Review by O. Finley Graves The University of Mississippi
Locke’s investigation into the relationship of higher education and entrepreneurial performance in Germany, France, and Great Britain during the second industrial revolution (1880-1940) chron-icles the accomplishments of German academicians in the area of business economics in the early decades of this century, accomp-lishments that not only resulted in a new business science but had a decided impact on German industry. Locke demonstrates that as early as the 1910s academic training and research met with a receptiveness among German entrepreneurs that remained uncharacteristic of their British and French counterparts until as late as the 1950s. In Britain and France, rather, the entrepreneur continued to esteem the practical man, the man who had received his training on the job or who had pioneered the first industrial revolution, and to view with contempt the idea of any academic orientation in business. As a result, Locke argues, Germany enjoyed a considerable degree of growth in the new high technology industries before and after the First World War that Great
Britain and France did not. It was the legacy of the business economics movement in German higher education, moreover, Locke suggests, that enabled Germany to bridge the economic chasm of the post-World War II years and reclaim its leadership position in industry as readily as it did. Accounting historians will find Locke’s account of the evolution of German business economics of special interest since the movement was centered at its inception around such accounting-oriented business economists as Eugen Schmalenbach of the University of Cologne and Fritz Schmidt of the University of Frankfurt.
Indeed, from the standpoint of the English speaking accounting historian, Locke’s inclusion in his book of an overview of the advances made in accounting in Germany from 1910 to 1930 is most fortunate. The 1910s and 1920s constitute what well may be termed a golden age of accounting thought in Germany. Several theoretical studies appeared that have become accounting classics in that country while a number of new German language periodicals served as a forum for a plethora of extraordinary theorists. In addition to Schmalenbach and Schmidt, Johann Scharr, Heinrich Nicklisch, Erwing Goldmacher, Willis Prion, Ernst Walb, Walter Mahlberg, Theodor Beste and Alfred Isaac contributed to the devel-opment of accounting thought. But, outside of Germany, only the Japanese and the Swedes appear to have taken note of the ideas of these men. The British and the French, whom Locke criticizes for their insularity to international developments in business economics, paid little heed to the German theorists.1 And little is known of German thought on this side of the Atlantic.2
The End of the Practical Man, especially in Chapter IV, “German Business Economics: The Theoretical Achievement,” provides the American accounting historian with an introduction to a rich body of accounting theory. Two subsequent chapters trace the influence of German business economics on educational achievement and institutionalization of management. The three chapters provide an excellent description of the forces that have shaped German accounting and enhance our understanding of the accounting profession as it exists in Germany today.
The book also provides the accounting historian with a good example of historical research methodology. Locke’s research is characterized first of all by an exhaustive examination of the relevant primary sources; his “Selected Bibliography,” which contains over 800 entries, is a reference tool in the area of European accounting history and general business history in itself. The breadth of Locke’s research, in turn, has equipped him with a thorough knowledge of the cultural conditions and social institutions in Germany, France and Great Britain that gave shape to the educational and industrial developments in those countries during the second industrial revolution. This enables him to explain why an economically stimulating relationship developed between higher education and industry in Germany and why such a relationship did not develop in Britain or France.
Moreover, Locke’s international comparisons are not limited to European countries. Since certain innovations in U. S. managerial accounting (standard costing and budgeting) had a significant im-past on German business economics, Locke incorporates observations concerning American contributions into his study (cf. Chapter III, “The American Challenge”). Thus, the book affords the reader an opportunity to place the history of U. S. managerial accounting in an international frame of reference. Unfortunately, Locke remains silent with respect to the role American higher education might have played in U. S. accounting innovations. Given the theme of the book and the frequent references to U. S. managerial accounting, one misses any mention of the relationship of higher education and entrepreneurial performance in this country.
Another area in which Locke’s breadth of view serves him well is with respect to interpretation of statistical data. Locke [1979] has written previously about the fallacious conclusions to which a myopic interpretation of statistical data can lead and he reiterates this point in the first chapter of The End of the Practical Man. He notes that the data on which the cliometric school bases its con-clusion, that the British and French performed well during the second industrial revolution, comes from old well-established in-dustries. These data, however, do not reflect the fact that economic growth was concentrated in new high technology industries during the second industrial revolution, industries that were soon to eclipse the older industries. The cliometricians, Locke contends, failed to consider their data in its proper context. Locke uses statistical data throughout his study, but he uses the data to corroborate and resists extrapolating conclusions on the basis of statistical data alone.
Finally, while Locke’s book is about the past, its lessons transcend the past. In its account of the impact of higher education on economic growth in Germany, the book highlights the importance of the teaching and research functions. Locke’s description of rather unhappy developments in Britain and France during the second industrial revolution makes clear the exigencies of ongoing research and of a close working relationship between academicians and industrialists in today’s technological environment. In addition, Locke points out the dangers of insularity. The success of the Germans during the first half of the twentieth century can be attributed to some extent to their ready assimilation of American breakthroughs in management sciences, and the success of the Swedes to their ready assimilation of German innovations. The British and the French, on the other hand, apparently suffered economic decline when recognition of new scientific management techniques might have resulted in economic invigoration. In sum, The End of the Practical Man has much to offer the accounting historian both in content and methodology.
FOOTNOTES
1The French, however, did experiment with German ideas on inflation account-ing, see Wasserman, 1931.
2The American accounting academician may have read Schmalenbach’s Dynamic Accounting, translated by Murphy and Most [1959], and perhaps, Fritz Schmidt’s articles published in the Accounting Review and the Harvard Business Review in the 1930s, but overall, the ideas of German theorists have not had a significant impact.
REFERENCES
Locke, Robert R. “Measuring British Entrepreneurial Performance, circa 1914, A Criticism, Based on Cost Accounting, of Some Recent Mathematical Interpretations.” The Accounting Historians Journal, v. 6 (Fall 1979), pp. 1-12.
Schmalenbach, Eugen. Dynamic Accounting, trans. by G. W. Murphy and Kenneth S. Most. London. Gee and Company, 1959. Reprint edition. New York: Arno Press, 1980.
Schmidt, Fritz. “Is Appreciation Profit?” The Accounting Review, vol. 6 (December 1931), pp. 289-93.
.”The Basis of Depreciation Charges.” Harvard Business
Review, vol. 8 (April 1930), pp. 257-64.
. “The Importance of Replacement Value.” The Accounting Review, vol. 5 (September 1930), pp. 235-42.
Wasserman, Max J. “Accounting Practice in France During the Period of Monetary Inflation (1919-1927).” The Accounting Review, vol. 6 (March 1931), pp. 1-32.
BOOK REVIEWS:
F. Sewell Bray, Precision and Design in Accountancy (London: Gee & Company (Publishers) Limited, 1947. Reprint edition, New York: Arno Press, 1980, pp. 145, $14.00).
Reviewed by
Edward N. Coffman
Virginia Commonwealth University
This books is based in large part on selected articles that F. Sewell Bray, an English accountant, wrote for professional periodicals.
The book is divided into three parts. Part I, entitled “The Accountancy Profession — Philosophy and Background”, consists of chapters on Philosophy of Accounts (3 pp.), Background of the Accountant’s Art (5 pp.), Professional Education (3 pp.), Approach to Economic Science (7 pp.), Internal Equilibrium (3 pp.), and Relation between Accountants and Economists (6 pp.).
In Part II, entitled “Accounting Technique and Research”, chapters are presented on the Development in the Functions of Ac-countants (7 pp.), An Accounting Statement of Profit (12 pp.), Theoretical Conceptions of Fixed Asset Valuation (3 pp.), Technique of Accountancy in Relation to Management in a Period of Transition (6 pp.), Uniform Accounting (5 pp.), and Accounting Standards (13 pp.).
Part III consists of 15 appendices containing mainly the author’s letters to the editors of professional journals, and exchanges of letters with H. W. Singer and H. Norris.
As indicated by the above list of chapter titles, Bray reflects on a number of topics, including the education of accountants and the accounting concepts of historical cost, realization, uniformity, and conservatism.
He briefly describes some of the changes that have taken place in commerce, industry, and in the environment that have caused changes in the services, duties, and responsibilities of accountants. Bray felt that more is being expected from the financial accounts than was formerly the case and it is therefore important that a sound theory base be established to support the techniques that are followed in practice.
Much of the book is devoted to discussions of the differences in the thinking of accountants and economists in relation to the concepts of income measurement, fixed asset valuation, depreciation, and changes in money value. Bray’s explanations of the differences in the accountants’ viewpoint and the economists’ viewpoint are easily distinguishable and well-defined.
This is a most interesting book that provides insight into the development of accounting thought, and thus would constitute valuable reading for courses so designated at the graduate level.
