Abstract
Foucault studied the change in the governmental practices of European countries under the influence of Enlightenment. The transition from intuitive actions of power to the rational ways of governing developed the need for experts as a group of people with professional knowledge. Our article focuses on experts as the key element of this concept. The article argues that the symmetry between governmental needs and the experts’ qualifications is the crucial factor in the application of new accounting techniques. We investigate an attempt to introduce an accounting innovation in the royal estate during the reign of Russian Empress Catherine II. The failure of this innovation can be attributed to the lack of skilled experts in public sector accounting. The authors came to this conclusion through analysis of the archival sources, including the account books of the Moscow Palace Office, which has not been widely academically discussed from that point of view before.
Keywords
We must enlighten the nation that we rule.
Introduction
Modern research in accounting history identifies various economic, cultural and political factors as the key determinants for the development of accounting methodology and practice (Baker and Quere, 2015; Littleton, 1933; Miller and Rose, 1990; Napier, 2001, and others). As a social practice, accounting is affected by different philosophical and political ideas. These ideas change the role of accounting in economic and social reality, the character of accounting activity and the value of accounting information.
The Enlightenment is a well-known range of philosophical ideas, formed in the late-seventeenth and eighteenth centuries. The progressive ideas of the Enlightenment were accepted by the sovereigns of many European countries and influenced their state policy (Madariaga, 1981; d’Encausse, 2002; Gomes et al., 2008). Foucault (1994) studied the fundamental change in the governmental practices of European countries under the influence of Enlightenment philosophy. The transition from intuitive, impulsive actions of power to the scientific, rational ways of decision-making marked the emergence of a new style of government based on analysis, problematization of reality and programming of actions. Foucault noted the need for a more in-depth study of the relationship between the development of governmentality and the technological aspects of power (Foucault, 1994), that is, the practical implementation of special tools to make government objectives calculable, verifiable and measurable. Miller and Rose (1990) suggested that accounting is one of such tools helping to govern population.
The new style of government formed under the influence of Enlightenment developed the need for experts as a special group of people with professional knowledge. In governmental terms, experts are subjects who manage political rationalities (Radcliffe, 1999). They play a crucial role in linking up political concerns about the government of the productive life of the nation and techniques for governing it (Miller, 1990). Thus, Enlightenment ideas became a stimulus for the development of accounting expertise as one of the intellectual technologies, and further institutionalization and professionalization of accounting.
The influence of Enlightenment ideas on the development of accounting methodology and practice is not always obvious; thus, there are still few studies in this direction. Mepham (1988) describes dissemination of Enlightenment ideas in the eighteenth century in Scotland, a process which led to the ‘Scottish Ascendancy’ in accounting literature. Gomes et al. (2008) and Rodrigues and Sangster (2013) study the influence of new styles of governing on accounting change in Portugal. Alvarez-Dardet et al. (2002) show the importance of Enlightenment calculation techniques for the emergence of rationality in government in eighteenth-century Spain. Baños et al. (2005) also analyse the impact of Enlightenment ideas on Spain’s accounting practices and the expansion of new accounting tools and control procedures for achieving governability of large communities. The studies mentioned above have identified a coincidence between dissemination of Enlightenment ideas and the active phase of the development of accounting, that is, a direct influence of the new philosophy on the emergence of innovations in accounting. In our article, we investigate a case from the history of Russia where such a coincidence did not occur, that is, the influence of Enlightenment ideas led to the emergence of new techniques in accounting but not to their widespread diffusion.
The study period was chosen with regard to the period when ideas of the Enlightenment were flourishing in Russia, that is, the second half of the eighteenth century. The political and economic reforms during the reign of Catherine II (1762–1799) were based on the ideas of the Enlightenment philosophers (Chechulin, 1906; d’Encausse, 2002; Gribovskiy, 1864; Madariaga, 1981; Sereda, 2004, and others). Centralization of the state financial system was one of the most important reforms undertaken by the Empress (see Chechulin, 1906). The traditional style of government did not allow for obtaining reliable information on government revenues and expenditures required for effective financial management in a country with such a large territory. In order to solve this problem, it was necessary to modernize accounting in the Russian public sector. 2 The government bodies in Russia used single-entry bookkeeping during the eighteenth century (Motyka, 1990; Sokolov, 1985). Double-entry bookkeeping (DEB) was known as a more advanced accounting technique and was applied in public sector accounting in Spain, France, Portugal and other European countries at that time (Gomes et al., 2008). Because of the strong lag in the social and economic development of Russia from European countries, Catherine II was forced to borrow administrative techniques used in Europe. Our article discusses an attempt to introduce a new accounting technique containing elements of DEB in the Russian royal estate bookkeeping at the last third of the eighteenth century. For this purpose, we analyse extensive archival material from Catherine’s era which has not previously been studied by accounting historians. Unfortunately, archival documents indicate that this innovation was local, used only for a short time and not widespread in Russia at that time.
Researchers have different points of view as to what factors are crucial for development of accounting. Some of them highlight the importance of individual actors as powerful change agents (Gomes et al., 2008). Others argue that interrelations of accounting and the state are central to understanding accounting change (Miller, 1990; Rodrigues and Sangster, 2013; Rose and Miller, 1992). Burchell et al. (1980) study the influence of institutionalization of accounting on the development of accounting thought and practice. Baños et al. (2005) examine the dependence of changes in accounting on the different discourses. Our article focuses on experts as the key element of innovative processes in accounting practice. As Boyns and Edwards (2013) stressed, people with relevant skills often became the agents of institutional changes. Their languages and theories allow them to create new ways of accumulating time and space for purposes of governing (Latour, 1987).
The main objective of our study was to analyse, using the Foucauldian framework of power-knowledge, the relationships between accounting experts and expertise and the accounting changes in the Russian public sector in the eighteenth century under the influence of the Enlightenment. We discuss the problem of symmetry between the competency of experts and the possibility of widespread dissemination of advanced accounting techniques in governmental practice. The article contributes to the previous literature by analysing the reasons behind the failure of accounting innovations in the Russian public sector during the reign of Catherine II. We argue that the lack of skilled experts in public sector accounting prevented the diffusion of new accounting techniques in Russia at that time. The results of this research are important for understanding modern processes in the development of accounting in Russia, since the emergence of the accounting profession in Russia dates back to the eighteenth century – a period of reforms in governmental and public administration under the influence of Enlightenment ideas.
The article is structured in the following way. The theoretical and explanatory framework of our study is described in the next section. It is followed by sections discussing the results of our research. First, the analysis of the Russian Enlightenment and its interrelation with the initiatives undertaken by Catherine II in order to change governmental procedures is given. The second section explores the essence of the innovation introduced in Catherine’s royal estate bookkeeping as an example of a new accounting technique applied in the Russian public sector. In the third section, we investigate the need of Russian public sector accounting for skilled experts and the ways used by the Empress Catherine’s Government to improve the competency of bookkeepers. At the end of the article, conclusions about the influence of the Enlightenment on Russian public sector accounting in terms of its modernization are made, and research perspectives in this area are outlined.
Theoretical and explanatory framework
The purpose of studying accounting history is not simply to record new facts – ‘a chronology of who did what and when’, but a search for patterns of development and causes behind changes in methods recording the facts of economic life, including those connected with the work of social, institutional and contextual forces (Boyns and Edwards, 2013). There are different views on the forces that contribute to the development of accounting methodology and practice (Baker and Quere, 2015; Littleton, 1933; Miller and Rose, 1990; Napier, 2001, and others). In recent years, accounting history studies based on Foucault’s theory have shown the greatest potential. Foucault (1991) stressed that in the eighteenth century, the ideas of the Enlightenment became an incentive for changing the way by which populations in European countries were governed. The supreme authorities needed to develop new technologies of government that would allow for setting measurable goals and evaluating their fulfilment.
Miller (1990) analysed an essential reciprocity between the programmatic and the technological aspects of government. The first forms a domain of rationales and reflections that address questions such as what and how to govern, and what the principles of government should be. The second aspect is the disparate body of techniques that makes the objects and objectives of government amenable to interventions (Latour, 1987). These technologies would cover ‘the complex of mundane programmes, calculations, techniques, apparatuses, documents and procedures through which authorities seek to embody and give effect to governmental ambitions’ (Rose and Miller, 1992: 177).
Governmental technologies are the answer on a very simple but not easy question of power: how the few may dominate the many. Latour (1987) offers the concept of action at a distance as an explanation as to how powerful actors can successfully enrol and mobilize persons, procedures and artefacts in the pursuit of their goals. As Latour (1987) wrote, ‘paper always appears at the end when the scale of this mobilization is to be increased’ (p. 16). The term inscription used by Latour means not only a written text, but different instruments of paper-work, which replaced the work with things: diagrams, lists, formulae, archives, files, dictionaries and so on. These objects have many advantages; they are mobile, but also immutable, presentable, readable and combinable with one another. The inscriptions become the devices for displacement and transformation of things through their visualization and cognition. First things are turned into paper, then paper is turned into less paper, and at the end ‘a few elements can manipulate all the others on a vast scale’ (Latour, 1987: 21).
The strategy which helps a location to become a centre that dominates the rest of the world is not to create the inscriptions per se but to deal with cascades of ever more simplified and costlier inscriptions. Consequently, the rationalization of public administration and the need to manage at a distance required special techniques for collecting and analysing the diverse information about the populations. ‘Science and technology’ became one of the main sources of power (Latour, 1987: 27).
Power based on knowledge began to play an important role in governmental activity in the eighteenth century. Miller and Rose (1990) draw attention to the fundamental role that knowledges play in rendering aspects of existence thinkable and calculable, and amenable to deliberated and planful initiatives: a complex intellectual labour involving not only the invention of new forms of thought, but also the invention of novel procedures of documentation, computation and evaluation. (p. 3)
Professionals in various fields – jurisprudence, finance, economics and education – became holders of these special ‘knowledges’. In the concept of Foucault (1991), such people are called experts. The lack of adequate numbers and quality of experts can become a barrier to the development of an effective management system (Boyns and Edwards, 2013; Gomes et al., 2008; Rodrigues and Sangster, 2013). Interrelations between expertise and government within innovative processes are very complex. The task of the government is to form a group of such people who will be carrying out evaluation of the problems and the ways of solving them. To provide the infrastructure for the activity of experts, the state needs to mobilize a government staff, to establish rules for the rotation of personnel and control of its competency, to organize the system of professional education and training. The role of experts is not only to create new cascades of inscriptions, but to present innovative technologies and to transfer their techniques through space and time.
According to Robson (1992), accounting provides a form of knowledge that may have a greater potential for action at a distance than many of the others. It plays a key role as a means of controlling individuals through management of information, giving a powerful tool in the hands of the government (Baños et al., 2005: 185). The construction and elaboration of governmental programmes are processes that often call upon the calculative practices of accounting to make their objectives operable (Hopwood, 1987). Accounting could serve a significant role in improving the flow of information useful for decision makers (Burchell et al., 1980). The records in account books are an example of the possibility for displacement of knowledge about economic activity from many places to a centre of calculation, and financial reporting illustrates a process of transformation of information for the purposes of governing. It is quite logical that an active development of accounting methodology and practice in the public sector started in Europe in the eighteenth century, when a new way to manage population appeared (Alvarez-Dardet et al., 2002; Baños et al., 2005; Mepham, 1988). The process of initialisation of accounting expertise was accompanied by the development of accounting literature and accounting education in most European countries at that time (Boyns and Edwards, 2013; Gomes et al., 2008; Mepham, 1988; Rodrigues and Sangster, 2013).
Although Enlightenment ideas influenced the reforms in Russian government practice too, these processes in different parts of the world were not identical. Researchers distinguish certain specific features in the perception of Enlightenment ideas in Russia. There is extensive literature on the subject both in English (d’Encausse, 2002; Madariaga, 1981; Rancel, 1975; Wirtschafter, 2009, and others) and in Russian (Gribovskiy, 1864; Klyuchevskiy, 1910; Pisarkova, 2007; Sereda, 2004; Solovyev, 1879, and others).
Most authors highlight the importance of the influence of Empress Catherine’s personality on the political and social development of the country. Russian political thought of that time was dominated by the doctrine of autocracy. 3 The coming to power of Catherine II was connected with the spread of new ideas of freedom, natural equality of all humans and rational thinking. The new idea of the Enlightenment and the traditional Russian autocracy combined in the notion of the enlightened monarch. Historians differ in their interpretation of the reasons behind Catherine’s ambition to present herself as an enlightened monarch: her personal characteristics (high intelligence, curiosity) (Gribovskiy, 1864; Klyuchevskiy, 1910); the influence of her supporters N. Panin, I. Betskoy and E. Dashkova (Rancel, 1975); the questionable way of her coming to power (d’Encausse, 2002; Madariaga, 1981; Solovyev, 1879); and popularity of European ideas (Bartlett, 1979; Kahan, 1966). The analysis of these reasons is outside the scope of our study. It is much more important for us that these ideas differently correlated in the mind of Catherine II at the beginning and the end of her reign (d’Encausse, 2002; Madariaga, 1981; Sereda, 2004). The confrontation between the idea of the Enlightenment and autocracy predetermined the pace and speed of economic reforms in Russia, including modernization of public sector accounting.
According to Wirtschafter (2009), the Russian Enlightenment concentrated on personal, rather than public problems. For many years, serfdom 4 hindered the development of creative activity and entrepreneurial initiative of the Russian society, forming a habit of dependency and passivity. In the Russian society of that time, there was an atmosphere of slavish subordination of peasants to noblemen, and of noblemen to the monarch. Enlightenment philosophers opposed fear and superstition, calling for an active civil position of each member of the society. Scholars also emphasize such characteristics of the Russian Enlightenment as emotionality and religiousness (Abramzon and Petrov, 2017; Hamburg, 2016; Zhivov and Uspenskiy, 1996). Due to the fact that the ideas of the Enlightenment came into Russia from Europe, some researchers (see Berendts, 1913; Peterson, 1979; Platonova, 2009) focus on the concept of borrowing philosophical ideas and copying European models of governance, as opposed to Slavic views and traditions.
Soviet authors traditionally interpreted the history of Russia in the eighteenth century based on Marxist philosophy (Archaeographic Yearbook for 1958, 1958/1960; Belyavsky, 1960; Druzhinin, 1964; Selected Works of Russian Thinkers of the Second Half, 1952, and others). They associated this period with the movement of the society from feudalism to capitalism and the formation of a new class structure, analysing the influence of Enlightenment ideas on the class struggle between the nobles and the serfs. Emancipation of serfs was at the centre of the discussion about the choice of state policy, and this issue influenced the essence of the Russian Enlightenment. Modern Russian authors conduct a more in-depth analysis of changes in the social structure of the society in the eighteenth century, examining the transformation processes in different social groups and strata (see Kovalchuk, 2017; Pisarkova, 2007). For example, Pisarkova (2007) analyses the development of bureaucracy as a social group and an element of the government system.
Despite differences in their points of view, all researchers agree that social and economic reforms in the era of Catherine II were fundamental. In our opinion, there was a huge gap between the ideas of the Enlightenment and the possibility of their practical implementation in Russia. This aspect of the problem is especially important for our research. The efforts of the Empress led to progressive changes in Russia: modification of state administration and law, centralization of public finance, emergence of primary education and intensification of publishing (Essays on Russian Culture of the XVIII Century: Part 3, 1988). These measures, however, were not sufficient to achieve the goals of government to modernize Russian financial system. Miller and Rose (1990) argue that symmetry of a government’s needs and governmental technologies is a prerequisite for the successful implementation of the state programmes. Our article discusses one more condition: the skill level of experts should correspond to the complexity of the state programmes and the techniques used to implement them.
To date, the problem concerning modernization of public sector bookkeeping in Russia in the eighteenth century and its interconnection with the Enlightenment has not been sufficiently investigated. The works of Kuter and Sokolov (2012), Motyka (1990), Mattessich (2008), Peterson (1979) and Platonova (2009) touch upon this topic only slightly. There are just a few works available on the development of Russian public sector accounting in the eighteenth century, published in Russian (Galagan, 1927; Lvova, 2014; Medvedev and Nazarov, 2007; Shyroky, 1939; Sokolov, 1985). These studies investigate the evolution of regulation acts and theoretical thought in the field of accounting at that period. On the contrary, our analysis is based on the extensive involvement of primary sources.
This article reports the results of our study of archival sources kept at the Russian State Archives of Ancient Documents (RGADA), particularly those from Fond 1239, Moscow Palace Archive. Fond 1239 comprises the 58 inventories of administrative and financial documents. Inventory 3 is the largest, consisting of 123 parts (from 20 to 500 documents in each part). The following documents are among them: inventories of incoming and outgoing documents, minutes of meetings of the Principal Palace Chancellery, 5 correspondence with higher authorities, including the Senate, 6 personnel documents and so on. Therefore, only some of these documents were selected for analysis. We were primarily interested in the documents related to the period of Catherine’s reign (1762–1796), but in order to conduct a comparative analysis, we also analysed the documents related to the beginning and the middle of the eighteenth century. We focused most of our attention on financial documents and reports: books of receipts and expenditures, unpaid duties books, inventory books, staff schedules and so on. The detailed study was carried out for documents 51892–51917, kept under Part 108, Inventory 3, Fond 1239, which contains 14 account books of the Moscow Palace Office 7 (from 1774 to 1786). At the same time, in order to carry out a comparative analysis, we studied the documents from Fond 23, Caucasian documents; Fond 194, Posolskiy prikaz; 8 Fond 271, The Berg-college; 9 Fond 275, Expedition of State Distilleries; Fond 1182, Moscow Print Yard, 10 for the same time period. The analysis of the primary sources also took into account the information contained in other documentary evidence of Empress Catherine’s era, especially the normative acts included in the Complete Collection of Laws of the Russian Empire from 1649 (PSZ, 1851). Our historical analysis also drew upon the results of research conducted by modern scholars working in such fields as political history, economic history and history of public administration, finance and taxes. This study of extensive archival material, using the Foucauldian concept supplemented with the analysis of a significant number of secondary sources, aims to form a comprehensive understanding of the role of Enlightenment thought for the development of public accounting in Russia.
Catherine II as an adherent of the Enlightenment on the Russian throne
Russian Empress Catherine II dreamed of following in the footsteps of Emperor Peter I and continuing his policy of Europeanization and modernization of Russia. Peter I implemented a new structure of government, taking European models as his inspiration. As a result of Peter’s reforms, the majority of governmental staff began to receive a fixed salary, while previously they had to ‘feed off’ the contributions from the citizens, that is, to subsist upon whatever applicants for services paid them (Demidova, 1964). Legislative acts of Peter I, for example, the Table of Ranks 1722 (PSZ, 1851, Volume VI: 486–493), attached great importance to work in governmental bodies for obtaining various privileges in the society. In order to introduce his innovations, Peter had to overcome enormous resistance of the traditional way of governing.
Reforms in governmental institutions began to develop actively after the succession to the throne of Catherine II (Klyuchevskiy, 1910; Solovyev, 1879). Having ascended to the Russian throne, Catherine II became the ruler of a country in which the laws did not recognise the civil freedom and equality of citizens. Most of the population was illiterate. Corruption and fraud reigned in the system of public administration. Empress Catherine II, as an adherent of European culture, would read the writings of European philosophers of the Enlightenment and corresponded with some of them (e.g. with Diderot, Voltaire and Grimm). She put a lot of effort into establishing an image of Russia as a strong European state under the rule of an enlightened monarch (d’Encausse, 2002; Madariaga, 1981). Acquaintance with the works of French authors allowed the Empress to conclude that the task of the authorities is not to preserve the existing social and political system but to gradually improve and develop it. Almost immediately after her accession to the throne on 28 June 1762, Catherine II issued the Manifest, proclaiming her political principles (PSZ, 1851, Volume XVI:1). Empress Catherine argued that the state power must satisfy the needs of the society, defend Russia’s national interests and ensure strict enforcement of laws.
At the beginning of her reign, Catherine II demonstrated a new style of government putting the issue to a broad public debate before adopting a state decision. The main political problem that hampered the development of the country was the need for emancipation of peasants from serfdom (Klyuchevskiy, 1910; Solovyev, 1879). Catherine II motivated the Free Economic Society to hold a competition for the best project to free the serfs (Belyavsky, 1960). This was the first step in engaging a wide range of people with knowledge in this area in a discussion of the state problem. It is worth noting that the projects were submitted anonymously and that representatives of different classes could participate in the competition. A. Polenov, one of the participants, was a soldier’s son who graduated from a Russian school and then studied in a foreign university (Belyavsky, 1960). The prominent courtier I. Yelagin, who several years later would become the initiator of modernization in the royal estate of Catherine II, also submitted a project (Journal of Landowners, 1859). The famous French philosopher Voltaire took part in this competition, too (Archaeographic Yearbook, 1958/1960: 412–413). However, the victory was not awarded to him but to a more moderate project by Bearde de l’Abaye (Solovyev, 1879). In the first years of her reign, Catherine II repeatedly showed her desire to end the shameful slavery of peasants in Russia. However, a strong resistance from the nobility, whose support Catherine II needed to govern the country, gradually pushed aside the resolution of this vital issue.
Another example of the new government style based on analysis and problematization of reality and introduced by Catherine II, was the work of the Law Commission in 1766–1767. The Commission was charged with the task of standardizing and modernizing the legislation of Russia. The work of the Commission provoked a strong public response. The Law Commission consisted of 564 representatives from different regions and different strata of the population: 28 from state institutions, 161 from the nobility, 208 from townspeople, 79 from state peasants and 88 from the Cossacks and national minorities (d’Encausse, 2002: 77). Before that, Catherine II had worked for a long time on the text of the Nakaz of Empress Catherine II for the Law Commission (Nakaz), which characterized the author as a liberal person with broad views (Nakaz, 1907). Afterwards, she held many meetings with the members of the Law Commission, listening to their suggestions and recommendations for the improvement of Russian society and promoting uniform laws for all citizens. The work of the Law Commission revealed the actual social and economic conditions in Russia. First, deep conflicts were identified not only between different classes (noblemen and serfs, townspeople and peasants, noblemen and merchants), but even within seemingly unified classes of the population (e.g. the ethnic Russian nobility and the nobility of other nationalities). Second, it became clear that not only serfs were unfree in Russia but also noblemen, whose freedom was limited by the will of the monarch. Third, numerous instances became known of lawlessness against the serfs inflicted upon them by the nobles who owned them. The owners of serfs staunchly opposed changes in this area. The work of the Law Commission influenced the course of further reforms by Catherine.
All these reforms in governmental institutions changed the social atmosphere of Russia. Enlightenment philosophy contributed to the emergence of a generation of statesmen who actively participated in the reform process. In the second half of the eighteenth century, adherents of the Enlightenment included outstanding statesmen (I. Betskoy, E. Dashkova, N. Panin, I. Elagin and others), professors of Moscow University (S. Desnitsky, D. Anichkov) and famous writers (I. Krylov, A. Novikov, D. Fonvizin, N. Radishchev). Some of them had studied in Europe. The works and public speeches of these persons made projects for the improvement of political and economic life in Russia known to the general public (Selected Works of Russian Thinkers of the Second Half, 1952). The reforms of Catherine II covered many areas of state activity. In the field of culture and education, Catherine’s measures included the development of journalism and publishing; opening of new educational institutions; financial support for the theatre, literature and fine arts; invitation of European philosophers and writers to Russia; and so on (Druzhinin, 1964).
However, the democratization of public consciousness was happening under the domination of the doctrine of autocratic power. Catherine II clearly demonstrated that the monarch’s power should be autocratic and unlimited when implementing her reform of 1763, which limited the functions of the Senate (d’Encausse, 2002; Rancel, 1975). Catherine justified the necessity of autocracy in Russia by the size of its territory. She wrote, ‘The Sovereign is absolute; for there is no other authority but that which centres in his single person, which can act appropriately to the extent of such a vast dominion’ (Nakaz, 1907). The geographical factor played an important role in the choice of the course to be taken for the modernization of Russian state administration. Therefore, it was important not only to change the governmental style of the supreme authority but to achieve the same changes at the local level. The need to manage at a distance made it necessary to develop clear-cut rules and procedures that could be then replicated at the lower levels of governance. Enlightenment thought influenced the economic policy of the Russian state in the eighteenth century; proclamation of the freedom of commercial activities principle, the development of manufactories, liquidation of some monopolies and expeditions conducted by the Academy of Sciences to study the country’s natural resources are examples of this impact. These measures contributed to the development of the country’s productive forces and the expansion of its territory and, consequently, required transformation of government (Kovalchuk, 2017). In order to govern such a large country effectively, it was necessary to mobilize significant financial resources and to improve its financial system.
Complex financial problems of the country had to be solved before the reforms in the field of governmental administration could be implemented. Having ascended to the throne, Catherine II inherited utter disorder in public finances and a lack of accurate data on the income and expenditure of the state. There are numerous reports from Catherine II and senior government officials concerning the unreliability of information about state revenues (Chechulin, 1906). The Italian Enlightener Algarotti, when travelling across Russia in 1739, wrote in his diary, ‘On the incomes of Russia. It is extremely difficult to know exactly what they are’ (Algarotti, 2015). This problem was further aggravated by the territorial vastness of Russia, as well as the disparity between the methods of financial management in the centre and in the regions. Catherine II understood the need for balancing the state’s revenues and expenditures. In her memorandum ‘On state revenues and finance’ she set the objective of reviewing the revenue items of the budget, strictly controlling expenditures and comparing them: ‘… we must make our expenditure correspond to the revenue; … our state expenditure, contrary to that, exceeds the revenue by more than one million … [roubles]’ (RGADA:397:1:30:14–15).
Mobilization of significant financial resources was an enormous task that could not be solved by the traditional way of governing. As a result of the Governorate 11 reform of 1775, the following changes in the government structure were implemented: the number of governorates increased; local government bodies were divided into administrative, financial and judicial authorities; and local bodies began to operate on the basis of self-government by nobles. A network of financial institutions was created at the level of local authorities. Public finance, like no other area, needed new accounting techniques and a lot of professionals with special knowledge, who would be able to act as experts when solving governmental problems. The number of staff in state bodies was increased dramatically. While in 1760, the number of officials in government bodies amounted to 6,500, after the Governorate reform, there was almost a sixfold increase. In addition, there was a redistribution of officials that benefited the local authorities. At the beginning of Catherine’s reign, the number of officials in central and local bodies was approximately equal, while in 1794, local bodies had 80 per cent of the total government staff (Pisarkova, 2007). Nevertheless, increasing the number of employees did not mean automatic improvement in governing processes. The Senate still received necessary information about the state’s actual revenues and expenditures with great difficulties.
The state’s need for qualified government staff was closely interrelated with the social problem of serfdom because the access of serfs to education and professional training was restricted. Catherine ruled Russia for 34 years and during this time, her political views changed. In the first decade of her reign, Catherine II did not doubt the need for gradual Enlightenment and liberation of the Russian people, and these aspirations were in full harmony with the idea of a strong imperial power. The French Revolution of 1789 was a huge test for the liberal views of the Empress (d’Encausse, 2002; Madariaga, 1981). The ideas of freedom and equality began to threaten absolute monarchical power, which prompted Catherine’s words about the ‘mistake of the French philosophers’. Even though progressive reforms in the field of state governance and the economy were continued, in the last years of her reign, Catherine II made great efforts to limit the penetration of the ‘French plague’, as she used to call appeals for revolutionary actions, into Russia. However, numerous peasant uprisings (1773–1775) and public appeals from famous persons for a radical change in the existing political system (N. Radishchev, A. Novikov) revealed a wide gap between the concepts of the Enlightenment and autocracy. Thus, reality imposed restrictions on the practical implementation of Enlightenment ideas, which contributed to the incompleteness of many of Catherine’s reforms including Russian public sector accounting.
Modernization of Russian public accounting during the second half of the eighteenth century
Catherine II set modernization of public finance and state financial control as one of her priority political tasks. The government needed to centralize collection of revenues and to control the targeted use of state funds. Innovations in accounting methodology as new cascades of inscriptions were necessary if the government wanted to achieve these goals and consolidate its power. Meanwhile, accounting methods introduced during Peter the Great’s reign (1696–1725) had for a long time been used in the Russian public sector without undergoing any changes. The first regulatory document in the history of the Russian accounting, the Admiralty Regulations 12 , established the structure of the books (registers), with recommendations as to the form of tables for maintaining chronological records of the Debit and the Credit sides. Despite the use of DEB terminology, this system was single-entry bookkeeping (Lvova, 2014). The structure of books specified in the Admiralty Regulations was recommended for use not only at organizations subordinate to the Admiralty Collegium, but also at those reporting to other departments 13 (e.g. Berg-College), 14 as well as governorate and volost 15 administrations (On Procedures for Maintaining Receipts and Expenditures, and Cash Accounts, and on How to Keep Books and How This Is to be Done in Governorates, Provinces, and Towns, 1736). Books of receipts and expenditures were widely used in the army, in administrative agencies of different levels, at state plants and factories. 16
The problem of public sector accounting at the middle of the eighteenth century was poor financial discipline. The central financial authorities needed to receive information from all governorates and volosts and then to analyse and evaluate the state revenues and expenditures. Instructions used by local authorities to report to central bodies were not strictly followed. For example, each state department was supposed to report about revenues and expenditures annually. However, in practice, such reports were sent to the central bodies much later than required; they were also confusing and contained a lot of errors. Therefore, disruptions in displacement of inscriptions made the further transformation of these data into consolidated reporting more difficult or impossible.
A large number of royal decrees were issued to improve the situation. For instance, the Instructions to governorate and volost administrations issued in 1736 recommended maintaining separate accounts for receipts by the type of tax or duty: Do not mix one duty with another, so that it can be always seen how much is due for a particular tax, and how much of that was collected, and how much is in arrears, and in this way it will be more convenient to report to the aforementioned authorities and draw up accounts. (On procedures, 1736)
The Senate issued decrees ‘on maintaining books of receipts and expenditures with a cord and a fastener’ to its subordinate institutions in 1754, 1768
17
and 1771. In 1773, following the decree signed by Catherine II, the Expedition of State Revenues was established
18
with the aim of centralizing the financial system. The officials were given the following instructions: Books of receipts and expenditures, as well as books of kantseliarskiye
19
duties, for growth of which they [i.e. officials] should strive, and reports that are sent concerning that, need to be clear and complete; and for achieving the most transparent account of receipts and expenditures, they should maintain, in a relevant book, entries for each duty separately.
20
(Emphasis added by authors)
However, after a few months, the Senate found out that collected taxes and duties, due to the carelessness and negligence of officials, were not registered separately in all reports as prescribed. 21
Works on accounting history in Russia describe the eighteenth century as a period when methods of accounting practice used in European countries were borrowed (see Galagan, 1927; Motyka, 1990; Shyroky, 1939; Sokolov, 1985). Accounting in most European countries had passed through several stages in development by that time: government regulation of accounting procedures had started; a number of publications summarizing the practice of double-entry system (DEB) appeared (Mattessich, 2008). More advanced methods were applied in public sector accounting in Austria, France and Portugal (Gomes et al., 2008). The governments of different European countries implemented accounting reforms which resulted in the introduction of DEB for managing public finances. Although the initial adoption of DEB within central government in some countries was not a straightforward process, the use of DEB for mercantile purposes provided evidence for decision makers of its potential relevance to public administration (Gomes et al., 2008). The motivation for this accounting change within central government was related to deficiencies of the previously used accounting system.
Russian accounting practice in commercial areas was unregulated by the government and there was a very small number of original publications on accounting in Russian at that time (Medvedev and Nazarov, 2007). Motyka (1990: 53) stresses that in the eighteenth century, scholars had little interest in having their works translated into Russian ‘because the accepted languages of scholarship were German and Latin. Moreover, thirteen of the sixteen original members of the Academy of Science (established in 1717-25) were German’. The progressive policy of Catherine II contributed to the dissemination of knowledge about European accounting practices in Russia. Due to active trade with England in the second half of the eighteenth century, the economic knowledge accumulated in the latter spread to Russia. The first book on accounting in Russian translated from the English language (Hawkins, 1783) was published in 1783. A few years later, several more works on DEB, translated from French (Chulkov, 1788) and German (Goessens, 1790; Ludovici, 1789), were published.
Advanced accounting techniques entered Russia in a variety of ways. The process was facilitated by the invitations of foreigners to come and serve the Russian government or work as teachers in the newly created Imperial Commerce School, and also by sending the representatives of the Russian nobility and Russian officials abroad to study (Pisarkova, 2007). In Russia, the term ‘merchant bookkeeping’ was often used to designate DEB. Unfortunately, only a limited number of people, mostly nobles, had access to this knowledge. Archival documents show that DEB was known among government officials during the reign of Catherine II, and its advantages were periodically discussed. In order to rationalize and improve public sector accounting methodology, the Principal Palace Chancellery came up with the idea to use merchant bookkeeping.
Accounting innovation appeared in the royal estate, 22 which activity represented a simplified model of the functioning of the state. Royal peasants were the private property of the emperor and the royal family. Peasants were responsible for providing labour on the owner’s land and produced everything necessary for the life of the royal household. Peasants also paid duties in cash to the royal treasury, apart from providing labour service (Semevskiy, 1901; Zaozerskaya, 1953). The money received was used to maintain the palace buildings, to organize celebrations and to provide for royal hunting, meals, rooms, clothing and jewellery, to purchase seeds and tools and so on. Management of such a vast and diverse estate required a significant number of administrative staff, so the list of expenses included wages for servants.
All offices of the Principal Palace Chancellery 23 used a traditional way of keeping records in various kinds of books from 1730 to 1800 (RGADA, 1239:2:541–1458). An annual report on the collected revenues and expenses was submitted by each office to the Principal Palace Chancellery. In small offices, receipts and expenditures were recorded in one cash book. In this case, it was necessary to use a special procedure to select the information when preparing a report on separate taxes. In larger divisions, such as the Moscow Palace Office and the St. Petersburg Palace Office, a separate book was opened for each type of revenue and expense (8–10 books for each year). This way was more convenient for preparing a report on separate types of revenues, for example, annual okladnye duties, 24 but it made it difficult to control the cash balance, since its calculation required summation and comparison of data from many books.
The Empress was very interested in the management of the royal estate. There are archival documents containing Catherine’s correspondence with the Senate concerning the issues of estate administration, numerous instructions for royal estate managers and decrees on the establishment of committees for auditing the work of administrators. Archival sources demonstrate that in 1771, the State Secretary of the Cabinet of Her Imperial Majesty, the future chief of the Principal Palace Chancellery, I. Yelagin,
25
presented to Empress Catherine II a report, which was analysed by a specially created commission. Yelagin’s report (RGADA, 1239:3:100:47981) contained a proposal for keeping accounts ‘on the model of prudential merchants’: so that the sum of the palace revenue will always be known: but this is not enough and the expenses should be clear; and for these needs special treasuries should be created in the Palace Office and in Moscow, too … they should keep the books on the model of prudential merchants; and for these needs accountants and cashiers with a salary greater than that of other employees should be included in the staff.
On 5 May 1773, the Commission, composed of Count Z. Chernyshev, Prince A. Vyazemsky and Privy Councillor L. Komynin, presented its report, in which Yelagin’s proposal was positively evaluated, to the Empress. After Catherine’s approval, an attempt was made to change the format of entries, using this model. Starting from 1774, a special Riscontro-buch register appeared in the Moscow Palace Office (RGADA, 1239:3:108:51892–51893). It was used for grouping the information about all revenues and expenses in the system of interrelated accounts. This innovation facilitated the analysis, control and comparison of financial information. Information from a cash book of receipts and a cash book of expenditures formed the basis for the records entered in the Riscontro-buch (Figure 1).
Interrelation between the books of the Moscow Palace Office used in 1774–1775.
Two books Riscontro-buch of the Moscow Palace Office (1774–1775) provide important evidence of accounting changes during the reign of Catherine II (Figure 2). The books have the form of leather-bound sheets of 30 cm × 48 cm or 27 cm × 42 cm in size, sewn together with a cord and sealed with a wax seal. The books are 3–7 cm thick.
Photo of the account books for the year 1774.
There is a sentence on the front page of the Riscontro-buch for 1774, which makes it clear that the book was maintained by the accountant Ivan Ivanov. The last page of each book has the number of pages listed on it. For example, this sentence signed by the member of the Moscow Palace Office M. V. Dmitriev-Mamonov 26 is written on the last page of the second book for 1774: ‘In total, the book has ninety three sheets’. This procedure became usual for account books, starting from 1722.
Pages in the books for the years 1774–1776 are numbered in a way characteristic of modern account books: on the double-page spread, the left and the right sides have the same number, for example, 3. The left side is called Debit, and the right – Credit. This page numbering was innovative at the time; it had not been used in any account book earlier in Russia. Each account included in the account book is given a few pages. The Debit entries are registered on the left side and the Credit entries are registered on the right side of each account. Entries are recorded in chronological order; the name of the relevant month is indicated in the centre of the page. Entries are made in a table consisting of several columns: the day of the month, the subject of the transaction, the sum in roubles and kopecks (as well as parts of kopecks, for example, ½, the so-called denga, and ¼, the so-called polushka). The amounts of transactions are indicated using Arabic numerals. The book for 1774 has an alphabetic index (Alphabet) with a list of accounts and page numbers on which each account begins, which was unusual for that time. The list of accounts contains both the Cash account and the accounts for different kinds of revenue (okladnye (fixed) duties, neokladnye 27 (unfixed) duties, doimochnye 28 (arrears) payments, payments for the hospital, kantseliarskiye duties) and expenses.
The Cash account occupies the first 93 pages of the book, then 16 Revenue accounts and more than 30 Expenses accounts come one after another. Blank pages (e.g. pages 94–95 and others) follow after each account. This suggests that the accounts were opened in advance, before the actual record-keeping started and it was hard to know beforehand how many pages entries of a particular account would take. Figure 3 shows the arrangement of entries on a page from the account book for 1774 (the Cash account).
The structure of the Cash account in the account book of the Moscow Palace Office.
The innovation here lies in the fact that the positional representation of each account contains a column, indicating the number of the page with a respective contra entry. Thus, page numbers of Revenue entries are written on the Debit side of the Cash account, while page numbers of Expenses entries are written on the Credit side of the Cash account. For example, on page 3, a sum of 3 roubles 20 kopecks, received from Vasily Mironov, administrator of the village of Izmailovo, is entered as a Debit entry to the Cash account with a cross-reference made to page 119 (see Figure 4).
A debit entry to the Cash account on page 3 with cross-reference to page 119.
We find the same amount entered as a Credit entry to the Neokladnye raznogo zvaniya zbory (unfixed duties levied on people of different ranks) account on page 119 (see Figure 5). The record on page 119 includes a cross-reference to page 3, too. This seems to prove that each revenue and expenditure transaction was registered in two accounts.
A credit entry to the Neokladnye raznogo zvaniya zbory account on page 119 with cross-reference to page 3.
Revenues and expenditures were registered in the book on a cash basis. At the bottom, the total sum entered on the page is calculated for carrying it forward to the next page. The resulting sum includes the amount accumulated from preceding pages. This record is designated as To transfer (Russian: Pereneseno). At the top of the next page, the sum brought forward is repeated, accompanied by the word Transferred (Russian: Transport).
At the end of each month, total amounts of debit and credit transactions, both accumulated total for the current month and for the year to date, were calculated. The sum of debit entries of the Cash account was equal to the sum of credit entries on Revenue accounts. The sum of credit entries of the Cash account was equal to the sum of debit entries on Expenses accounts. At the end of the year, the total amounts of debit entries of the Cash account included the opening balance of the account. Then the difference between the total amounts of debit and credit entries before the closing of the Cash account was calculated, and this sum was entered on the credit side of the Cash account for balancing it. Equivalent amounts were written on the Debit side of the Cash account at the opening of a new book on 1st January next year.
What is the essence of the royal estate accounting modernization? During the eighteenth century, labour service was gradually replaced with cash payments. According to the archival documents from 1732 to 1766, the amount of annual payments collected from royal peasants had increased almost five times, while there had been only a slight increase in the number of peasants and in the area under the jurisdiction of the Principal Palace Chancellery (Indova, 1964; RGADA 1239:11:31236; 1239:292:48241–48327). This indicates that the scale of mobilization of financial resources was to be increased and new technology for governing of cash flows was very necessary. Riscontro-buch was a new register that allowed improvements in the quality of the information received and to propose a new method of grouping it.
After the end of each month, all entries on the Cash account were grouped into five items. The first was duties levied according to the Old Act of 1724. 29 The second item was an additional duty introduced in 1769 after the beginning of the Russo-Turkish War. 30 Duties collected from the volosts located near distilleries were included into the third group. The fourth group was the deductions of 1 kopeck per each rouble of staff salaries, which were directed to the maintenance of hospitals. And the fifth item was transit money received for the benefit of Schtats-kontor. 31
The Russian financial system used the principle of specialization of revenues in the eighteenth century. Each duty was to be recorded separately because it was established for a specific purpose, and the money could be spent only in conformity with this purpose. Sixteen Revenue accounts and more than 30 Expenses accounts represented the same information in more detail (type of duty, year). Some of Revenue accounts showed the possibility of short-term borrowing between items in the case of a shortage of money for expenditures under a given revenue item. Such borrowings between the Principal Palace Chancellery and the Moscow Palace Office were sometimes registered. The amounts of revenues and expenses for 1774 are given in Table 1.
Total amounts on the Cash account for 1774, roubles. 32
How can we characterize the archival sources described above? Italian accounting implied the use of several books in the accounting system: a memorandum, a journal and a ledger. The Riscontro-buch described in this article is, in essence, a ledger, a principal book, with a set of cash, revenue and expenses accounts. Three groups of accounts are clearly interconnected – by means of indicating the page number where the second, contra entry, is listed. Transactions are posted into the ledger from previously kept books of receipts and expenditures.
Can we conclude with full confidence that the archival sources described above demonstrate examples of DEB use? Sangster (2016), when describing double entry at the early stages of its development, uses the term
What were the advantages of using the Riscontro-buch? At first, the information about each type of revenues and expenses recorded on the separate accounts was available at any time, and not exclusively after the end of the reporting period. It made the data more operational. Second, keeping correspondent records made it possible to monitor the correctness of records on Revenues and Expenses accounts against the balance of the Cash account. Thus, the information became more clear and reliable. Third, such system of records made it possible to increase or decrease the number of accounts when revenues and expenses types changed without additional efforts. Therefore, a new system was more mobile. Fourth, it facilitated the comparison and control of the target use of royal estate funds. Fifth, registration of borrowings between the different offices on the special accounts made it more convenient to control debts between distant government bodies without the transportation of cash. And the last but not least advantage was the possibility to combine the information for preparing various reports at the local level and transfer the different financial reports to the central body.
Therefore, the innovation in the Moscow Palace Office allowed for obtaining more operational, clear, reliable, mobile and combinable information on revenues and expenses; provided for a stricter control over cash flows; and facilitated preparation of the state budget. In terms of Latour (1987), it was a new cascade of inscriptions which allow to displace and to transform data by the new way. The displacement of information about economic activity of royal estate was carried out by means of the system of Revenues and Expenses accounts. The transformation of information on revenues and expenses was made through their additional grouping according to separate items. The modernized accounting technique appeared as a response to the requirements of the government for more transparent and operative information about the imposition and collection of taxes, and state expenditures. This fact testified to the symmetry of governmental needs and new accounting technology created by an unknown author for Russian public sector at the end of eighteenth century.
Accounting expertise as an enlightened practice during the reign of Catherine II
The centralization of the Russian financial system during the reign of Catherine II led to a search for more sophisticated ways of collecting and consolidating the information on state revenues and expenses. Acquaintance with advanced European accounting techniques became the determinant of changes in public sector accounting. New accounting techniques created in the Moscow Palace Office (1774–1775) became an instrument for more rational governing of the royal estate. An application of this innovation required new knowledge and higher professional skills of government staff. Accounting changes contributed to an increase in the number of persons engaged in intellectual work. These people as experts were needed to improve the effectiveness of government decisions. An expert opinion became an integral element of the new way of government. In this case, we can regard accounting expertise as an Enlightenment practice.
What is surprising is that the new technique used in the Catherine’s royal estate was not widely adopted by other offices or at the higher level of management of the Principal Palace Chancellery. We could not find any evidence of a similar way of record-keeping among the archival materials of other government bodies, for example, Berg-Collegium (RGADA, 271:1:554–556), Expedition of state distilleries (RGADA, 275:1:24–648) and others. The application of the new technique was short-lived; even at the Moscow Palace Office, it was used for just two years. The role of the Principal Palace Chancellery significantly diminished after 1775 as a result of administrative reforms; the amounts of cash receipts of the Moscow Palace Office dramatically decreased after 1776; and accounting for receipts by types of revenue, therefore, was no longer such a difficult task. This could be the reason why the use of the new accounting technique in the Moscow Palace Office was suspended. But why was the experience of the Moscow Palace Office not duly appreciated by other administrative institutions?
As mentioned above, for the success of innovation, the new technique should be not only created but presented by the experts. They have acted as powerful translation devices between ‘authorities’ and ‘individuals’ (Miller and Rose, 1990: 19). The transfer and translation of knowledge are carried out through manuscripts, articles, books, written instructions and textbooks. For many centuries, accounting knowledge ‘may have been passed on from father to son, or from business partner to business partner or from owner to clerk but, eventually such knowledge came increasingly to be written down’ (Boyns and Edwards, 2013: 34). For example, the dissemination of DEB in European countries intensified after the publication of the work of Paciolo in 1494, describing this technique (Mattessich, 2008; Sokolov, 1985). For the period from 1494 to 1700 years in Europe, 283 books on accounting in eight languages were printed (Motyka, 1990). This led to the expansion of practical application of DEB in France, Germany, England and other countries.
In our case, a new accounting technique existed only in practice. We did not find any descriptions or recommendation for using this system of accounts for governmental needs. Regulation acts of later years (e.g. Instructions for local treasurers on 26 May 1782) contained the same rules of single-entry bookkeeping for different bodies of Catherine’s government (PSZ, 1851, Volume XXI:506). As for literature, all books, related to accounting, published in the second half of the eighteenth century in Russian, are known and analysed by researchers (Galagan, 1927; Lvova, 2014; Medvedev and Nazarov, 2007; Shyroky, 1939; Sokolov, 1985). Prior to 1800, only 24 items were published in the Russian language that could in some way be related to the subject of accounting: 13 translations from non-Russian literature, 10 items of a regulatory and legal character and one work of the Russian author M. Chulkov (Motyka, 1990: 50). The possibility of the use of DEB or its elements in public accounting is not even mentioned in any of these books.
Records kept in Riscontro-buch represented undoubtedly a more sophisticated accounting procedure in comparison with single-entry bookkeeping. However, it is also obvious that this technique required a deeper understanding of the essence of economic operations, knowledge of mathematics and specialized knowledge in the field of accounting. There is a good reason why Ivan Yelagin wrote in his report to the Empress about ‘accountants and cashiers with a salary greater than that of other employees’. The staff of the Principal Palace Chancellery included assessors, secretaries, assistant secretaries, copyists and registrars, with the salary of 120–300 roubles per year. Due to this innovation, the accountant 33 position with the salary of 500 roubles per year was added to the staff of the Moscow Palace Office in 1774 (RGADA, 1239:3:100:47981). In practice, even for the Moscow Palace Office, one accountant was not enough. Archival documents show that at least three accountants worked there in 1774–1775 – Ivan Ivanov, Ivan Vasilyev and Yegor Bazhenov (RGADA, 1239:3:108:51892–51893). A higher level of salary took into account not only the increased volume of work, but also the fact that the new technique required specialized knowledge and higher intellectual skills.
The size and structure of governmental staff in Russia did not match the government’s needs at that time. The local authorities experienced difficulties in recruiting a sufficient number of employees because of restrictions on their social status (Pisarkova, 2007: 421). Nobles took part in the work of local authorities reluctantly; at the same time, access to work in the government bodies for representatives of other social groups was prohibited. Therefore, Catherine issued decrees that softened restrictions on the social status of government officials (PSZ, 1851, Volume XVI). In addition, significant changes were introduced to the wage system; the tradition of ‘feeding’ was eradicated and all officials began to receive a fixed salary (Pisarkova, 2007). It was necessary for the state to take measures to improve the skills of the officials. Most of the officials started working for the government without receiving any previous special training; there were even singular cases when the government official was illiterate (Pisarkova, 2007). The lack of an accessible education system influenced the low level of culture and professional competency of all social strata of the Russian population. Only one from 10 officials of the Counting expedition working in the Cabinet of Her Imperial Majesty’s at the end of eighteenth century had a special education (Krichevtsev, 2007). Accounting books of the Moscow Palace Office reveal the illiteracy of the overwhelming majority of peasants. Servants could not themselves put a signature on a document; therefore, an accountant did this for them and added the following note: ‘signed by such-and-such’ (RGADA, 1239:2:1979).
The Empress entrusted the education reform based on the principles of the English philosopher Locke to a prominent figure in the Russian Enlightenment, I. Betskoy. Schools providing practical training in handicraft, artillery, engineering and so on were established in Russia in the second half of the eighteenth century (Historical and Statistical Essay on General and Special Education in Russia, 1883). However, only the privileged groups of the population, first of all noblemen, could study in these schools. In 1781, the Empress opened a public school in St. Petersburg financed from her personal funds, where reading, writing and arithmetic were taught to everyone. In the same year, six more schools of this kind were opened in St. Petersburg, with the total number of pupils of 486. In 1786, the Charter of the National Colleges in the Russian Empire was adopted, which provided for the establishment of a system of primary schools throughout the Empire, and specified their organizational structure and subjects to be taught. The Charter abolished restrictions on the social status of pupils. Schools were opened in 26 provinces; in addition, the Teacher’s Seminary was established, which trained 275 teachers in the next 15 years (Historical and Statistical Essay on General and Special Education in Russia, 1883). This was negligible compared to the population of Russia which at the beginning of the reign of Catherine was approximately 19 million people (Encyclopedic Dictionary, 1890–1907). As a result of these measures, by the end of Catherine’s reign only about 20 per cent of officials had graduated from various educational institutions (Troitsky, 1974: 159).
As mentioned above, all governmental bodies had difficulties with recruiting competent employees. A similar situation existed in public sector accounting. There were no schools for professional training of bookkeepers in Russia at that time; many bookkeepers did not even have primary education. They could carry out only routine procedures, mechanically copying previous records. In 1772, the first Imperial Commerce School in Moscow was opened; its students were taught French, German and English, commerce arithmetic, commerce correspondence and bookkeeping. But their number in comparison with the government needs for competent experts was extremely small. Thus, only 20 students entered the Imperial Commerce School every three years (Historical and Statistical Essay on General and Special Education in Russia, 1883).
The lack of qualified personnel as a reason for the poor development of commerce was evidenced by contemporaries of Catherine. In 1864, the Head of the Arkhangelsk Ivan Druzhinin in his submission to the Commission of Commerce wrote about the ‘total ignorance of knowledge in the field of commerce’ from merchants as the main reason for their bankruptcy and failures (Kizevetter, 1912: 95). Russian historian Vasily Krestinin reported the Commission of Commerce on the urgent need to open a gymnasium, where young men could study commercial science, including merchant bookkeeping (Motyka, 1990). Describing the reasons for the unsatisfactory situation in Russian public accounting at the end of the eighteenth century, Sakharov (1849) noted ‘a general shortage of experienced and capable officials for bookkeeping, the number of which was always disproportionate to the monetary and material turnover of the state’ (p. 206). Moreover, the modernization of public sector accounting faced the unwillingness of the vast country to accept the innovations. Catherine II initiated an education reform, but it faced the opposition of both serfs and their owners. The peasants refused to study because the increased salary did not change their social status; they still remained serfs who could be bought, sold or separated from their families (Kizevetter, 1912; Motyka, 1990). The owners understood that education of serfs would teach them to strive for a new social order based on reason, natural law and equality of all men (see Belyavsky, 1960; Selected Works of Russian Thinkers of the Second Half, 1952, and others).
It was not indeed possible to extend the experience of the Moscow Palace Office to other governmental institutions. The new technique was more sophisticated and could only be used by skilled employees possessing special knowledge. Given the scale of the Russian public sector, it would have taken a large number of accountants to introduce the innovations. All these accountants had to be trained, and such opportunities were not in place at the time. Cheap textbooks and a large number of schools and teachers were required for widespread dissemination of this innovation. Social reform was an urgent necessity, but Catherine II could not implement it at the time. The low level of education and financial illiteracy of the Russian population became a barrier for the emergence of a new class of highly skilled professionals needed to carry out government projects and reforms. Thus, the level of competency of accounting expertise in Catherine’s Russia was not adequate to the tasks being solved by the government, and to the new technologies that allowed to achieve the government objectives.
Conclusions and research perspectives
The ideas of the Enlightenment served as the conceptual basis for the governmental reforms in European countries in the eighteenth century. Foucault (1991) suggested that attempts to instrumentalize government and make it operable also take a certain ‘technological’ form. Latour (1987) described the essence of government technologies as mobilization of different resources (material things) through their displacement and transformation into the mental objects (complex of inscriptions). It is important to establish ‘… connections and symmetries, at both the conceptual and practical level, between political concerns about the government of the productive life of the nation […] and techniques for the governing of the subject’ (Miller and Rose, 1990: 27). A new way of managing the population required appropriate tools for its implementation. The modernized methods of public sector accounting became one such tool in the eighteenth century.
This study has sought to contribute to accounting history research by looking at the innovations in Russian public sector accounting in the eighteenth century through the analysis of new sources of primary data not yet widely discussed academically. The period of Russian history analysed in this article can be called unique. Catherine II not only proclaimed herself a proponent of the Enlightenment ideas during her reign but also translated these ideas into action, taking steps to achieve her ideal of the civilized state in Russia. As a result of the Europeanization of the Russian governmental practice, the new structure of the state financial system was constructed. The government felt an urgent need for timely and reliable information about the state revenues and expenses. However, financial data from remote regions of Russia came with a delay and a large number of errors, and the central authorities were not able to check and consolidate an increasing number of reports from local financial bodies. For example, 35,580 reports and 19,968 accounts for previous years remained unchecked in the Revision-Collegium 34 in 1788 (Sakharov, 1849). As Latour (1987) noted, the domination of government ‘can be corroded, interrupted or destroyed if the records, files and figures are immobilized, made more mutable, less readable, less combinable or unclear when displayed’ (p. 27). In order to implement the government’s programme to modernize the state financial system, new accounting and control techniques were needed.
The archival documents examined in our article indicate that changes in Russian public sector accounting were linked to the attempt to use DEB that was known in Russia as a more advanced method than the widely used single-entry bookkeeping. The description of account books kept by the Moscow Palace Office (1774–1775) brings evidence of the first attempts to use the elements of DEB in the Russian royal estate. In accordance with the criterion for the success of innovations in government technologies, established by Latour (1987), all innovations ‘will be selected for or against depending on how they simultaneously affect either inscription or mobilization’ (p. 25). The authors argue that the accounting innovations discussed in this article provided the system of detailed accounts for palace revenues and expenditures (new cascade of inscriptions) and facilitated the analysis, control and comparison of financial information (improved way of mobilization of financial resources). It was a tool that the administration could use when implementing a new way of governing the royal estate. This fact was a direct consequence of Catherine II’s desire to rationalize public accounting and the state financial control system. The innovations tested by the Russian royal estate bookkeeping were actively used at the end of the late-eighteenth century in the accounting practice of the Russian American Company – the first Russian joint-stock company with state participation (Wheeler, 1965). Thus, accounting changes during the reign of Catherine II became the basis for future development in this area.
At the same time, innovations in accounting were introduced very slowly in Russia. Analysing the causes of this process, the authors draw attention to the significant role of accounting experts as the agents of change. Experts usually act as the creators, holders and translators of new knowledge. Reforms of Catherine II affected the social structure of Russian society. A new stratum of the population that started to form was the experts dealing with paper-work as a professional activity. The growth in the value of intellectual labour and professional skills for administrative activities was, perhaps, the main consequence of the reforms of Catherine II carried out under the influence of Enlightenment thought. Thus, the impact of Enlightenment ideas on the system of government administration led to the emergence of a potential opportunity for any person to exercise power over others in accordance with his education and professional experience, and not dependent on class affiliation, social status or kinship. It was a cardinal change in social consciousness under the influence of the Enlightenment philosophy.
The dissemination of Enlightenment ideas as well as the reform efforts of Catherine II and her associates, on one hand, led to significant social shifts, triggering the mechanisms needed for the growth of social activity in the population, but, on the other hand, they failed to overcome the inertia of traditional thinking. The barriers to reforms in Russia in the eighteenth century included illiteracy, serfdom and the passive, routine thinking of the majority of Russian citizens. The emergence of highly skilled accounting experts required a long and intensive work, first, to eliminate illiteracy, and then to widely disseminate accounting knowledge. The development of publishing and the periodical press, and a radical reform of the educational system were necessary for creating a generation of educated people capable of mastering the complex techniques needed for the government of the state. The active development of the accounting profession in Russia started only at the end of nineteenth century (Karelskaia and Zuga, 2014; Lvova and Lvova, 2018; Sokolov, 2015). Significant events for public accounting occurred before that time: the Ministry of Education was created (1802), the first original works of K. Arnold on state accounting were published (1814, 1823), universities had begun to teach accounting (1836), the Code of Accounts Regulations for all government bodies was developed (1848) and, most importantly, the serfs were emancipated in Russia (1861).
Thus, this article concludes that in the conditions of social passivity and total financial illiteracy, the asymmetry between the government’s need for complex techniques and the low level of qualifications of government staff incapable of mastering these techniques became a crucial factor determining the success of reforms. The efforts of the government to manage without competent experts failed to produce the desired effect. In our opinion, the congruence between the competency of experts and complexity of the accounting innovation is the indispensable condition for the widespread dissemination of advanced accounting techniques in governmental practice.
The history of Russian bookkeeping in the eighteenth century demonstrates an evolution of accounting practice, causes and consequences of which require a further comprehensive in-depth study. A study of archival sources can help researchers to determine what the personal fate of the first accountants in Russia was, what government tasks they helped to solve and how the establishment of the Imperial Commercial School influenced the spread of knowledge about European accounting techniques in Russia. The search in the archives and examination of the obtained information will bring a deeper understanding of how the Enlightenment influenced the accounting innovations in Russia.
Footnotes
Acknowledgements
An earlier version of this article was presented as a section address at the 14th World Congress of Accounting Historians, Pescara, Italy, 25–27 June 2016, and the authors would like to thank Massimo Sargiacomo and those attending the conference for their valuable comments. The authors are grateful to Charles Richard Baker and three anonymous reviewers for detailed suggestions for improvement; any remaining errors remain their own responsibility.
Funding
The author(s) received no financial support for the research, authorship and/or publication of this article.
