impacted the fortunes of modern states including France under King Louis XIV, Florence during the Renaissance—and the rise of the De Medici banking family—and the Netherlands during the Golden Age of the Dutch East India Company.

“The history of accounting is a story,” said Soll, “about the rise and fall of nations. When talking about wealth and poverty—and the survival of companies and governments—accounting plays a major role.”

In the book, Soll, a recipient of a MacArthur “Genius” award in 2011, examines 2,000 years of bookkeeping, inventories and auditing, and shows how accounting or, more specifically, the sense of public accountability that widespread literacy of the tools and techniques of proper accounting brings, influenced the vitality of major nation states.

“When I went into the archives of the biggest states, I kept finding accountants at the top,” said Soll. “Each time accounting was a central issue, but its failure also was an issue. Often people turned away from it, due to aversion or fear, and that led to financial crisis.”

Soll says accounting was seen as not only necessary, but also potentially dangerous; this is why past societies created safeguards such as developing a financially literate public and a tradition of regular audits. “Every member of Dutch society knew how to do a ledger with double-entry accounting, but they also knew its pitfalls and its dangers. It’s not enough just to have the books. You need a public and an administrative class that is actively engaged with those books,” said Soll.

Today, Soll says, accounting has lost its former prestige and accountants, despite the integral role they play, may be viewed as either boring or, following major financial scandals, with great suspicion.

And yet, he continues, widespread accounting knowledge may have headed off fiascos, including the subprime mortgage crisis that spurred the recession of 2008.

“If people learned double-entry bookkeeping, they would not only know how to handle their own books, but also understand risk, depreciation and all the basic things that are essential for a mortgage,” he said.

Aside from a call for better accounting standards and a return to teaching accounting at the high school level and beyond, Soll hopes readers gain a new respect for the field and its role. “What I want people to take away from the book is, ‘Wow, here’s an industry of capitalism and government in the West that hinges on accounting. I’m going to think about the world in a new way,’” he said. “Every transaction eventually goes through the hands of an accountant, but nobody wants to hear about them or know what they do. That’s a willful blindness that’s completely self-destructive.”


About the USC Marshall School of Business
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