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Accounting as a technology of government in the Portuguese Empire: The development, application and enforcement of accounting rules during the Pombaline Era (1761-1777) Delfina Gomes a, University of Minho email@example.com b Garry D. Carnegie RMIT University firstname.lastname@example.org a Lúcia Lima Rodrigues University of Minho email@example.com a The first and third authors are respectively Assistant Professor and Associate Professor, in the School of Economics and Management, University of Minho, Gualtar, 4709 Braga Codex, Portugal. b Professor of Accounting, School of Accounting, RMIT University, GPO Box 2476, Melbourne, Victoria, Australia 3001. * Corresponding Author: Delfina Gomes, University of Minho, School of Economics and Management, Gualtar, 4710-057 Braga Portugal, Tel.: +351253601917, Fax: +351253601380, E-mail: firstname.lastname@example.org This working paper has been accepted for publication in European Accounting Review Acknowledgments: Earlier versions of this paper were presented at the Sixth Accounting History International Conference, Wellington, New Zealand, August 2010, the 35th Economic & Business Historical Society Conference, Braga, Portugal, May 2010, the 12th World Congress of Accounting Historians, Istanbul, Turkey, July 2008, the 31st European Accounting Association Congress, Rotterdam, The Netherlands, April 2008, and at the Critical Perspectives on Accounting Conference, New York, USA, April 2008. The authors are grateful for the comments received from participants during these presentations. Appreciation is also expressed to Trevor Hopper, Massimo Sargiacomo and Brian West for their helpful comments on earlier drafts of the paper. This research is financed by Portuguese national funds through FCT - Foundation for Science and Technology by the Project PEst-OE/EGE/UI4021/2011. 1 Electronic copy available at: http://ssrn.com/abstract=2227297 Accounting as a technology of government in the Portuguese Empire: The development, application and enforcement of accounting rules during the Pombaline Era (1761-1777) Abstract This study of the interrelations of accounting and the State portrays accounting as a technology of government to effectively enact “practical action” (Snook, 2000: 186) at a distance in the Portuguese Empire. The study examines the development, application and enforcement of accounting rules under Portuguese imperialism in the “Pombaline Era” during the period 1761 to 1777. These rules, comprising the “1761 Law” and the later applicable accounting “Instructions”, were issued by the Royal Treasury, established in 1761, for application throughout the Portuguese Empire. Using the combination of Foucault’s concept of governmentality and Snook’s theory of “practical drift”, the study elucidates how the implementation and evaluation of accounting control systems permitted the Portuguese Government to exercise control at a distance, thereby mobilizing individuals to pursue its goals for the Empire. The measures taken to enforce conformity with the accounting rules are shown to have been targeted at deterring the phenomenon of practical drift and, therefore, were concerned with avoiding malfunctioning and potential chaos in colonial administration. Keywords: Accounting rules, Central government, Portuguese Empire, Colonies, Technologies of government, Practical drift 2 Electronic copy available at: http://ssrn.com/abstract=2227297 Introduction In the second half of the eighteenth century, the Portuguese Empire, although somewhat diminished in significance from its halcyon phase of the sixteenth century, remained of considerable importance to Portugal and to the colonizing function of Europe in the broader international context. During the regime of King D. José I (King Joseph I) (1750-1777) Portugal was characterized by the adoption of mercantilist policies, enlightenment ideals and an absolute conception of the power of the state (see, for example, Black, 1990; Hartung, 1957; Maxwell, 1995; Serrão, 1996a; Gomes, Carnegie and Rodrigues, 2008). The colonial administrative system adopted by the Portuguese government and the accounting controls put in place were intended to be the means of integrating, connecting and harmonizing the administration of the Portuguese Empire dispersed around the world. Formed in 1761, the Royal Treasury was the central government organization in Portugal which administered the country and her colonies. Headquartered in Lisbon, the Royal Treasury was the first Portuguese central government organization to adopt double entry bookkeeping (DEB) specifically within the four Contadorias Gerais [General Control Offices] only from 1 January 1762 (Gomes et al., 2008). Within the Portuguese colonies and in other parts of the Royal Treasury, DEB was not required to be adopted from 1 January 1762. Instead, a simplified yet formal accounting control system was applied from this date, founded on single entry bookkeeping (SEB). This accounting system was intended to result in uniform colonial administration as facilitated through the establishment of the Royal Treasury under the Carta de Lei de 22 de Dezembro de 1761 (Letter of Law of 22 December 1761, hereafter known as the “1761 Law”) by the government of the Marquis of Pombal 3 (“Pombal”). Pombal was a powerful political figure who led the government in a dictatorial way during the period 1756 to 1777 (the “Pombaline Era”). Subsequently, the 1761 Law was supplemented by the development of accounting Instrucçoens (the “Instructions”) that were effectively issued as regulations for adoption in the country’s colonies from as early as 1764 in the case of Angola but, more generally, for progressive application in the other Portuguese colonies from 1766. The Instructions, however, did not impose any shift away from the use of SEB in the colonies as specified in the initial Law. The 1761 Law and the Instructions are collectively described in this study as the “accounting rules”. Based on available surviving records relating to these accounting rules that are held in repositories of public archives in Lisbon, this study focuses on the Pombaline Era and is concerned with exploring the development, application and enforcement of the accounting rules in the Portuguese colonies. The study embraces an examination of the surviving official correspondence that was issued as supplementary advice in applying the 1761 Law and the Instructions and in enforcing the accounting rules. Typically, accounting history studies set in the eighteenth century do not focus on the enforcement of rules. Importantly, this study presents evidence of non-compliance with accounting rules and of the measures that were adopted to enforce compliance with the rules at dispersed locations. However, the study does not involve an examination of any surviving colonial accounting books that were maintained in the Portuguese colonies as records of original entry of transactions. The study aims to enhance an understanding of the development, application and enforcement of accounting rules in the eighteenth century in the context of Portuguese Empire through the examination of governmental 4 discourses on the issuance and initial application of the rules and the available surviving evidence pertaining to compliance with, and enforcement of, these rules in the colonies. Studies on the interrelations of accounting and the State have been integral in a number of recent studies of accounting change (see, for example, Álvarez-Dardet, Baños, and Carrasco 2002; Baños, Gutiérrez, Álvarez-Dardet, and Carrasco, 2005; Miller, 1986, 1990; Miller and Rose, 1990, 2008; Rose, 1991; Sargiacomo, 2008, 2009a, 2009b; Sharma, Lawrence and Fowler , 2012 ; Yayla, 2011). Studying these interrelationships in the past within specific countries or regions assists in enhancing an understanding of accounting as a social practice, as well as a technical practice, and the dynamics of accounting change (see, for example, Hopwood and Miller, 1994; Miller, 1994; Gomes, 2008; Gomes, Carnegie, Napier, Parker and West, 2011, Carnegie and Napier, 1996, 2012). Recognizing that accounting is a social practice with impacts on organisational and social functioning and development, this study applies an interpretive framework for analysis purposes using a combination of perspectives, specifically Foucault’s concept of governmentality and Snook’s theory of practical drift. The 2 study’s concern with the development of accounting rules provides insights into how accounting, as a technology, is deployed in operationalising the rationalities of government at a distance. The study’s focus on the application and enforcement of accounting rules, on the other hand, provides insights into accounting’s use in deterring practical drift and, thereby, in avoiding chaos in colonial administration. The current paper differs from Gomes et al. (2008) who did not examine accounting control systems across the Portuguese Empire but instead examined the advent of the Royal Treasury in 1761 and the DEB system adopted in Lisbon from 1 5 January 1762 within the four General Control Offices of the organisation. This investigation of colonial administration focuses on the accounting control systems adopted within the Portuguese Empire during the period 1756 to 1777 and recognizes the influence upon accounting of the political, economic and philosophical ideals of the time. It is intended to augment the literature in several key ways. First, the study addresses for the first time the development, application and enforcement of public sector accounting rules which were intended to harmonize the accounting practices for Royal finances in the context of the Portuguese colonial Empire during the eighteenth century. The available archival evidence examined on the enforcement of accounting rules permits a deeper analysis of compliance regimes and their purpose within colonial public administration. Although previous studies have analyzed aspects of the administration of colonial dominions, they have not been directly concerned about compliance with, or the enforcement of, accounting rules (see, for example, Carmona, Donoso and Walker, 2010; Lai, Leoni and Stacchezzini, 2012). Second, the study provides an opportunity to explore the impacts of a single individual on country and Empire, namely Pombal, who was a powerful and central figure in the administration of the Portuguese Empire. Third, the governmentality literature is extended for the first time as far as can be ascertained to Portugal and all of her colonies during the eighteenth century, thereby combining the apogee of Mercantilist policies and Enlightenment ideals within an absolutist conception of power. These contextual determinants have not previously been addressed together in studies on the interrelations between accounting and the State in the context of Empire during this period. Although previous studies on the interrelations of accounting and the State have been set in the eighteenth century (Álvarez-Dardet et al., 2002; Baños et al., 2005), 6 these particular studies were concerned instead with government-supported organizations. While certain other studies (Chua and Poullaos, 1998, 2002; Dyball, Chua, and Poullaos, 2006; Dyball, Poullaos, and Chua, 2007; Neu, 2000; O’Regan, 2010; Poullaos and Sian, 2010; Sian, 2011) have examined accounting in the context of imperialism and colonialism, these studies were set in the nineteenth and twentieth centuries or provided an account of colonial developments from the perspective of the former colonies in the post-colonial period. Finally, the study applies Snook’s (2000) notion of practical drift to accounting phenomenon for the first time, as far as can be ascertained, thereby illuminating accounting’s role in managing populations by means of the deterrence of practical drift in distant places. The remainder of the paper is structured as follows. The next section provides an overview of the interpretive framework adopted in this study. There follows a description of the political, economic and social context, which addresses the political and philosophical ideals and Pombal’s leadership during the Pombaline Era. An outline of the administrative control systems within the Portuguese Empire during this period is then provided. This outline is followed, in turn, by a discussion of the components of the regulatory framework in the context of the Portuguese Empire, specifically the development of the accounting rules in the form of the 1761 Law and the Instructions. The next section presents an analysis and discussion of the application and enforcement of the accounting rules in the context of Empire, with a particular emphasis on instances of non-compliance and the enforcement measures adopted. This section is followed by the main conclusions. 7 Interpretive Framework The investigatory perspectives applied in this study for analysis purposes comprise the concepts of governmentality (Foucault, 1980, 1991) and the theory of practical drift (Snook, 2000). Each perspective is addressed in turn. Governmentality The eighteenth century was a period characterized by changes in technologies of, and attitudes towards, governing populations, which Foucault described as “governmentality” (Danaher, Schirato, and Webb, 2000: xii). Governmentality or “the art of government” was used to describe “the ensemble formed by institutions, procedures, analyses and reflections, the calculations and tactics that allow the exercise… of power” (Foucault, 1991: 102). The term is generally applied in “governmentality studies” to denote the mentalities, rationalities and techniques through which subjects are controlled or governed. According to Foucault (1991: 92), “the art of government […] is essentially concerned with answering the question of how to introduce economy – that is to say, the correct manner of managing individuals, goods and wealth […] into the management of the state”. Foucault (1991: 92) elucidated the control dimensions of the concept in stating: To govern a state will therefore mean to apply economy, to set up an economy at the level of the entire state, which means exercising towards its inhabitants, and the wealth and behaviour of each and all, a form of surveillance and control as attentive as that of the head of a family over his household and his goods. Foucault (1991: 97) argued that “mercantilism might be described as the first sanctioned efforts to apply this art of government at the level of political practices and knowledge of the state” and “is the first rationalization of the exercise of power as a practice of government; for the first time with mercantilism we see the development of a 8 savoir of state that can be used as a tactic of government”. Governmentality, understood as the art of governing, encompasses two distinct aspects: 1) the “rationalities” or “programmes” of government, and 2) the technologies of government (Miller and Rose, 2008: 15). In historical contexts, “rationalities were styles of thinking, ways of rendering reality thinkable in such a way that it was amenable to calculation and programming”, while technologies “were assemblages of persons, techniques, institutions for the conducting of conduct” (Miller and Rose, 2008: 15-16). In Portugal during the eighteenth century, the rationalities were embodied by the philosophy of enlightenment, mercantilist policies and the absolute conception of the power of the state, and all actions and techniques applied by the government to exercise its power needs to be understood at the light of those rationalities. Accordingly, technologies are the ways through which programmes of government are put into practice, so they refer “to all those devices, tools, techniques, personnel, materials and apparatuses that enabled authorities to imagine and act upon the conduct of persons individually and collectively, and in locales that were often very distant” (Miller and Rose, 2008: 16). Foucauldian analyses of governments in accounting, focusing mainly on the technologies of government, that is, on the adoption and use of accounting control 4 systems, have uncovered the capacity of accounting to manage populations. Accounting as a technology is “imbued with aspirations for the shaping of conduct in the hope of producing certain desired effects” (Rose, 1990: 52). Accordingly, accounting is broadly recognized as an instrument of power and domination, among other “technologies of government” (Miller and Rose, 1990; Rose, 1990: 52; Rose and Miller, 1992: 183; Miller and Rose, 2008, chapters 2 and 3). Power relations are important because they characterize the manner in which people are governed by one 9 another. Foucault argued that “relations of power cannot themselves be established, consolidated or implemented without the production, accumulation, circulation and functioning of a discourse” (1980: 93; also see Cowton and Dopson, 2002: 193). Nonetheless, it is necessary for this discourse to be subsequently translated into effective practice in any location (Quattrone and Hopper, 2005). The relationship between the level of non-accounting discourse and rationale and the level of accounting techniques can create the “problematization”: the role of accounting control systems is translated into the policy discourse as connected to the specification of particular problems (for example, the necessity for greater control, to improve the efficiency of tax collection, and to increase the wealth or expand the territories of the State) that should be addressed. New or modified forms of accounting and associated calculation are articulated as a solution to the problem. Attention on accounting control systems is translated into the terms and objectives of the policy discourse to stimulate change and related impacts in the accounting domain (Robson, 1991). The call for change also involves a process of persuading others to see the “problem” and its solution in their way (Robson, 1991: 552). Action at a distance Accounting control systems, for instance, allow knowledge of distant sites to be mobilized and brought home to centres of calculation (Miller and Rose, 1990: 9), therefore enabling action at a distance to be generated. According to Robson (1992: 686) it is the quantitative orientation of accounting which facilitates the use of inscriptions, including accounting writing, numbers, lists and reports, in the form of accounting documents, to assist in enabling action at a distance. Where acting at a 10 distance gives rise to problems which result in the mismatch of the forms of explanation “here” and the objects to which they refer “out there” (Robson, 1992: 691), the question arises: “How to act at a distance on unfamiliar events, places and people?” (Latour, 1987: 223). Latour rendered the following answer: … by somehow bringing home these events, places and people. How can this be achieved, since they are distant? By inventing means that (a) render them mobile so that they can be brought back; (b) keep them stable so that they can be moved back and forth without additional distortion, corruption or decay, and (c) are combinable so that whatever stuff they are made of, they can be cumulated, aggregated, or shuffled like a pack of cards. If those conditions are met, then a small provincial town, or an obscure laboratory, or a puny little company in a garage, that were at first as weak as any other place will become centres dominating at a distance many other places (1987: 223, emphasis in original) As articulated by Preston (2006: 560), “accounting documents have the features of mobility, stability and combinability, which are the key elements of allowing action at a distance to occur”. Notwithstanding such qualitative features, the difficulty of acting at a distance tends to increase as the setting becomes more remote from the “here”, thereby often necessitating enhanced or additional action to be taken. As stated by Robson, “action at a distance implies not merely physical space between two points, but the capacity, through ‘strong’ explanations, to influence many contexts at the same time” (1992: 691, emphasis in original). According to Latour (1988: 160; cf. Robson, 1992), “practice becomes whatever people do in the setting acted upon; knowledge becomes whatever is mobilized […] to act upon the other setting”. Knowledge, as the prime focus of attention of Foucault (1977, 1980), is produced by the “maintenance of networks for the gathering, transmission and assimilation of inscriptions” which “translate the elements of the context” (Robson, 1992: 691, emphasis in original). However, even though power/knowledge is properly oriented towards acting in distant settings, Foucault 11 perceived action at a distance as the intended action to occur as embedded in the minds of the officials located at the centre. He did not focus attention on instances where the intended practices, as prescribed by rules, did not materialize due to non-conformity, for whatever reasons, with the applicable rules. McKinlay et al. (2010: 1026) elucidated this point in stating: In governmentalism there is always the temptation to move from an analysis of how individuals are rendered visible and calculable to an assumption that this possibility actually occurs in practice. Or that, once rendered calculable, organisations install monitoring, reporting and recording systems that are consistent and cumulative over time. We know that this is far from the case. Nor is it reasonable to assume that individuals police their behaviour, beliefs, and attitudes with such intensity that any shortcomings in organisational systems are more than offset by self- surveillance. In short, Foucault did not provide a model for conceptualizing the redesign or redevelopment of the rules in addressing the dimensions of non-conformity with the initially-adopted rules. These instances, where the desired practice is not obtained regardless of the form of the applicable rules, are interpreted in this study through the lens of “practical drift” (Snook, 2000: 192-3). Practical Drift Among other rules, accounting rules and any associated enforcement regimes assist in facilitating “practical action” (Snook, 2000: 186). Under Snook’s “practical drift” perspective, practical action is described as the “behaviour that is locally efficient, acquired through practice, anchored in the logic of the task, and legitimized through unremarkable repetition” (2000: 182). The possibility of “mismatches between the local demands of the situation and those global design rules” may result in the phenomenon known as “practical drift”, according to Snook (2000: 192-3). The context, time, distance and the interpretation/adaptation that individuals in local settings make of “designed rules” (including accounting rules) may result in a gap between what is 12 designed at the centre of calculation for adoption at the distance and what is the state of actual practice at a distance, otherwise known as practical action. Snook (2000: 24) defined practical drift as “the slow steady uncoupling of local practice from written procedure”. In short, practical drift arises when those people located at the scene where actions should take place do not or cannot follow the laid-down procedures in order to produce the intended results. Therefore, the notion of practical drift permits elucidation of action arising at a distance rather than the intended action, as envisaged, from the perspective of officials operating at the centre. Practical drift may cause organizational failures, including failures in accounting control systems, and may place complex and geographically-dispersed organizations at risk. Figure 1: Theoretical Matrix Logics of Action Rules Task Loose Engineered Applied 2 3 Situational Coupling 1 4 Tight Designed Failed Source: Snook (2000: 186). Stable Unstable Through the use of both contextual and temporal aspects of a phenomenon, Snook (2000: 220) created a theoretical matrix to explain “the dynamic, integrated nature of organizational reality”, as reproduced in Figure 1. In particular Snook 13 emphasizes the importance of looking through different levels of analysis, such as the level of the individual, group and organizational boundaries, and time to explain the occurrence of divergences between practices and the global designed rules that are 5 intended to govern practical action. Situational coupling refers to two important states of nature inside the organization: loosely or tightly coupled, where “coupling” refers to the level of interdependence existing between subunits of the organization (Snook, 2000: 187). Logics of action are “systems of scripts, norms, and schemas among which people shift” according to context (Snook, 2000: 188 quoting DiMaggio, 1994: 39). The third dimension is time. Time is introduced in Figure 1 through the arrows drawn at the centre of the matrix, which suggests a general sequence of the flow of the four designated states of the organizational system, determined by the interaction of a unique combination of situational coupling and logic of action. The theoretical matrix (see Figure 1) contains four quadrants, “each with a label to capture the dominant feature of the organization at that point in time” (Snook, 2000: 189). In brief, quadrant one represents a point in time where the organization only exists in the imagination of its designers and, therefore, is labeled as “designed” (Snook, 2000: 190). It consists of planning the activity by writing the rules to coordinate the actions of several subunits. The scenario envisaged in developing the rules for application would be one in which the designed system is tightly coupled where the members of the different organisational units would be expected to adopt the rules as written. Therefore, the “design state” identified in Quadrant 1 “is defined by a rule-based logic of action and a tightly coupled situation – a rational fit” (Snook, 2000: 190) and is a stable situation. The state of action in Quadrant 2 is defined by the interaction of a rule-based logic of action and a loosely coupled situation that creates an unstable situation. This 14 unstable situation results from a disconnection “between the real world constraints of everyday life and those imposed by artificial, externally dictated logics of action” (Snook, 2000: 192). Quadrant 3 depicts the stable situation where practical drift occurs, arising when the designed rules are “interpreted as overly controlling and as an unreasonable burden on operators in the field”. “When the rules don’t match, pragmatic individuals adjust their behavior accordingly; they act in ways that better align with their perceptions of current demands. In short, they break the rules” (Snook, 2000: 193). Quadrant 4 depicts the unstable situation where tight coupling exists but where there is a “gap between the locally emergent procedures actually being followed in various subgroups from those that engaged actors assume are dictating action” (Snook, 2000: 199). This disconnection increases the likelihood of disastrous coordination failures and to failures themselves. According to Snook (2000: 189), “quadrant 2 and 4 represent inherently unstable states for the organizational system; rule-based logics don’t match loose coupling and task-based action is no match for tight coupling”. On the other hand, quadrants 1 and 3 are “states of quasi-equilibrium” (Snook, 2000: 200). Movements from Quadrant 2 to 3 and from Quadrant 4 to 1 are stimulated by an imbalance in the system. However, the more dramatic mismatch occurs in Quadrant 4. Leaving Quadrant 4 feeds back to the original Quadrant 1 as “redesign”, and the cycle continues across time (Snook, 2000: 201). In this investigation, the subunits are the colonies within the Portuguese Empire, whose officials were required to prepare and report accounting information to the Royal Treasury in Lisbon. The administration of the Portuguese Colonial Empire from the centre of calculation in Lisbon is illuminated under Snook’s (2000) theoretical matrix in portraying the dominant features of colonial administration 15 at different points of time and, on occasions, at specific locations. This labeling occurs by reference to the surviving evidence on the development, application and enforcement of accounting rules. Accounting, therefore, is shown to be central in attempts to modify organizational positioning and to avoid failure. This combination of perspectives is applied to illuminate how accounting control systems were designed, deployed and redesigned to enable the Portuguese Government, during the Pombaline Era, to exercise control over people at distant places, thereby mobilizing individuals to pursue its goals for the Empire. Foucauldian governmentality elucidates the interplay between political discourse, infused by economic and philosophical ideals and conceptions of power, and technologies of government, specifically accounting control systems, and how the latter facilitated the control of individuals in distant locations. Particularly, the study focuses on how the discourse was translated into rules, specifically the accounting rules which mandated particular forms of accounting practice in the colonies. It highlights the problems identified in the implementation of those rules in practice and, with a focus on practical action at a distance, illuminates the enforcement regime put in place and the remedial measures that were taken for the purpose of deterring practical drift and, thereby, avoiding malfunctioning and potential chaos in colonial administration. In summary, the study’s concern with the development of accounting rules provides insights into how accounting, as a technology at the disposal of a government, is deployed in operationalising the rationalities of government at a distance. The focus on the application and enforcement of accounting rules, on the other hand, provides insights into the use of accounting for modifying organizational positioning to avoid failure. 16 Before analyzing the development, application and enforcement of accounting rules and exploring the role of accounting as a technology of the government and its importance in deterring practical drift in the Portuguese Empire between 1761 and 1777, the context in which these developments took place is outlined. The contextualization necessarily includes an outline of Pombal as a powerful and central figure in the administration of the Portuguese Empire Political, Social and Economic Context This section describes the political, social and economic context and comprises two sub- sections which depict the dominant political and philosophical ideals and Pombal’s leadership during the Pombaline Era. Political and philosophical ideals In exploring the art of government adopted in the Pombaline Era, it is pertinent to recognise the “worldwide models [which] define and legitimate agendas for local action, shaping the structures and policies of nation-states and other national and local actors in virtually all of the domains of rationalized social life” (Meyer, Boli, Thomas, and Ramirez, 1997, p. 145). Models such as mercantilism, enlightenment and absolutism prevailed in Europe during the time period of this study, and exerted influence throughout the European nation-states. Portugal was no exception. Mercantilism was the dominant economic premise during the fifteenth to the eighteenth centuries and consisted of a mixture of beliefs, theories, and practices that were aimed at enabling wealth accumulation by the State, especially through the accumulation of precious metals combined with the use of monetary policies for economic management (Macedo, 1971: 271-275). Its dogma was based on State intervention in economic life 17 that was intended to advance and reinforce the power of the State (Pombal, 1777). Not a single sector of the social life could be left untouched by the action of the State (Falcon, 1982, p. 134). In Portugal there was a concerted attempt to establish a clear dominion of the King, or the State (Hof, 1995: 172). This dominion of the government supported by both mercantilist policies and enlightened ideals is referred as absolutism. Absolutism can be defined as a form of government which is not hampered by parliamentary institutions, but where there is the voluntary submission to laws and the acknowledgement of the rights of subjects (Maxwell, 1995, p. 158). This form of government was adopted by the monarchs of most of the European states, who “strove to promote their sovereignty by amassing power over policy and resources within the State, and by competing with other states for influence and territory” (Woloch, 1982, p. 1). Differently, despotism is equivalent to unchecked tyranny (Hartung, 1957). As pointed out by Maxwell (1995, p. 158), Portugal was a hybrid case, “part-absolutist, part-despotic”. The expression “enlightened despotism” is generally used to describe the form of government that prevailed in many European states in the decades before the French Revolution, in particular, combining attacks on clerical power and privileges (especially those of the Jesuits), the support of religious toleration, the legal reforms, the abolition of torture, and the widespread interest in educational reform and development (Black, 1990). The enlightened despotism which characterized the period of this study moulded the implementation of mercantilism and enlightenment principles as will be addressed in the next sub-section which outlines the thought and intervention of Pombal. 18 In Portugal during the eighteenth century, a key development was the rise to power of Pombal who aspired to transform and develop Portugal to the level of the most developed nations in Europe. Pombal intended “to make the Portuguese Crown a powerful and brilliant one” (1777, p. 85). His wide ranging initiatives and actions were, however, controversial (Serrão, 1982, 1996b, pp. 19 and 85). Among other things, he has been described as the “Paradox of the Enlightenment” (Maxwell, 1995). One of his closest collaborators described Pombal’s leadership, in the years after his demise, as follows: “This minister [Pombal] tried to follow an impossible policy; he wanted to civilize the nation and at the same time to enslave it; he wanted to spread the light of philosophical sciences and at the same time elevate the royal power to despotism; …” (quoted in Boxer, 1969, p. 191). Pombal’s leadership In 1750 on the nomination of the new King D. José I (King Joseph I) (1750-1777) and the appointment of the enlightened diplomat Sebastião José de Carvalho e Mello, later Marquis of Pombal (Pombal), to the post of Foreign Affairs and War Minister, Portugal began to witness increased intervention by the Monarch. The political and administrative reforms, which were conducive to strengthening the power of the King leading to the modernization of Portuguese economy and society, occurred mainly after 1 November 1755 when an earthquake causing a tsunami and massive fires devastated Lisbon. Pombal assumed control of the key measures to be implemented in dealing with the destruction and restoration in Lisbon, increasing his reputation and connectedness in the process (Marques, 1984: 353; Serrão, 1996b: 28). On the death of the Chief Minister in 1756, Pombal ascended to this position. Pombal’s leadership resulted in the adoption of many important economic and social reforms in the country and across the 19 Portuguese Empire (Falcon, 1982; Marques, 1984, Serrão, 1996b). The reforms implemented by Pombal represented the practical dimensions of the rationalities or “programmes” of government” of the time. Indeed, Pombal (1777: 257) argued that: … I applied myself with all the care (as far as my small talents allowed) to choose the books that best taught Political Arithmetic, State Economy; and to study them as well as the commercial and navigation laws. … these notions that I kept on my memory were the reason why he [the King] remembered me to become a Minister of State … The legislative measures implemented by Pombal were considerable in number and diverse in nature and exerted control and power over aspects of Portuguese society, particularly at the religious, economic, educational, fiscal, and administrative levels (Gomes et al., 2008). Following his ideologies, Pombal considered that it was necessary to create large and solid commercial houses, to stimulate the creation of new industries, and to provide Portuguese merchants with an adequate education in commercial affairs, which he believed was insufficiently developed among the Portuguese (Gomes et al., 2008; Pombal, 1742). Through an array of diverse initiatives, Pombal endeavoured to develop commerce and industry, to reduce importations and consequently restrict the amount of gold that went abroad to pay for imported goods and, at the same time, to create a small but competitive and powerful class of Portuguese businessmen with the necessary skills and capital resources to compete with the foreign businessmen (Gomes et al., 2008: 1158). One form adopted by the government to “act upon the conduct of persons individually and collectively, and in locales that were often very distant” (Miller and Rose, 2008: 16), was the establishment of the School of Commerce. The School was part of a broad educational reform, both at the secondary and university level, as developed by Pombal, and was intended to bring education under the control of the State, secularize instruction, and standardize the curriculum (Gomes et al., 2008). 20 Under the mercantilism model adopted, the Pombalism phase was characterized by the re-emergence of the importance of the Portuguese colonial dominions, with Brazil and Angola being recognized as the most important colonies (Schwartz, 1998: 93; Serrão, 1996b: 141). Commercial trade with the colonies was restricted to companies enjoying a trading monopoly. The creation of monopoly trading companies in Brazil, in particular, had implications for the development of commerce in that 7 colony. A deliberate strategy was adopted to integrate and connect the resources that were dispersed throughout the world and to put the colonies in permanent connection with the metropolis (Maxwell and Silva, 1986; Schwartz, 1998). Pombal broadly put into practice the philosophy of the “colonial pact” which prevailed during the eighteenth century. Under the colonial pact, the colonies were to serve exclusively the metropolis (Bairoch, 1989: 104; Lloyd, 2001: 16; Rego, 1967: 181). The colonial pact can be summarized by a general rule, according to which “the interests of the mother country override those of the colonies themselves” (Bairoch, 1989: 104). By controlling the colonies and the overseas commerce, Pombal intended to reduce the Portuguese dependency on England and, at the same time, to transfer the commerce from the hands of foreign merchants to Portuguese merchants (Maxwell and Silva, 1986: 336; Schwartz, 1998: 93). To accomplish this objective, trustworthy individuals who shared Pombal’s ideals were appointed as Viceroys and Governors in the colonies to administer them (Serrão, 1996b). These trusted representatives were known as “Pombalism Governors”. As Pombal’s chosen representatives, they were instrumental in disseminating Pombal’s philosophies and ideals, thereby resulting in little significant resistance across the Empire, and, therefore, creating at least potentially 21 favourable conditions for the control of people in distant places (Bellotto, 1986: 277; Magalhães, 1998: 35; Serrão, 1996b: 139). Other measures were implemented by Pombal in order to improve the financial situation of the country and develop the nation’s commerce which also had implications for the Portuguese colonies. The establishment of the Royal Treasury was intended to contribute to increased State income through the more efficient collection of public money, both in the metropolis and in the colonies. With the advent of the Royal Treasury a new and centralized organization of the public finances was implemented, which involved the adoption of a new accounting control system. Under the administration of the Royal Treasury, it was specifically intended that the collection of rents (income) would be better controlled than previously, the frequent abuses involving frauds by officials would be deterred or avoided, the undue delays which heightened the risk of the improper use of monies would be reduced or eliminated and, as a result, government receipts would be enhanced under the new administrative control system (Magalhães, 1998: 35). For Pombal, the strategy of enhancing efficiency through State intervention was a key means of increasing the State's power over the colonies (Pombal, 1741; also see Magnusson, 1993). As stated by Foucault (1991: 92), the art of government in the eighteenth century constituted “the art of exercising power in the form and according to the model of the economy”. Pombal put in practice this art of government in Portugal through his mercantilist economic policies. Pombal’s art of government, however, was profoundly influenced by enlightened despotism. According to Foucault (1991: 98), mercantilism was modified, however, under such regimes because: 22 … it took as its essential objective the might of the sovereign, it sought a way not so much to increase the wealth of the country as to allow the ruler to accumulate wealth, build upon his treasury and create the army with which he could carry out his policies. And the instruments mercantilism used were laws, decrees, regulations: that is to say, the traditional weapons of sovereignty. […] mercantilism sought to reinsert the possibilities opened up by a consciously conceived art of government within a mental and institutional structure, that of sovereignty, which by its very nature stifled them. The several different measures implemented by Pombal did not provide equal opportunities and benefits for all members of the population. Creating trading companies, under the mercantilist principle of monopoly, served to privilege a limited number of businessmen and, accordingly, generated a small but competitive elite merchant class which benefited substantially from such measures (Marques, 1984: 292; Maxwell, 1995: 69 and 74; Pedreira, 1995; Serrão, 1996b: 99-100). Nevertheless, the measures were taken in the name of “the State” (Miller, 1990) and were intended to increase its wealth (Pombal, 1777: 85). During the Pombaline Era, the State exerted considerable influence in all aspects of society within the Portuguese Empire. The administration of the Empire during this period was central to such developments, which was facilitated in part by the adoption of centralized administrative arrangements as addressed in the next section. Administrative control systems within the Portuguese Empire Under Pombal’s leadership, new centralized administrative control systems were adopted. One of the first measures adopted, following the example of England and in conformity with the colonial pact, was to terminate the regime of “overseas areas” which involved the subordination of some territories to others, such as Angola with Brazil, Mozambique with India, Guinea with Cape Verde, and Timor with Macau 23 (Rego, 1967: 19). Pombal believed that all of the colonies should be oriented towards the metropolis based in Lisbon rather than being clustered by regions resulting in most colonies being subordinated to certain leading colonies. The adoption of a highly centralized command system in Lisbon was necessary in order to ensure “local powers” in the colonies were firmly controlled in order to avoid “agitation and disorder that was disadvantageous to the social well-being and contrary to the pre-established order” (Leite, 1988: 13; also see Rego, 1967). This centralized command system, as inspired by Pombal’s ideology, “went too far”, as subsequently argued by a prominent figure in 8 the command of the Royal Finances (Souza, n/d: 322). A group of colonies dispersed through the world was, therefore, connected with the centre of the Empire located in Lisbon. While each colony, or administrative areas in the case of the largest colony of Brazil, adopted centralized administrative systems locally, the administration of all colonies was centralized in Lisbon at the Royal Treasury. Pombal’s colonial reforms faced different obstacles. The biggest problem was related to the tyranny of distance which “blocks, delays and complicates the administrative activity” (Bellotto, 1986: 265). It was a prominent characteristic of Portuguese Empire building as well as European colonial expansion in general. Several administrative and diplomatic problems were related to the time required to effect communications between Lisbon and Brazil, a direct consequence of the three months period involved during that era to cross the Atlantic (Bellotto, 1986: 265). But the distance was also a problem within the colonies themselves. In the most extensive and prosperous colonies, such as Brazil, it was difficult and time consuming to reach the most remote areas (Azevedo, n/d; Livermore, 1976: 208-9; Russell-Wood, 1998: 171). The distance problems had direct consequences in the authority delegation and in the 24 autonomy of colonial administrators in distant areas of the Empire. In Brazil, for instance, these difficulties led to the view that it was not possible to continue to use (or operate) a single centralized administration structure within the colony. Accordingly, it was decided to divide Brazil into nine principal administrative regions, and each one had its own centralized administration and was required to report to Lisbon (Bellotto, 1986: 265; Rego, 1967: 155). A further major problem in Portuguese colonial administration was the lack of a sufficiently large and adequately qualified group of individuals for public administrative posts (Russell-Wood, 1998: 171). This limitation was alleviated, as indicated, by the appointment of persons of high nobility with some military experience to the positions of Governors in the different colonies (Russell-Wood, 1998: 169-92; Serrão, 1996b: 180). While these governors were individuals whom Pombal trusted, who received Instructions from Lisbon on their appointment to the role, they were also harshly reproached by Pombal himself whenever deviations from the Instructions were identified (Leite, 1988: 12). The advent of the Royal Treasury under the 1761 Law resulted in the revision of the entire tax system of the colonies, not only at the level of the organizational structures involved, but also in respect to the personnel involved and the ways in which public moneys were collected (Bethencourt, 1998: 238). The collection of public moneys in the colonies was later centralized by means of “Juntas da Fazenda” [Collection Houses] which were created subsequent to the establishment of the Royal Treasury from around the mid-1760s under the Instructions. As calculative spaces in the colonies, these large and centralized colonial organizations assumed responsibility for 25 the administration, collection and expedition of all matters related to the Crown, including the effective collection of all the income administered by them or third parties (Bellotto, 1986: 282; Paixão, 1998: 5). The function of the Collection Houses was to collect the taxes and rents of the Crown in each Captaincy and to report annually directly to the Royal Treasury (Bethencourt, 1998: 238). The task of collecting public money involved the gathering of a number of different taxes. In undertaking this task, a diversity of contracts of public rents was to be managed, and an array of expenses was incurred (Bellotto, 1986: 284-88). The establishment of the Royal Treasury initiated a strong focus on accounting control systems in centralising the administration of the colonies, making Lisbon the administrative control centre of the Portuguese Empire. The accounting rules adopted in the administration of the Portuguese Empire are examined in the next section. Development of Accounting Rules in the Context of Empire It will be recalled that governmentality, as the art of governing, encompasses two distinct aspects: the rationalities and the technologies of government. The philosophies and ideals of enlightened despotism, constituting the rationalities of the Portuguese government under Pombal’s leadership, were operationalised in colonial contexts by means of the adoption of accounting control systems as technologies of government. The political discourse of the Pombaline Era was translated into rules, specifically the accounting rules which mandated particular forms of accounting practice in the colonies. The rules were intended to standardize the controls for collecting income and incurring expenses and also for the reporting of information to Lisbon. 26 The specification of new accounting control systems was a product of the discourse formulated by government, and “by a different attitude towards governing” (see Danaher et al., 2000: xii; Foucault, 1991: 102), particularly in the case of the colonial dominions, marked by the centralization of the administration during the jurisdiction of the Royal Treasury. The Portuguese government had the power to create a corpus of knowledge – synthesized in accounting terms in the 1761 Law and the later issued Instructions – as devices to enable action at a distance as envisaged at the centre. The governors, the public officials, and the collectors of public monies, dispersed through country and Empire, created an “individuality” or “network” (see Foucault, 1977: 167; Sargiacomo, 2009a: 274). Officials of the State collectively exercised discipline by means of hierarchical surveillance (Foucault, 1977; Sargiacomo, 2009a), as known today, by means of the facilitation of the 1761 Law and the Instructions. As will be shown, the main objective of the accounting rules was to facilitate control at a distance and to allow for distance places, dispersed through the Portuguese Empire, to be made visible at the centre of calculation – the Royal Treasury – by means of the preparation and reporting of accounting information on the collection and expenditure of income. Indeed, the accounting rules prescribed the behaviours that were expected to be witnessed within Portuguese colonial administration. Based on available evidence, however, those expected behaviours were not always delivered across the Empire as will be addressed. This section comprises three sub-sections. The first sub-section deals with one of the components of the regulatory framework – the 1761 Law. The second sub-section examines the later-issued Instructions that were progressively issued for application in the various colonies from 1764. The final sub-section addresses the accounting rules as 27 complementary devices to facilitate control at a distance. The next section examines evidence of compliance with, and enforcement of, the accounting rules, applying Snook’s (2000) theory of practical drift to inform the findings. 1761 Law As stated in the introduction of the 1761 Law, and addressed by Gomes et al. (2008), the creation of the Royal Treasury was problematized as the way to make the collection of rents more effective and efficient and, more generally, to assist in augmenting the wealth of the monarchy (1761 Law, p. 2). The Law itself stated that the situation in Portugal was less acceptable than that evident in other European countries due to the abuses made by the various former collectors of public monies (1761 Law, p. 2). The abuses and difficulties regarding the collection of public monies were, however, not new. The collection of public monies had been the responsibility of the Customs House, the first Portuguese public organization responsible for the administration and supervision of the finances of the Crown, which was established around the end of the thirteenth or beginning of the fourteenth centuries (Paixão, Lourenço and Franco, 1995: 39). The administration system was decentralized and several taxes and other incomes were collected by contractors who had to pay a rent to the King. However, the delay and frauds increased through time and measures were taken from time to time, to prevent such problems (Rau, 1951). The Customs House was formally disbanded on the introduction of the 1761 Law (Rau, 1951). The charge and discharge method of recording previously adopted at the Customs House was partly replaced by a double entry bookkeeping system while all previous decentralized public offices were declared extinct and closed (Paixão, 1998; Paixão and Lourenço, 1999). 28 From the advent of the 1761 Law, all individuals in charge of the collection of public money were to deliver, without delay to the General Inspector (Pombal), all monies and associated accounting documents (1761 Law, p. 3). In the event of delays or other neglect by the collectors of public monies in making the remittances, the General Inspector was authorized to suspend, sequestrate or arrest them (1761 Law, p. 11). Personal liability was also imposed on collectors to deliver the Royal rents that had been collected to the Royal Treasury (1761 Law, pp. 11-12). In the last years of the operation of the Customs House following the 1755 disaster in Lisbon, the decentralized system of colonial administration was not only operationally inadequate but did not serve Pombal’s purposes under the colonial pact. The control and efficient collection of the Royal finances, according to the 1761 Law problematization, was also dependent on the adoption of appropriate accounting methods given the scale of the Royal finances. Under the new Law, DEB was initially required to be adopted only in the four General Control Offices of the Royal Treasury in Lisbon, in accordance with the exact division of the country and Empire (Gomes et al., 2008), while a SEB system was applied elsewhere, including in the Portuguese colonies. Where SEB was to be employed, the 1761 Law required the preparation of books of revenues and expenses, including a number of auxiliary books (1761 Law, pp. 11-22). Under the 1761 Law, information extracted from the books to be maintained in the colonies was to be reported annually to the Royal Treasury in Lisbon in order to ensure that the information in the auxiliary books within the Royal Treasury mirrored the results reported in the books of the colonies. The system was intended to enable the preparation of a set of “consolidated” accounts for the Empire (that is, as a form of 29 whole-of-government accounting) and to ensure that such accounts were as dependable as possible in depicting the finances of the Empire. The Lisbon-centric focus of the 1761 Law was problematized as the solution to the problem of public finances under the administration of the former Customs House and was intended to result in the production of whole-of-government accounts for the Portuguese Empire. Individuals at different levels of Portuguese public administration, including officials in the colonies, were expected to comply with the Letter of Law. The 1761 Law, however, was mainly concerned with specifying the accounting control systems within the Royal Treasury in Lisbon, with a focus on the four General Control Offices based in that city. While evidently presumed in Lisbon to be clear for compliance purposes, the Law did not provide specific or detailed guidance on how the information recorded in the books to be maintained in the colonies was to be prepared and reported to the Royal Treasury officials in Lisbon (1761 Law, pp. 11-22; see, for example, AHTC, ER, Book 4218, Bahia, pp. 19-20). Rather, the 1761 Law used broad or general terms to specify the need to record details of revenues (Title XIII), and of expenses (Title XIV) and to ensure the balances of revenues and expenses were “positive” (Title XV) and for the entries recorded in the books maintained in the colonies to be periodically entered into the relevant books prepared in the different control offices based in Lisbon. The Instructions The Instructions were issued for progressive application to individual Portuguese colonies from 1764. The preamble to the Instructions provided the problematization to the underlying administrative and accounting reforms by emphasising that the colonies 30 were a source of wealth for the State and that the Royal revenues were dependent mainly on agriculture, industry, developing commerce, and the effective collection of the Royal properties (AHTC, ER, Book 4070, Minas Gerais, p. 1; AHTC, Book 4061, S. Paulo, pp. 119-26). Under the political and philosophical ideals of the government, the colonies were viewed as “the source from which emanates wealth as well as respect and opulence for the State” (AHTC, ER, Book 4070, Minas Gerais, p. 1). Accordingly, certain information was provided, for example, on how to stimulate agriculture and how to increase levels of commerce and to avoid misconduct by different agents. The effective administration of the colonial dominions was specifically related to increasing the Royal income and the effective collection of that income (AHTC, ER, Book 4061, S. Paulo, p. 120). While the 1761 Law was evidently considered by officials in Lisbon to be clear for the effective administration of the colonies, delays and various other problems continued to be experienced in colonial administration, as will be illuminated in the next section. As indicated earlier, the Instructions specified that a Collection House was to be established in each Colony which would comprise two distinct offices: the Office of the General Treasurer and the General Control Office. The Instructions identified the particular control and administration procedures that were to be followed at the Collection Houses operating in the colonies based on the principle that no single person was permitted to check one’s own work. In other words, the individual who was responsible for recording entries in account books was not permitted to certify that work in a separate process.10 Accordingly, the Instructions were more operational in nature than the 1761 Law in specifying, in detail, the particular books to be maintained in the colonies and what information was to be extracted from those books and reported to the 31 Royal Treasury in Lisbon for “consolidation” into a set of dependable whole-of- government accounts for the Empire. In the Instructions, illustrations were provided of the procedures to be followed in the colonies and much attention was devoted to the need to ensure the “accuracy of the accounts” and to have “true and correct” accounts (AHTC, ER, Book 5322, S. Tome, p. 15; AHTC, ER, Book 4233, Pernambuco, pp. 152- 153). The written Instructions were carried to the respective colonies by Royal Treasury Officials themselves, who would travel from the centre of calculation in Lisbon to the local colonial setting to assist in assuring that the prescribed action at a distance was implemented. The detailed procedures for keeping accounts in the colonies had not previously been identified under the 1761 Law nor had they been prescribed at any time during the period 1761 to 1764 for Angola and in periods beyond that date for other colonies. Th