Historical innovations in the regulation of business and accounting practices: A comparison of absolutism and liberal democracy

Abstract

This historical review article draws upon two theoretical models to compare state regulatory innovations pertaining to business and accounting practices in two contrasting periods: the Colbert Period, a period of absolutism under Louis XIV in seventeenth-century France; and the period of liberal democracy in the United States in the early twentieth century, during which the US federal government sought to expand its power over the regulation of unregulated capitalist activity. These two contrasting periods of state intervention in business and accounting practices can be characterized as innovations whose underlying design was conditioned by contemporary circumstances. The theoretical models employed include that of Miller (1990), who maintained that a primary “reason of state” (i.e. “political rationality”) justifying intervention in business and accounting practices during the Colbert period was “military competition” between France and other European powers. The second theoretical model employed is based on Clarke (2004), who argued that there is cyclicality to reasons of state focusing on “restoring economic stability” in the face of economic crises. This article identifies innovations in the regulation of business and accounting practices that have helped states to obtain the economic resources necessary for the exercise of sovereignty while maintaining social order within their national boundaries.