شرکت هلندی شرق هند و حسابداری برای سرمایه اجتماعی در طلوع سرمایه داری مدرن 1602-1623

Capitalism’s profound effect on society has encouraged economic and accounting historians to hypothesise about the importance of double entry bookkeeping to its development. According to Sombart the continual reinvestment of the profits earned depended on the existence of a capitalist form of double-entry bookkeeping that would allow investors and managers to measure the return on investments as a means of making rational business decisions. More recently, with particular reference to the English East-India Company Bryer has argued that the adoption of the capitalist form of double-entry bookkeeping was essential to resolving the social conflict between investing capitalist classes that arose with the rise of industrial capitalism in England in the late 17th and 18th centuries by providing the means to calculate the rate of return on socialised capital. This paper widens the historical context of these debates to The Netherlands in the early 17th century by examining accounting practices of the Dutch East-India Company, the epitome of modern capitalism in motives, organization and funding. It establishes that, although the 17th century Dutch were pre-eminent in Europe in their knowledge of the capitalist form of double-entry bookkeeping, at no time during the period covered by the first charter (1602–1623) of the Dutch East-India Company, or thereafter, did the domestic operations of the Company use this form of bookkeeping across all chambers. This meant that the investors did not have the necessary information that would have allowed them to calculate the return on their investments. Indeed, the Company’s investors neither expected nor demanded information to calculate the return on their investments and, hence, double-entry bookkeeping was not a necessary condition for Dutch capitalism in the manner suggested by Sombart, Weber and Bryer. Instead, the form which capitalism developed in The Netherlands recognised the social and economic impact of its unique geography which produced a society characterised by a monetary economy, a long tradition of joint ownership, and a free market for assets and capital rights.

The process by which much of Europe was transformed from a feudal economy to a modern capitalist economy has exercised scholars’ minds since Marx published the first volume of Capital: a critique of political economy (Das Kapital: Kritik der politischen Ökonomie) in 1867. In particular, the writings of Werner Sombart and Max Weber have engendered vigorous, sustained debate among economic and accounting historians, notably their views on the contributions of accounting practices to the transition to capitalism ( Chiapello, 2007, Carnegie and Napier, 1996, Funnell, 2001, Hopwood, 2000, Oldroyd,, 1999, Toms, 2010, Winjum, 1971, Yamey, 1949, Winjum, 1972 and Yamey, 1959). Whereas Marx’s principal interest was ‘industrial capitalism’1 which was mainly a post 18th century phenomenon defined by investment in the means of production, the concern of Sombart and Weber was commercial capitalism which marked the appearance of modern capitalism during the 16th and 17th centuries ( Bryer, 2000b, De Roover, 1942 and Sée, 1928/2004). Commercial capitalism is distinguished from feudal capitalism by the latter’s emphasis on investment in land, whereas commercial capital was more mobile and, therefore, more readily able to pursue opportunities for profit (ten Have, 1976, p. 6). Sombart posited that the modern capitalist mentality associated with commercial capitalism depended on both the prior existence of double-entry bookkeeping to measure profit and the desire (spirit) to use this technology to make rational business decisions (Sombart, 1916/1953, p. 38). Weber, in contrast, regarded double-entry bookkeeping not as an essential requirement for the development of modern capitalism but as mainly a technology that facilitated rational capitalist action which “rests on the expectation of profit by the utilization of peaceful opportunities for exchange” (Weber, 1956, p. 17). A rational capitalist business entity determines its “income yielding power by calculation according to the methods of modern bookkeeping and the striking of a balance” (Weber, 1927/1981, p. 275).2 More recently the transition debate has been revitalised by Bryer, 2000a and Bryer, 2000b whose contributions, mainly in Accounting, Organizations and Society, have been described by Toms (2010, p. 219) as “an important next step in the Sombart–Weber debate”. Bryer (2000a, p. 144) has argued that “the mere existence of accounts kept by DEB (double entry bookkeeping) provides no basis for identifying the authentically capitalist mentality”, and hence the appearance of the capitalist business. Instead, and most importantly, it is “only evidence of the capitalist mentality if it produces the return on capital employed …” (Bryer quoted in Toms, 2010, p. 209). Relying principally on evidence from the history of the English East-India Company (EEIC) during the first half of the 17th century, Bryer further widened the transition debate when he concluded that the EEIC “and others (particularly the merchants of northern Europe) eventually introduced double-entry bookkeeping3 to foster the socialization of their capital” ( Bryer, 1993 and Bryer, 2000b). While Toms (2010, p. 206) accepts Bryer’s broader thesis he disagrees with his more “narrow” argument that rate of return calculations occurred quite early and their use as a specific form of profitability calculation was the accounting signature of modern capitalism. Instead, Toms (2010, p. 206) argues that “fully ROCE calculations make a much later appearance than suggested in … (Bryer’s) previous empirical surveys”. Bryer (2000b, p. 379) had previously acknowledged the need for “more theoretical and empirical research … before a plausible theory becomes convincing history”. Moreover, he noted that “(w)e must base the social history of accounting on a thorough study of the large amount of archival material that lies untouched by historians of accounting” (Bryer, 2000b, p. 379). Toms (2010, p. 206) has also suggested that an over reliance in these debates on the experience of England in the 17th century had implications for the resilience of any related conclusions. This paper responds to the call by Bryer and Toms for more empirical evidence concerning the development of capitalism in Europe with a detailed study of the Dutch East India Company (Vereenigde Oost-Indische Compagnie, hereafter referred to as the VOC) in the early 17th century. Examination of the VOC, regarded as the first public limited liability joint stock company and, together with the EEIC, considered the epitome of capitalist enterprise ( Bryer, 2000a, Gepken-Jager et al., 2005, Nussbaum, 1937, Sée, 1928/2004 and Van Dillen, 1958), complements Bryer’s study of the EEIC by broadening the historical context for the debate about the importance of double-entry bookkeeping in the transition to capitalism. More importantly, the new evidence introduced here from the archives of the VOC held at The Hague challenges the essential, critical importance given by Bryer to capitalist double-entry bookkeeping. The paper establishes that, unlike the EEIC, the method of bookkeeping used by the VOC to account for its capital was not a capitalist form of double-entry bookkeeping which would have allowed investors to determine the return on their investments. This study confirms and extends the findings of Funnell and Robertson (2011) who identified the influence of German bookkeeping texts and northern German Hanseatic business practices on Dutch accounting in the 16th century, that is well before the VOC was even conceived. They found that during this time agents’ (factors’) bookkeeping and the practices of Hanseatic businesses, which had long been the Netherlands’ most important trading partners (De Groote, 1961 and De Roover, 1963), were the dominant influences on the organisation and administrative practices of Netherlands’ businesses. Hanseatic accounting developed over the pre-ceding centuries primarily from the need to enable a settlement between partners at the conclusion of a business venture. Hanseatic businesses did not have a common capital but instead were loose associations of businessmen in which no partner could exercise formal control over the actions of other partners (De Roover, 1974 and Posthumus, 1953; Stieda, in Mickwitz, 1938, p. 189). Accordingly, Funnell and Robertson conclude that for Hanseatic businesses a capitalistic form of double-entry bookkeeping, in which a capital account is central, was neither possible nor desirable and any notion of accounting for an entity as a whole by means of a centralised accounting system was entirely foreign to both the 16th century north Germans and the Dutch (ten Have, 1976, p. 9). These aspects of Dutch business history are now shown in this paper to have maintained their influence on the system of bookkeeping used by the VOC from its earliest days and throughout its long and profitable existence, despite the sophistication of Dutch capitalism and the importance of social capital as the means to finance the operations of the VOC. The advanced capitalist nature of the Dutch economy as early as 1648 was noted by Marx who observed that “the total capital of the (Dutch) Republic was probably more important than that of all the rest of Europe put together” (quoted in de Vries and van der Woude (1997, p. 8)). Brenner (2001, p. 231) has also affirmed the uniqueness of the late 16th century Dutch economy by noting that it “differentiated itself from the leading economies that preceded it (Flanders, Brabant, the city-states of northern Italy) in its capitalist modernity, manifested most tellingly in its advanced, capital-intensive agricultural sector”. Although the 17th century Dutch are widely believed by historians to have been also at the forefront of the development of modern business techniques which included sophisticated accounting practices (Nussbaum, 1937 and Sombart, 1913/1967) evidence of the VOC’s organisation and financial administration surprisingly has not been considered in any detail in previous studies of the role of accounting in Europe’s transition from feudalism to capitalism. The independent late 16th century Dutch East-India companies that were combined to form the United Dutch East-India Company (VOC) in 1602 were described by Steensgaard (1973, p. 127) as “true capital associations, divested of political interests, and probably the first organisations of that kind in the European expansion in Asia”. Authorities such as Sée (1928/2004, pp. 22, 81) also concluded that the VOC was “a real corporation of the modern type”, that is a public company.4 This study focuses on the period 1602–1623, with reference to some important changes before 1647, during which were established the VOC’s organisational structure and bookkeeping practices that endured for its entire, very profitable, existence of nearly 200 years. In contrast to the EEIC, evidence from the VOC’s archives does not indicate that the VOC’s organisation and financial administration were associated with the adoption of a particular form of bookkeeping. Despite the VOC fulfilling all other criteria for a capitalist business entity, most especially freely marketable, unrestricted share ownership, and the pre-eminence of the Dutch in the use of and writing about double-entry bookkeeping (Stevin, 1604), the VOC persisted with a Hanseatic form of venture accounting for its domestic (Netherlands) accounts. This form of accounting did not incorporate an integral capital account or the means of periodically calculating net profit. In addition, the evidence provided here reveals that, unlike the EEIC, the VOC’s general investors, known as participants, did not require an accounting of the company’s management that would have allowed the rate of return earned on their investment to be calculated as required by social theories of capitalism. Instead, they had much less sophisticated, more limited, expectations of the VOC’s accounting, demanding only that it would allow management’s probity or stewardship to be assessed. This was dramatically confirmed by a protracted conflict between the VOC’s general members and its directors (bewinthebbers)5 that erupted after 1620 when the bewinthebbers refused to provide a set of accounts to the participants for the first 21 years of the VOC’s operations as required by its first charter. The participants’ determination that the bewinthebbers would provide a general accounting was explicitly not motivated by the need for information to determine return on capital invested. The first section which follows provides an overview of Sombart, Weber and Bryer’s theories about the relationship between capitalism and double-entry or capitalist bookkeeping with particular and extensive reference to Bryer’s more recent, influential contributions. Archival and other evidence is then used to examine influences on the organisational structure and bookkeeping practices of Dutch businesses and the formation of the VOC. This evidence establishes that rather than these being most immediately responses to social conflict between established and emerging investing capitalist classes, such as that which characterised the rise of the EEIC, they recognised instead the influence of the harsh natural landscape which had prompted the development of innovative political and economic institutions in The Netherlands, considered as “the land of capitalism par excellence” (Sombart, 1913/1967, p. 144). Especially influential for the VOC were the principles and practices developed by the mediaeval Dutch water-boards, the communal local authorities established to manage the risk of tidal surges and floods.

Transition from a feudalist to a capitalist mentality is said to have been a consequence of a particular spirit that sought to continually expand a stock of wealth by the rational pursuit of profits (Sombart, 1916/1953, Sombart, 1919/1979 and Weber, 1968) or the product of social conflict generated when business was conducted with joint capitals administered by professional managers (Bryer, 1999 and Bryer, 2000a). Common to these transition theories is the notion of a calculative mentality focussed on the returns earned by invested capital. The latter is considered most effectively served by a capitalist form of double-entry bookkeeping capable of periodically generating net profit information and revealing the state of the entity’s capital at a particular date. Calculation of the rate of return on invested capital is not an end in itself but the means to allow investors to make rational decisions concerning their investments and to hold professional managers accountable for their administration of joint capitals (Birnbaum, 1953, Bryer, 1993, Bryer, 2000a, Bryer, 2000b, Carruthers and Espeland, 1991, Gras, 1947, Lemarchand, 1994, Nussbaum, 1937, Sombart, 1916/1953 and Yamey, 1994). Evidence presented in this paper has established that the advent of Dutch social capital was not marked by the adoption of a capitalistic form of double-entry bookkeeping nor was it a consequence of religious principles or social conflict. Instead, the roots of Netherlands’ capitalism are grounded in the country’s long experience with social institutions such as its medieval water-boards and with land reclamation projects. These gave rise to the notions of joint ownership and a free market for intangible rights which are fundamental to the idea and practice of capitalism. The importance of these features of Dutch society was magnified by The Netherlands’ long and successful commercial history, its largely free and waged workforce, its monetary economy, and a tradition of reinvesting profits to expand commerce. A weak feudal authority compelled the Dutch to take responsibility for their society and organise it in a manner conducive to the geographic circumstances of the country. Geography compelled the Dutch to sustain themselves through export-led commerce and industry, which consequently created a highly urbanised, waged population and a monetarised economy that relied on credit. By the 17th century the Dutch were endowed with all the principles and practices of a modern capitalist society, including modern double-entry bookkeeping, which resulted in The Netherlands being widely regarded as the premier capitalist nation of the age and the VOC, which met all standards for a capitalist business entity, the paramount 17th century Dutch commercial enterprise (Nussbaum, 1937, pp. 158–162; Ranke, in Sombart, 1913/1967, Sombart, 1919/1979, Stevin, 1604 and Ten Have, 1933). Investors in a sophisticated economy, characterised by commercial leases, credit, negotiable capital rights, and specialised production, such as that which prevailed in The Netherlands after the 13th century, must necessarily adopt a calculative mentality to manage their financial affairs. Evidence presented here suggests that rather than the participants making financial decisions on the basis of return earned by an entity in relation to the capital it employed they instead did so with reference to what was considered an acceptable rate of interest. Certainly, a capitalist form of double-entry bookkeeping, which could yield the rate of return and capital employed, was not generally utilised in The Netherlands, or in any other European country, before the late 18th century (Yamey, 1964, pp. 117, 124). Instead, Dutch entrepreneurs used a variety of calculative practices to rationally administer their investments in joint capitals and other financial dealings. VOC investors made a reasoned assessment of their investments’ current worth by reference to Amsterdam’s organised market in VOC capital rights (Gelderblom & Jonker, 2006, p. 8). In much the same way as share markets do today, this market factored a range of circumstantial evidence into the base price for VOC capital holdings to establish a ruling price at which VOC capital rights were traded. Investors were content as long as distributions received from the VOC compared favourably with earnings from other investments, and occurred with reasonable frequency. Thus, although a calculative mentality was undoubtedly an important element in capitalism’s development, in the case of The Netherlands and the VOC the evidence does not support limitation of such a mentality to the rate of return on capital employed and, therefore, that modern double-entry bookkeeping is a necessary condition for capitalism. When the VOC was formed in 1602 as a public company, investors could freely trade their capital rights in an open market from the outset. Moreover, the VOC was structured as an independent legal entity whose members enjoyed limited liability for the company’s debts. Although formed with a terminating capital, the VOC quickly determined to adopt a permanent capital, eventually succeeding in this endeavour by the end of the first charter in 1623. Further indications of the company’s increasing capitalist nature are evident in amendments to its charter between 1623 and 1647 that gradually transformed its directors into waged employees, the 1623 requirement that the capital be maintained by paying distributions from surplus funds, and its resolve to pay all distributions in cash after 1644. Consequently, the VOC met the criteria for a capitalist business enterprise before the end of the first half of the 17th century (Most, 1972, pp. 723–724) and, thus, according to Bryer and other social theorists of capitalism, the VOC should have utilized a capitalist form of double-entry bookkeeping. However, the evidence provided establishes that, with the exception of the Zeeland chamber prior to 1608, this bookkeeping method was not used by the VOC for its domestic accounts which was in marked contrast to the EEIC. Nor did the company have a centralised bookkeeping system that would have made available to its managers and members the information necessary for the calculation of the rate of return on invested capital. While the conflict between the company’s general members and the bewinthebbers towards the end of the first charter resulted in profound changes to the relationship between them and the company, it did not lead to a demand that the VOC utilise a capitalist method of double-entry bookkeeping. Nor, unlike that which Bryer found in his examination of the EEIC, did this conflict indicate that the company’s participants had any interest in calculating the rate of return on their invested capital. Although a capitalist form of double-entry bookkeeping was not demanded by the VOC’s members to allow them to calculate the rate of return on invested capital, this was not the result of ignorance on their part. On the contrary, evidence from the conflict between the bewinthebbers and the participants shows that the latter were quite astute about bookkeeping and auditing matters and demanded an accounting that would allow them to assess the bewinthebbers’ stewardship. Furthermore, the VOC’s decentralised capital structure, which necessitated each domestic chamber have its own working capital, together with the company’s decentralised accounting system, demonstrated that the VOC’s bewinthebbers, too, did not value calculation of the rate of return on capital invested as a primary means of managing the company. Indeed, a capitalist mentality supported by a capitalist form of double-entry bookkeeping, as posited by Sombart, Weber, and Bryer, is not evident in the VOC’s archived financial accounting records. Thus, contrary to the findings of Bryer in relation to the EEIC, in the case of the VOC capitalist double-entry bookkeeping was not a necessary condition for it to operate as a capitalist enterprise or for Dutch capitalism to develop and thrive. Nor was double-entry bookkeeping implicated in resolving social conflict between established and emerging investors which was the case with the EEIC. There is substantial evidence provided here which also supports the views expressed by Most, 1972, Winjum, 1971 and Yamey, 1949 who concluded that accounting served narrow technical objectives and that double-entry bookkeeping’s ability to reveal the data that made the calculation of the rate of return possible was not significant in the development of capitalism. In particular, the study of the VOC supports Winjum (1971, p. 350) in that, while Sombart was correct in positing a relationship between the development of capitalism and double-entry bookkeeping, it was double-entry bookkeeping’s ability to reveal gross profit and ensure an orderly financial administration that was most valued. Winjum’s position was substantiated by the VOC’s bewinthebbers’ practice of utilising gross profit on particular commodities to plan imports and exports (Glamann, 1981, p. 272; Steur, 1984, p. 72). This study of the VOC’s organisation and financial administration and the implications that this has for debates about the importance of particular accounting practices in the emergence of modern capitalism has presented a number of possible areas for future research. These include addressing a persistent gap in the knowledge of accounting methods used in northern Europe and in other locations at the cusp of modern capitalism in the last half of the 16th and early 17th centuries. This would also provide the means to judge whether the circumstances and accounting practices of the VOC in the early 17th century were unique and even exceptional. Another focus for future research is the possible culpability of accounting practices for the VOC’s sudden and dramatic demise as a result of bankruptcy in 1798. The reasons for this seemingly perplexing conclusion to the VOC’s commercial hegemony have been, and continue to be, a matter of some debate. A number of prominent historians have suggested that the company was bankrupted because it refused to increase its capital base, which left it relying heavily on short-term debt secured against the future sale of imported goods (de Vries & van der Woude, 1997, pp. 455–456; Meilink-Roelofsz., 1982, p. 184). The fourth Anglo–Dutch War (1780–1784) upset this strategy by severely limiting Asian imports, causing direct losses estimated to be about forty-three million guilders. As a result, the company was forced to default on its debts. Of particular interest to accounting historians, however, are the views of Mansvelt (1922, pp. 101–111) who argued that the VOC’s downfall was directly attributable to significant deficiencies in its accounting system which ignored the company’s vast capital investment in Asia, relied upon poor estimates of costs and failed to produce reliable profit and loss accounts (Mansvelt, 1922, pp. 8, 93). Future research, therefore, might seek to conclusively demonstrate whether the company’s accounting system did play a determining role in its decline and eventual bankruptcy. The possible important contributions of accounting practices to understanding the VOC’s later history are also suggested by the problems that the VOC experienced in gaining access to short-term funds which, as noted above, finally dried up the early 1780s. At this time, Holland’s chambers were deeply in debt but the situation in Zeeland was much more liquid which meant that the chamber had no need to seek financial assistance before 1785 (de Korte, 1983, pp. 79–83). One possible reason why Zeeland’s situation was so different was that it may have used a much more sophisticated system of bookkeeping, as it had done in the early years of the VOC, than that which was employed by Holland’s chambers. This would have allowed it to manage better its finances. Although, as established in this paper, the archival evidence of Zeeland’s general accounting indicates that it had been forced to adopt the Hanseatic method of bookkeeping prevalent in Holland, it is possible that it continued internally to manage its affairs by a more sophisticated method of accounting and that only those accounting records that had to be shared with other chambers or submitted to the Heren Zeventhien complied with the company’s standard method of bookkeeping. Further research may be able to determine whether Zeeland did, indeed, use a dual system of bookkeeping and, if so, whether this had any significant impact on the chamber’s ability to remain liquid long after its fellow chambers had succumbed to their debts.