OK, rant beginneth. I crave the indulgence of the list, for I rather suspect that I am the only person who cares about accounting standards, but I *do* care about them. Hate me plenty.
>The essential point is that technological knowledge--not merely its
>embodiment in machines--is an objective part of the productive forces
>of society (and historically the most important part). Under capitalism,
>according to the law of value, its producers
>contribute socially necessary labor time at an enormous multiple of
>the "standard" labor hour. The capitalists who employ it extract a
>correspondingly enormous amount of surplus value, which they realize
>directly, without need for any further transactions, by incorporating it
>into their capital base. But the transactions-based accounting system,
>which Lev rightly decries, not only refuses to recognize this, it as
>actually quite perverse. Research and development expenditures not
>only are not recognized as additions to capital, they are actually
>accounted for as *losses*!
All true, but based on a fundamental misunderstanding of what accounts are for. The *purpose* of a set of accounts is to be a record of transactions. The accounts of a company record the stewardship which its directors and officers have exercised over the previous year. Accounts are useful if one is valuing a company, but that is not their purpose. Their purpose is to allow the members of a company to keep track of what the company has done. When a company has spent money on research and development, then that money has been paid to somebody else, and is not available to the company any more. True, the company will be able to make profitable transactions in future, but it can then *account* for them in the future. Trying to make the accounts talk now in a timeless framework about everything that will ever happen from now to the end of capitalism is a perversion of their intent. The "15th century monk" who invented double-entry book-keeping invented it in order that Venetian syndicates did not have sums of money going astray and getting lost, not in order to aid speculators.
>Once you realize this, you can grasp that "profitability" of a
technologically
>dynamic firm, as measured by conventional, legally required, standards, is
>not merely irrelevant to the rational capitalist but even tends to be
>correlated with positive investment value. Rational investors, their eyes
>focused on the *future* returns of a firm over a long run measured in
decades,
>evaluate current expenditures, not for their effect on this years "bottom
>line," but for whether or not they really are likely to build up, for that
firm,
>a durable "competitive (ie., monopoly) advantage." Some make right
judgments,
>some wrong. Those who are right will be richly rewarded, those who are
wrong
>will be harshly punished, financially. But in the World According to Marx
>(ie., the real world) the technologically dynamic sectors of capital will
>always outstrip the laggards.
Absolutely so. But since the market already does this with old fashioned transaction-based accounts, why screw them up in order that it can continue to do so? Making the profit and loss account dependent on somebody's guesstimate of the value of future R&D strikes me as a complete lose. The trouble is that, in modern business culture, a piece of objective information (the earnings statement bottom line number) has been fetishised. Instead of being what it is, a summary of the transactions carried out in the year, the earnings number has been turned into an arbiter of (moral and stock market) value. And so the acocuntants, faced with the fact that accounting earnings are only tangentially related to capital accumulation, have treated this as a problem to be solved, and started to seriously bugger up their profession in doing so.
I've always felt that accountants have been unfairly maligned as part of the system -- the function they perform is useful, and something like it would be necessary under almost any alternative other than superabundant Marxian utopia. Paradoxically, I'd always thought that the accountants were the last remaining true profession, after the lawyers, teachers and doctors have been brought into the web of capital. Very disappointing to see the likes of Baruch (the UK ASB is going in a similar direction) selling out the noble traditions.
rant off, sorry for wasting your time, etc.
dd
Shane Mage
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