Ever since the first simple notes of commercial transactions in Mesopotamia more than 5000 years ago, accounting has been a tool for traders, capital owners and elites in their efforts to control society’s assets and maximize their return on investments. Throughout history, from the innovation of double-sided entry bookkeeping in medieval Italy’s city-states, and the large trading companies’ colonial trade in exotic goods and slaves in the 18th and 19th centuries, on to industrialization and its expansion, and up to today’s globalized financial capitalism, customised accounting procedures have been used to facilitate the elites’ taxation and exploitation of subjects and employees.
The design of accounting procedures, in turn, has affected the way in which different economic systems and ideologies have evolved and how quickly, by creating favourable conditions for capital accumulation and return on investments for some groups and not others, and their control of society’s resources. The increasing complexity of accounting systems has also meant that accountants throughout history, and especially in recent years, have been able to monopolize accounting knowledge and form themselves as an independent group with its own aspirations for power and influence in relation to their capital owning clients.
It is therefore perhaps not surprising that the radical left very early on had a strong negative attitude towards accounting, considering it to be an integral part of capitalism, private ownership and market transactions. The long-term vision of the Left was early designed as an utopian society, without money or accounting, where society’s commonly owned resources, together with limited work efforts (according to ability), could satisfy all our needs of goods and services without society having to make difficult decisions about what to produce and consume. A quote from the late 1800s by the French anarchist Ravachol may here represent the attitude, which at the time was shared by much of the Left, at least regarding the value of accounting and accountants in a future society, and still has its supporters among the radical Left:
“There currently exist many useless things; many occupations are useless as well, for example, accounting. With anarchy there is no more need for money, no further need for bookkeeping and the other forms of employment that derive from this.”
The dream of a society that satisfies our needs for goods and services without much effort and without having to rely on accounting or money to prioritize and choose between different economic alternatives has gained some traction lately with the rapid technological developments in such areas as AI, 3D printers, robotization and the huge amount of services and information that are now spread over the internet basically free of charge.
The need for accounting
The increase in productivity since the industrial revolution and especially in the last decades has truly been exceptional, and much suggests that this development will continue. Compared with 1950, the US in year 2000 produced 5 times more with the same work effort. In other words, a US citizen in year 2000 could have enjoyed the same material standard as in 1950 by working only 8 hours a week. However, increased productivity has not led to fewer hours worked, quite contrary, worked hours per capita have increased. Instead, the development has primarily resulted in dramatically increased consumption, which has, among other things, led to great negative impacts on the environment and the climate.
There are good reasons to expect that a non-capitalist democratic economy in which profit maximisation and growth are not primary goals will give priority to leisure in terms of less working hours at the expense of more consumption. A reduction in working hours can of course be implemented in several different ways, for example through lower retirement age, a reduction in annually worked hours with more time for vacation leave, shorter working days, or specifically targeted leave such as parental leave.
In addition, there is reason to believe that such an economy will also prioritise the production of sustainable high-quality products instead of products designed to break and be replaced at short intervals. One can also expect that collective consumption will increase at the expense of private consumption, through various collective solutions for housing and transport and the establishment of pools of certain capital goods for shared use. Such a development would not only have positive effects on personal quality of life and health, but is by now necessary to avoid the environmental disaster in terms of climate change that creeps closer by the day as CO2 emissions from production continues. The earth’s assets such as clean air and a protective atmosphere, but also natural resources such as different minerals and ecosystems are not infinite and are currently being used up at a rapid pace because of profit seeking.
In other words, there are great possibilities and very convincing arguments for converting increased productivity into more leisure time and sustainable products. Having said that, we are far from a situation where we will meet all our needs and desires, and produce all the goods and services we demand without any, or negligible, work efforts and especially without consuming neither non-renewable natural resources nor manufactured productive resources. In other words, it is unlikely that within the foreseeable future we will be able to satisfy all our needs and meet all our demands for goods and services without having to prioritize what is to be produced and consumed.
If productive resources are scarce and if the production of goods and services consumes resources, all economies – whether they call themselves capitalist, socialist, participatory or something else – must make choices about what to produce and consume, and decide how they want to allocate resources and consumption rights between individual producers and consumers. Different economies will make different decisions depending on their values and goals, and they will allocate power and organize decision-making differently and to different actors but they must all inevitably choose some options over others.
For decision-makers, whomever they are, to make efficient decisions, i.e. decisions that promote society’s goals without unnecessarily wasting resources, including decisions about the trade-off between leisure and work/consumption and how and what technological innovations to implement, they will need information about opportunity costs. An opportunity cost is the potential benefit or revenue that is sacrificed when a resource is used in a certain way and not another. The cost charged to a producer for the right to use society’s productive resources should reflect the opportunity cost, and the prices for inputs and end-products should reflect social costs (as opposed to only the costs for the individual producer). Without such information it is impossible for decision makers to make decisions that are fair and efficient from society’s perspective, no matter how good the intentions.
In this context, accounting, defined as “registration, aggregation and reporting of financial transactions with the purpose to provide the necessary information for making, assessing and evaluating financial decisions”, is absolutely necessary.
An accounting system for a participatory economy
In a democratic economy in which giving people control over decisions that affect their lives is a goal, there can be no private equity owners or shareholders who own factories and other means of production controlling what is produced or how production is organized, seeking maximum return on their private investments without regard to adverse effects on other groups in society. Nor can there be private banks or other lenders who control investment opportunities for those who do not have access to their own wealth. And there cannot be groups of workers whose sole task is to obey orders or to perform monotonous and repetitive tasks while other workers make all decisions and monopolize tasks that provide access to information and power. Any differences in income are small and based only on differences in the choices people make regarding levels of effort or sacrifice and not on differences that are beyond human control.
A long-term alternative to the market system must (i) be genuinely democratic and enable those affected by the decisions to influence them through a bottom-up structure of industrial and geographic federations; (ii) be decentralized without any central planning bureaucracy; (iii) generate the necessary information and reveal real social benefits and costs for different alternative economic actions, including effects on other people as well as on the environment, and finally (iv) encourage participation without being too time consuming or boring.
An example of such an alternative to the market system is the participatory economics model developed by Michael Albert and Robin Hahnel. Information about the model can be found at www.participatoryeconomics.info.
A future participatory economy will obviously have different decision-makers, requirements and information, compared to capitalist or state socialist economies. The accounting system of the economy must create the information that these new decision-makers need in order to make efficient and fair decisions, and, as far as possible, facilitate and simplify such decisions. Therefore, such an accounting system will face some new challenges.
In a participatory economy, both consumers and producers are expected to participate in the annual planning procedure by proposing their planned consumption and production in the coming year. In a developed economy, there is normally a very large variety of available goods and services, and consumers and producers will have very different desires and requirements regarding the categorization of these goods and services for democratic planning of production and consumption to be possible. Consumers want as few coarse categories with as few details as possible to consider when planning their consumption. Producers, on the other hand, need to consider potential differences in resource utilization for the production of different varieties of goods and services when preparing their production proposals and therefore need to work with more detailed information. And both consumers and producers will need to be able to adjust their proposals as the year progresses.
Secondly, the costs charged to worker councils for their use of labour do not correspond with the workers’ individual remuneration, as in a capitalist or socialist market economy. The worker councils’ costs for using labour should reflect opportunity costs, while members’ incomes are based on effort and sacrifice.
Thirdly, in a participatory economy, productive assets, such as land, factories, machines and tools, belong to all the citizens in society and the worker councils’ costs for getting access to these resources do not necessarily correspond to their historical acquisition costs, but should reflect the assets’ current opportunity costs.
Finally, in a participatory economy, society’s costs in terms of negative environmental effects resulting from activities of producers and consumers are borne by those who cause them and not by third parties i.e. other people in society. Those who suffer from the effects are compensated. An accounting system for a participatory economy must handle all of these and several other challenges, including facilitating the longer-term investment and strategic planning.
These challenges and their potential solutions are explored in the book, Anarchist Accounting – Accounting principles for a participatory economy first published in 2016. Readers can find out more by visiting the website: www.anarchistaccounting.info.
The design of a new accounting system is of course not a task that has, or should have, a high priority in a situation where the daily struggle against the capitalist system is focused primarily on mitigating its worst effects. But there is a value in discussing visions and demonstrating that alternatives to the capitalist economic system can be expressed in more concrete terms as well, and not only in high-flying utopian rhetoric. It is desirable to concretize ambitious visions as long as we understand and realize that in the real world the goal must always be to achieve the best possible approximation of our ideals.
In addition, more concrete ideas about how we could obtain, sort and present financial information to promote democratic decision-making and economic cooperation can have a positive and beneficial impact on the development of alternative economic institutions such as self-managed workplaces or consumer associations, or different forms of participatory budgeting processes for parts of our collective consumption, in a situation where we can start creating such alternative institutions.
While I have made the case in this article that any economy, including a democratic one, will need an accounting system in order to record and track necessary information, it is important to point out that the future accounting system, in the sense of society’s set of accounting principles, will constantly change and develop, and mirror but also affect the development and design of the key institutions of the economy, such as the ownership of productive capital, allocation mechanisms, remuneration models and division of labour.
Anders Sandström lives in Stockholm, Sweden, and is a trained accountant with a degree from Uppsala University. He is the cofounder of Parecon Sverige, an advocacy group for the economic model of participatory economics in Sweden and the author of “Anarchist Accounting: Accounting Principles for a Participatory Economy.”