Abstract
In Accounting for Value, Rob Bryer aims to show how Marx uses his theory of value to explain capitalist accounting. The book has been published in parallel with a forthcoming companion volume titled Accounting for History in Marx’s ‘Capital’: The Missing Link. At the time of writing this review, the companion volume is yet to be published, and what follows inevitably suffers from the disadvantage of considering the current volume in isolation, notwithstanding the author’s clear intention that the volumes be considered in parallel. On the surface at least, the Value volume would seem by necessity less relevant than the History volume to an audience of accounting historians. Indeed, the target audience for Accounting for Value is very much the radical political economist. So does this mean the typical accounting historian should bypass this volume, or at least await publication of the next? Not necessarily. The subject matter is relevant to accounting theorists of all persuasions and to accounting historians interested in the evolution of the concept of value.
Bryer’s aim is to convince radical political economists of the value of studying accounting as social practice. To achieve this, Marx’s thinking throughout the book is lined up with mainstream modern accounting concepts. Accordingly, Smith’s invisible hand of market behaviour is replaced by the invisible hand of accounting, hence the book’s subtitle. Chapter 2 argues that the purpose of accounting, as it developed from the mid-nineteenth century, was to hold workers and management accountable to capital for the required rate of profit based on the maintenance of capital, with the implication that fixed assets and inventories be valued at replacement cost. The historical origins of Marx’s ideas on accounting are explored in chapter 3, through an examination of his correspondence with Engels. Bryer shows that Marx was able to use the financial records from the Engels’s family firm to teach himself accounting, which understanding, the book then argues, was crucial to the subsequent exposition of Marx’s critique of political economy in the three volumes of Capital and other writings. An important example is outlined in chapter 4, in which Bryer argues that a new, accounting-based, ‘replacement cost interpretation’, predicated on capital maintenance adjustments, supports one particular interpretation from the Marxist political economy literature that accommodates the labour theory of value, consistent with price changes and the tendency of the rate of profit to decline over the long run. The ground is thus prepared for the ambitious chapter 5, titled ‘Marx’s Accounting Solution to the Transformation Problem’, in which collective capital demands the same general rate of profit, such that, by taking the output price of any specific capital as given, and then deflating price by the required rate of profit, we arrive at the‘target’ or ‘standard’ costs that accountants can use to hold workers to account for the required return on capital. A consequence is the ‘law of one cost’, which is applied in chapter 6 to explain fixed asset valuation, such that depreciation is varied subject to the constraint that all units produced are of equal value, regardless of the relative efficiency of the machines utilised. In chapter 7, Bryer argues that Marx used the entity concept of accounting to distinguish between productive and unproductive labour, thereby providing consistent rules for treating overheads, as understood by accountants, but not thus far grasped by the radical political economy literature.
Throughout the narrative, there are some common themes. Most strident is Bryer’s determination to debunk Marx’s critics from various schools of economics, ranging from Bohm Bawaerk, to Bortkiewicz, Sraffa, Steedman and Harvey. The challenge is huge, and Bryer’s analytical skills are undoubtedly on the same level as these great economists, and perhaps even superior where he deploys his formidable accounting knowledge. Ever controversial, Bryer’s narrative device is to enlist Marx directly in support of accounting-based interpretations of the radical political economy literature. ‘Marx and accountants’ are thus presented as agreeing on a range of fundamental accounting concepts and articulated by Marx more than a century ahead of their official codification by the accounting profession. Whether one agrees with Bryer’s larger project or not, this narrative device smacks of anachronism, and will open the door to criticism from accounting scholars, if not from radical political economists. Unfortunately, Bryer’s approach has the added problem of obscuring the underlying message, as the reader is forced to check back to the original texts to answer questions like: Is there such a thing as ‘Marx’s replacement cost accounting’? Even so, it is clear to this reader at least that reinventing Marx in this fashion is not necessary to the success of the wider project, which is Bryer’s use of accounting to reinterpret some of the big questions of classical political economy.
To use the transformation problem as an example of one of these major questions, have Bryer, or ‘Marx and accountants’, succeeded where original Marx (without this new accounting interpretation) and subsequent generations of radical political economists have failed? In the third volume of Capital, Marx proposed that labour-based values could be transformed into market prices, so that even capitals with different compositions would earn the same rate of profit. Marx’s critics highlighted inconsistencies if inputs were purchased at prices of production, rather than values, a conundrum that has resulted in a large literature and a number of competing interpretations. Crucial to Bryer’s interpretation is Andrew Kliman’s Temporal Single System Interpretation (TSSI). Bryer develops this approach by suggesting a capital maintenance adjustment to determine consumable profits, allowing the equalisation of price, value surplus and profit in the subsequent period. An interesting result in the context of the radical political economy literature and the Rubik’s cube that is the transformation problem.
As all colours on one face align in this solution, however, new inconsistencies appear on others. In the second period, the ratio of surplus to variable capital changes, as does the ratio of variable to constant capital. The new surplus to variable capital ratio does not, however, reflect changes in the working day or rate of exploitation but rather the requirement to meet the conditions of equality arising from the distribution of profit in the proceeding period. The rate of exploitation thus now depends on distribution rather than production.
Such an outcome may matter to Marxist purists, but the general implication, that once formed – the rate of profit required by capitalists then determines the conditions under which production occurs – is one which many economists and accounting scholars could accept. Indeed, accountants can learn much from the outstanding analysis of underlying financial relationships set out by Bryer in formulating the solution to this problem, as indeed they can, from similar exercises in other chapters, understand the nature of target cost, fixed capital and overheads. How they might interpret Marx’s role in all this, and Marx’s position in the annals of accounting history, is a matter of further debate, which this absorbing book will undoubtedly stimulate.