OV: Ebbers goes to confession

By JERRY BOWYER, A UPI Outside View Commentary  |  July 1, 2002 at 4:09 AM
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PITTSBURGH, June 29 (UPI) -- Novelist Tom Wolfe has a knack for summing up an era.

The man who told us that the decade of the 1970s was the "Me Decade" captured the spirit of the 1980s in his novel "Bonfire of the Vanities" and of the 1990s in "A Man in Full."

After a recent speech, during the question-and-answer session, Wolfe was asked by a member of the audience to attempt to sum up the first decade of the 21st century in advance. The answer came without hesitation.

"The 21st century," Wolfe said, "will be known as the Great Relearning." He went on to explain era would be characterized by a process of migration to the established truths that were forgotten in the 20th.

In the 20th-century the world seemed to have gone mad; totalitarian regimes of the left and right threatened global security, and even the democracies seem to have forgotten the basic absolutes of freedom and morality. The job of the 21st century would be to relearn the things that were forgotten in the 20th.

So far he's been right. The first U.S. president elected in the 21st century is a man who emphasized dignity, honor and patriotism in his campaign.

He ran on themes of classical morality when he promised to uphold the dignity of the office of president in contradistinction to the implied decadence of the previous president's personal life.

He ran on a theme of classical political science when he promised to rebuild the military in order to preserve the peace.

He ran on a theme of classical/supply-side economics when he promoted tax cuts to further economic growth.

The first U.S. president elected in the 21st century was a man who, as a candidate, told the world that Jesus was his favorite philosopher.

It's not just the presidency; the challenges of the early 21st century have sent many of us scurrying back to the concepts expressed in ancient texts.

Among economists, last year's recession led to a revival of interest in the concept of a "price rule" approach to monetary policy. Many economists argued, contrary to the claims of Keynesianism -- or, as it was known in the mid 20th-century, New Economics -- that it was not the job of the Federal Reserve system to manage the economy or the stock market.

Rather, its job was and is to focus on maintaining the dollar as a fixed standard of value by tying it to commodity prices with principal reference to that "barbarous relic" gold.

The century's first great crisis, the terrorist attack on 9/11 revealed an intellectual vacuum that ultimately sucked old words and ideas -- from as far back as the founding of the republic and even the founding of Western civilization and its common-law tradition -- onto the editorial pages of the nation's leading newspapers.

All of a sudden we were reading about "crimes against humanity" and "violations of the laws of nations" and the legal precedents set in Thomas Jefferson's campaign against the Barbary Pirates.

Maybe it's time that we drew upon some old wisdom to help us deal with the reigning crisis in America's financial markets. There's no better place to start than in the writings of the man called "the father of double entry bookkeeping", Luca Pacioli.

Pacioli was born in 1445 in Italy. A mathematician by training and tutor by trade, he dedicated himself to God and the calling of a Franciscan Friar after having been personally urged to do so by the Pope. He later went on to take a doctorate in theology and described himself "as a humble professor of sacred theology." He was a friend of Leonardo da Vinci -- whom he tutored in the mathematics of perspective. Da Vinci returned the favor by drawing the illustrations for one of Pacioli's books.

The phrase "Renaissance man" connotes to us that this was an age of men with multiple talents, but I think this misses the point. To these men, their talents were not multiple because they did not dissect human life as thoroughly as we do. Pacioli was not a theologian who was also a mathematician who was also the founder of modern accounting theory. To Pacioli everything he did was theology.

His treatise on mathematical proportions was based on the proportions of 1/3 and 2/3 that he saw in the doctrine of the Trinity. His accounting theory as well was grounded in the Judeo-Christian moral tradition. His books were filled with witty proverbial aphorisms such as, "He who does business without knowing all about it, sees his money go like flies" and statements of piety "(If debits do not equal credits) that would indicate a mistake in your Ledger, which mistake you will have to look for diligently with the industry and intelligence God gave you."

For Pacioli, accounting was a subdiscipline of theology.

He was right. Buried in the equation that I learned on my first day in Accounting 101: assets-liabilities = capital -- is a moral principal that can be summed up in one word -- stewardship.

The algebraic equation: A-L=C could be expressed in plain English by saying, "Everything which a company owns, except what is owed to an outside creditor, belongs to the company's owners." This means that the managers of corporations are stewards who manage somebody else's property.

The scriptures of Christianity and Judaism are filled with parables and moral illustrations featuring stewards. There is the unrighteous steward who, knowing that his master was about to fire him, inaccurately exaggerated the company's bad debts account. By doing so, he let creditors off the hook in order to curry favor with them and harm his master. There is the story of several stewards one of whom buried the money creating a 0 percent return on investment and the other who took a risk to give his master 100 percent ROI.

At heart, the executives at Enron and Tyco and Imclone and the other companies that seem to have deliberately deceived their shareholders have violated something more fundamental than Generally Accepted Accounting Procedures; they have violated the sacred equation that every penny and every desk and every acre of land and every line of code for which a company must give account creates an obligation either to a creditor or to an owner.

Given the crisis of moral confidence currently shaking the American financial markets, isn't it time we re-sacralize financial accounting?


Jerry Bowyer, a former auditor, is chairman of Impact Mutual Funds and a radio and television talk show host based in Pennsylvania. He can be reached at jerry@newsmakersonline.com.

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