The Metaphysics of Accounting with Paolo Quattrone

Paolo Quattrone (@PaoloQuattrone) joins Money on the Left to discuss the metaphysics of accounting and the significance of accounting’s repressed history for political economy today. Professor of Accounting, Governance & Society at The University of Manchester, Quattrone insists that, while often seen as a positivist and merely technical skill for recording extant data, accounting in truth represents a rhetorical and quite generative engagement with the “mystery of value.” This mystery, Quattrone reminds us, informs nearly all aspects of collective life. Genealogy is central to Quattrone’s work and, in our conversation, we explore how numbers, figures, and visual arrangements used in contemporary accounting trace complex and often surprising lineages that have a lot to teach us about accounting’s still untapped possibilities. Along the way, we touch upon two of Quattrone’s most important case studies. First, we delve into the Jesuit order’s rich contributions to early-modern accounting, including its development of double-entry bookkeeping. Then, we turn to the more recent history of “I.R.I.,” the Italian “Institute for Industrial Construction” which, even as it served as administrative arm of the Marshall Plan, underwrote the midcentury period of prosperity known as la dolce vita by precisely rejecting the ideology of “profit maximization” promulgated by The United States. We conclude, finally, by rethinking money’s futurity through Quattrone’s approach to accounting. If spending tomorrow is never flatly predicated upon yesterday’s inert data in the form of receipts or revenue, we suggest, then it instead derives from mobilizing accounting practices in the present to create new credit and debt relations “endogenously” in response to shifting circumstances.

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Scott Ferguson: Paolo Quattrone, welcome to Money on the Left. 

Paolo Quatrone: Thank you, Scott. Thank you, Maxx. 

Scott Ferguson: Thanks so much for joining us. I was hoping that we could begin by asking you just to tell our audience a little bit about yourself, your background, your training, and how you came to this question of accounting.

Paolo Quattrone: Maybe we can start from how I came to become an accountant. I’m actually a qualified accountant. Of course, the answer is by mistake. Because until the age of 17, I wanted to become a medical doctor. And then, because my father was an accountant and he had a small practice, I said, “Why do we have to waste all of these clients that you have?” And so, I wanted to become an accountant too. He discouraged me with all of his power, but because of course kids never do what their dad tells them to do, I started to study economics and management. 

Then, when I was in my last year of my degree, my father was not very well. I started to help in his business. I took a year off from university. And I understood that that was not what I wanted to do. Then, I decided to do a PhD and I was very lucky to have a great supervisor, Professor Claudio Lipari, who’s still alive and well. He viewed accounting as a theory of knowledge, not as a stupid technique. I started to study accounting with him, he became my PhD supervisor, and then also by chance, we started to get interested in the Society of Jesus, the Jesuits. Also, because the first college of the Jesuits was opened in Messina in 1548. I’m Sicilian from Sicily. I’m from Palermo, and the first college was opened in Sicily. So we started to discover this huge, new world of relationships between religion and accounting, rhetoric and accounting, pedagogy and accounting, and various other things.

Maxximilian Seijo: Accounting in the dominant reading is often seen as a positivist and merely technical skill for recording extant data. However, in your work you make a passionate case for accounting’s generativity and uncertainty which, you remind us, inform nearly all aspects of collective life. I suppose for starters, what is accounting in your view? Why is it so important? And why is accounting, as you would say, “rhetorical” and not simply boring?

Paolo Quattrone: First of all, accounting is important because it deals with the production and distribution of value. It is very meticulous about how value is produced and distributed. There are a couple of things that come to my mind. In the production and distribution of money, one important thing is the way in which you do that. Not many people know the word “rationality” has an interesting genealogy. It comes from Latin ratio. When I teach my students, I always tell them, “Look, at the end of this, you may not learn anything new about accounting or program management,” which I teach a lot, “but you will learn a lot about Greek and Latin.” This is my first Latin etymology class. The word rationality comes from ratio. Ratio, in Latin, means two things. One is ratio, so proportion. In order to be rational, you have to be balanced, you have to be proportioned. Two is account, because account gives the idea of symmetry and balance. So if you want to be wise, you have to be balanced. 

Accounting is interesting because it emerges and was designed as an instrument to seek for this wisdom and for this balance. It did that thanks to a lot of rhetorical techniques, and we can talk about them if you want. One thing that is interesting is also that in the first accounting treatises–let’s say early, modern times, late medieval times–to explain to those who are reading these treatises what accounting was about, an example that was used is the metaphor of the mirror. When it is asked: “Why do you use the accounts?” It is because you will see the state of your affairs, you will see yourself, you will reflect on your morality as if you are looking at yourself in a mirror. 

This brings us to the second important Latin etymology behind contemporary accounting discourse: speculation. Mirroring in Latin is speculatus. Sorry, my Latin is a bit rusty. My father would be ashamed of me. The idea is you create a distance between you and yourself and you reflect on your behavior by looking at yourself in this mirror which, in accounting terms, is the financial reports that are produced at the end of the year, or when you close the books and you open them again. Interestingly, this speculation was a moment of reflection, a moment of reflecting on your morality. In modern times, this has devolved into a degraded sense of speculation, however. “I don’t even care about who I am and why I’m here, I just want to make money.” Then, you’re in the world of high frequency trading and algorithms where no one stops and reflects. 

One other thing: at the moment we teach a lot from home. When I’m at home in my study, I have all my books around me, including one on my left on the history of balance. But next to that, I have a few books on labyrinths and mazes. It’s the same idea. I’m interested in labyrinths and mazes, because the maze is made up of moments where you have to stop and think. So do I go right or do I go left? Then, you make the decision, you deal with the uncertainty and the mystery of life, you decide to go right. Then, you stop and you face another wall. Again, you have to make a decision. If you make all of these decisions right, you are amazed, you are out to the maze and you see the light.

So accounting is all about speculating about what you do not know. It’s about creating

spaces in between opposites. In that sense, it’s rhetorical, to make sure that you interrogate the unknown. There is a link between Latin rhetoric and accounting as well. I mean, if you think of a couple of words like data, or fact, fact is possibly the most interesting, but data as well. Fact comes from factum, which means made. Data comes from datum, which means given, but also attributed. So the meaning of data is never given, it’s always attributed. The truth needs to be in the middle, in that middle space between the two opposites. Accounting is about creating two opposites in order to speculate on the mystery of value, in order to speculate on what is in between these dichotomies, expenses and revenues, assets and liabilities. You create figuratively in order to deal with the mystery of value, with uncertainty, with the unknown, so forth and so on.

Scott Ferguson: What it seems like you’re starting to explain here, and what so much of your work is criticizing, is a certain modern and even more contemporary reduction of accounting to a series of terms. I wonder, if you had to spell out a critique of the key terms in contemporary accounting, or maybe even just popular conceptions of accounting, what would they be? What bugs you about our approach to contemporary accounting that your genealogical method seems to work in the opposite direction of in a movement of opening up, of expanding meanings, which are maybe hiding in our contemporary language, but that we only treat in a reductive way?

Paolo Quattrone: I had a meeting yesterday or the day before yesterday with some people who were working on an initiative on the future of environmental accounting, and there are various, different initiatives. At one point, one of the people said, “I know you want to measure nature. I know you want to count how many bees are being killed or how many bees have been saved, the stock of natural capital that we have and how much we are consuming.” And I said, Look, I think you’re completely wrong in the sense that it’s the idea of measure which is wrong. You cannot really understand the stock of nature that we have available. But we can reflect on what we do when we consume natural resources and what trade offs we have.” Another example is this idea of believing that you can define targets and measures in these targets. So you’ve got this target and that target becomes the “truth,” or it’s affirmative in a sense. It defines what is the right objective of a corporation, maximizing profit or whatever. In doing that, you lose sight of what, in economics, would be the opportunity costs. But in other terms, it would be the trade offs. In order to pursue profit, what is it that you are killing? In order to make sure that you deliver your target sales this year, what is it that you are losing?

I think accounting has, until very recently, always been about reflecting about these trade offs. So it’s about making sure that you use what you can count–money–in order to reflect about what you cannot count, which is the purpose of the organization, your morality, what you need to do next year, and so forth, and so on. While we tend to, nowadays, reduce everything to numbers in the false belief that numbers will produce objectivity and generate rational choices, that was just the first movement that accounting did. Accounts indeed reduce the complexity of the world that is around you which cannot be reduced to numbers in order to augment your understanding of this complexity. However, numbers were excuses, they were not final objectives. They were means to explore the ambiguity of life. They were means to explore the mystery of value. They were means to explore how we always deal with uncertain situations. There were never instruments to eliminate the mystery, eliminate the uncertainty and eliminate the ambiguity. That would have been a stupid way of using numbers. Yet this is exactly what we’re doing in contemporary time. We are using accounting as if accounting can provide more certainty through answers, while instead, the only thing accounting can do is to point us towards the right questions. 

I always make this point to my students. I mentioned Professor Lipari, my supervisor. He was also my professor in accounting 101, the first accounting course that I ever took in my life. I did Classics in my high school, so very little math, very little anything that was merely practical. At that time we had oral exams. So you do the written part, and then you sit in front of 30 people who ask you questions all the time. And if I told him, “Accounting is about truth,” he would have taken me from the ear and kicked me out of the group saying, “You have not understood what accounting is about!” This is 1980. So it’s actually quite recent. It’s only with the financialization of the world and the belief in the power of markets as a mechanism to substitute accounting in the valuation of basically understanding how value is produced, distributed, and allocated that we lost sight of the power of accounting. In a sense, it’s the victory of finance versus or against accounting. 

This reduces everything to cash, as if cash is the ultimate goal in life. Of course, it isn’t the ultimate goal in life, it’s a means to pursue an end.  This is why the Jesuit cash box had two keys. One was kept by the accountant, the appropriator of the college. He was the spokesperson for financial matters. He needed to take care of the money. But the other one was kept by the Rector of the college, who was the spokesperson for anything else that was not financial. So yeah, the means, the key of the appropriator to interrogate the end, which is the key of the Rector. You can count the money, but you use the money to speculate about what the Jesuit Order was about without pre-defining what is right, without fixing targets. Because that would have been too stupid to deal with managing a complex and large organization like the Jesuits.

Scott Ferguson: What is so fascinating, and I think it’s such a nuanced point that you’re making, which is that this kind of reduction of accounting to non-accounting becomes a function of what we call “neoliberal financialization” or “marketization,” on the one hand. But on the other hand, even those who are thinking about the environment or thinking about ecology get stuck, too, in this reductive epistemology and the ontological assumptions involved, right?

Paolo Quattrone: I would say they’re trapped into this idea of measurement. We can measure finances now. We have to measure what happens in society and we have to measure what happens in the environment. Yet, we forget that, as much as measures are wrong for understanding how value is produced and distributed, they will be wrong in terms of how we understand societal matters and environmental matters. But those who designed double entry bookkeeping knew this very well. There is another interesting issue here. I would say, since the 16th century, from a technical point of view, in relation to double entry bookkeeping, there has not been any groundbreaking innovation. I mean, with the accruals, you basically, from a double entry point of view, you have more or less everything that you need to keep the accounts. 

So it’s the same double entry that can be used in different ways depending on what kind of epistemology orientates you. So are you driven by positivism? Then, you screw with the beauty of accounting. Are you driven by a very, I would say not even relativist, I would say, very pragmatist approach? Then, you start to see that things are much more complex than what measure can tell you. In that book that was mentioned, it’s one of the first accounting treatises where the rules were described. It was published in my hometown in Palermo in 1636, by Lodovico Flori, a Jesuit. 

In the preface, it says accounting is a scientia prattica, it’s a pragmatic science. It’s not about truth. I’m not a theologian. So it’s about solving problems. In order to solve problems, you know, truth is almost irrelevant. You want to reflect on what may be true in Rome is false in China. What is true in Rome at one point in time will become false in a different point in time. What is right in a certain network of relationships in Rome will be false in another network of relationships. Accounting helps you with that ambiguity. It helps you to manage that ambiguity, helps you to manage that continuous malleability of what counts as right.

Maxximilian Seijo: You’ve mentioned the Jesuits a few times now, and they are an animating feature of your work, specifically with regards to their particular accounting forms. One term we would ask you to explicate from this lineage is the meaning of “inventory. Your genealogical approach really does a lot of work to defamiliarize how accountants, and perhaps lay people, might understand what inventory means and how they fit into accounting practices, and particularly, the alternative practices that you locate in this 16th century Jesuit context. But before you do that, could you say for our listeners, who are the Jesuits and a little bit about how they came to transform accounting?

Paolo Quattrone: Yeah, the Society of Jesus is still a Catholic order. It was founded in 1540 by Ignatius of Loyola. The first college was opened in Messina in Sicily, because Messina was the port. It was the kind of door, along with Venice, towards the east. The Jesuits were interesting because they mainly did three things. They did many things, but let’s say three main missions. One was, of course, evangelization. So they had missions. Another was they had colleges and schools. So if we teach in classrooms these days, it is because of the Jesuits and their Ratio Studiorum, the first treatise of pedagogy. It was a Jesuit treatise. And they were crazy about double entry bookkeeping. They were using double entry bookkeeping, or they loved double entry bookkeeping, as much as we love artificial intelligence these days. So for them, it was a fantastic innovation. What is interesting in the Jesuits is that, in every single activity, even in the arts, think about the Baroque and the Fall, and the work that Deleuze has done on the Jesuits to explain how it was impossible to find a true representation of the world in a sense, and it was open to difference, but anyway, in every activity that they did, they dealt with the unknown. So in pedagogy, it was the mystery of knowledge, in the missions, it was the mystery of the unknown. You go to lands where you don’t have the maps, you would not know what animals would kill you, you would not know what kind of people you would find, what culture they had, and still, you needed to establish a connection with them. 

They were pioneers in accounting, because they understood the mystery of value. For them, value was not something that is easy to represent but it was something that it’s quite difficult to represent. It’s contingent and it varies depending on where you are and what you do. So my interest in the Jesuits emerges from their interest in the mystery, and also, spiritual exercises and the mystery of God. They never define what God is, but they give you instruments to make sure that you search for it. 

This is why I was interested in them, because in contemporary terms, I would say they were at ease with the idea of dealing with “unknown unknowns,” the infamous word, or collection of words, that Rumsfeld discussed. It’s their daily business. It would have been very stupid for them to define what is right, because as I said before, what is right in Rome, will not be right in China, will not be right in Latin America, will not be right in India, will not be right in Rome in different times. It’s interesting also how I use this stuff when I teach major program management, or when I teach people who run very large projects. This could be large infrastructures like airports, defense, or nuclear plants. And these projects are so complex that you cannot really say what they are about. There’s a famous phrase that I use from the program director of HMS Queen Elizabeth II, one the new aircraft carriers of the Royal Navy. He has a very nice line where there’s a picture of the warship and then the heading is, “This Is Not a Warship.” 

So if you think that this is a warship, you have not understood what my job is about. So if you fit the target to believe that I have to deliver a warship, you are adrift in the very first moment in which you do that. And you are adrift because the warship is many different things at once. It’s an airport, a small village. If it were a nuclear submarine, it would also be a nuclear power station. It would be many different things. But also, most importantly, it’s a very dynamic object. It has the tendency to become what it was not, I would say. So he said, “No one told me when I took this job that this program would have been used to keep Scotland in the United Kingdom because the shipyards are in Edinburgh in five.” During the Scottish referendum, the UK Government said, “Okay, you can leave the United Kingdom, but be careful that you will lose 12,000 jobs because this shipyard will be moved down to England.” Forget the warship because this thing will never go to war. Forget the other things. At one point in time, in a certain network or relationship, this thing was about jobs and votes in order to keep the United Kingdom together. That creates a quite serious challenge to modern management, which is based on positivity. “This is a warship, this is not a warship.” So a negative attitude towards the warship is actually much more useful than a positive attitude towards the warship. The Jesuits understood that in the 16th century.

Scott Ferguson: Just to circle back to Maxx’s question, the term “inventory” seems to be the place where accounting practices are supposed to begin, but you point out in your genealogy, that an inventory, as we’ve been saying so far, is not just in a positivist recording of inert items. It’s something more. So maybe you can tell us where that word comes from? 

Paolo Quattrone: When people think of the word “inventory,” they think of accounting, of course. They do not know that the term originates from the first canon of rhetoric, which is inventio. And inventio is about classifying things in spaces, in Greek, it would be topos. They would become topics of conversation, for instance. Then, the first canon of rhetoric is about doing this classification, or doing this de-finition. So an asset becomes certain things and expense becomes other things. But again, because of the richness, I would say, of the Latin word, Romans understood very well that every classification, every de-finition–and we can think of the word definition as well–it’s always contingent. 

That classification valuementary was functional to actually be reclassified, that is the second canon of rhetoric, ordinatio e dispositio. And, not by chance, that book that I mentioned before by Flori was organized in three parts. The first part, “Dell’inventario,” is about the inventory. How do you do the classification, how do you do your chart of accounts? But the second part was about the ordinatio e disposizioni dei conti, or the ordination and disposition of the accounts. Once you have the classification, you start to mix them around in order to invent solutions to problems and issues that you have not thought about. So the inventory was not there to measure things or to represent them. It was there to prompt imagination, to prompt creativity, and to prompt the possibility of finding new solutions. 

So the inventory, which is a definition with the emphasis on the word finis, or boundary, opens up the possibility of taking those boundaries away, knowing that the moment in which you make a definition, some people will agree and some other people will disagree. So you always get, as a good rhetorician, to be open to the possibility that you are wrong. Never fixate on things in a way that you believe you’re right. That would be the greatest sin that you can commit. And in that sense, accounting is rhetorical and pragmatic. Because the ultimate end is not to deal with and understand what is right, what is true. But actually, to deal with the unexpected circumstances in which you can find yourself, and that the belief that you have is actually put in question by something that you had not thought about. 

This is why I talk about the procedural rationality of the Jesuits. That example of the two keys that I made earlier exemplifies the fact that they never defined what is right, but they defined procedures through which you understand, in every single circumstance, what is right and what is wrong. You do that by establishing a tension between two opposites in order to explore the ambiguity of them, which is symbolized by the space in the middle.

Maxximilian Seijo: Moving from this attention to genealogy and language, your work deals quite a bit with accounting’s visuality. This might be counterintuitive so I’m looking forward to you explaining this, but instead of treating visual arrays, like the double entry grid, as transparent mechanisms for conveying the underlying facticity of the data–this measuring process and reduction that we’ve talked about–you compare accounting’s visual representations to paintings, and explore them rhetorically, if not in almost a metaphysical sense. So with that, can you explain how accounting can be like a painting and what attending to accounting’s visual aesthetics might mean for the future of accounting?

Paolo Quattrone: Yeah, there is a need for a step back first, and maybe an example helps. I always make the same example so some of the people who will listen to this, if they are my students, they will have listened to this already. Think about a classroom, also talking about the Jesuits who invented the classroom in the first place. Depending on how you lay out the desks in that classroom, you would have a different kind of social interaction. So in a conventional way, you’d have the teacher sitting and then a series of rows opposite to the teacher. And the idea is that the teacher conveys knowledge to a passive audience. Organize that classroom as a Harvard style lecture theatre, so you have an amphitheater, you have a space in the middle which is empty, and then you have the lecturer who orchestrates the debate amongst the participants in that classroom.

Typically, that architecture symbolizes the fact that a good Harvard case study does not have a solution. It’s a rhetorical device to investigate the ambiguity of management and the empty space in the middle signifies the fact that the case study does not have a solution. So knowledge emerging from the debate will not be conveyed by the lecturer. Or think about an executive session classroom. The layout is organized in Cabaret style and the knowledge emerges from the tables, because people are really experienced. 

So I’ll translate that into an account, and an account is also space. Physically, it is a space. Depending on how you design that space, depending on how we design that data visualization, you would have different kinds of social interactions. Depending on how you design the income statement, you will have different kinds of social interactions. So when I was a student, I was taught I think 6 or 7 different formats of income statements. Now, we teach students only one, which is the one that everyone knows that starts with revenues, cost of goods sold, gross profits, then operating expenses, operating profit, financial income or expenses, profit before tax, and tax and dividends. That is not, I would say, an income statement. That is a political statement. It tells us that the most important thing on earth is the shareholder, and the dividends that need to be distributed to them.

But you can organize the income statement in different ways where there is no one single perspective then there is taking into account. Think about value added accounting, for instance, where you have reduction augmentation, you have the production of value, and then the distribution of value amongst peers. Interestingly, you would distribute this value between workers, labor, shareholders, capital, banks, the state through taxes and the firm where the mediation amongst these different stakeholders would happen. That is a statement where there is no perspective. So this is the link with his theory of art. Because in most modern forms of visualization, there is a clear perspective. So we tend to represent things from a clear perspective, normally the perspective of the owner. Instead, you can design dashboards, for instance, which do not have perspectives. In another paper, I analyzed one of the dashboards utilized for a program managed delivery for one of the London Heathrow terminals, one of the few that actually had been delivered on time and on budget. I used medieval aesthetics to explore how that artifact works because the artifact by design does not want to privilege one target versus the others. 

Because if it did, you would think that visually that that target would be building the warship, or building the airport, as if that program is about building the airport only. Well, that problem is much more complex. So you need to create spaces where you debate what is important at one point in time or another point in time. That dashboard does not have one single focus and does not have one simple perspective. It does have multiple foci and multiple perspectives exactly like medieval art where the technique of perspective was not invented. And therefore the viewer, and the eye of the viewer, was asked, and even forced, to go around the painting and not focus on the vanishing point, which is instead what happens with modernity.

So there are lots of links between accounting, its spatial nature, but also it’s, I would say, artistic nature, in the sense that it embeds intrinsically in ways that are very pervasive and work without being seen, notions of perspective. Which become ways to make certain forms of capitalism work, for instance. Without those, without accounting and the income statement done in a certain way, you will not be able to think about the maximization of profit. You will not be able to do certain things. Of course, Keith Hoskin who reminded me how double entry cannot be an Italian invention, because the Italians did not have zero in their numbers. So it needs to be an Indian, Persian, or an Arab invention. These things had an agency. The structure of the data visualization, the structure of the income statement is not a neutral, banal technique. It embeds certain forms of seeing societies, certain forms of seeing the world, certain forms of seeing the economy, and who counts in that economy and what counts in that economy.

Scott Ferguson: That’s so fascinating. It also really defamiliarizes Excel spreadsheets, which is what mediates so much money in our world today. Whenever I hear you talking about and affirming dashboards or accounting visual matrices that walk our eyes around, it makes me think of certain cinema theories, actually. André Bazin, the French film critic and writer from the 30s, 40s, and 50s, he famously argued for the value of a certain kind of cinematic aesthetic that he deemed “realist.” But he didn’t mean it in any kind of positivist sense, he had a kind of a mystical articulation of this aesthetic. And it precisely, for him, asks our eyes to wander about the frame. And even though cinema is based on photography, and photography on the camera obscura, and these kinds of optics that go back to Renaissance perspective and before that have a tendency to focus us in a very monocular way, even using, to go back to your example, what we account for, what we say it is, isn’t necessarily all that it is. What Bazin is doing is he’s telling us that this monocular, single perspectival technology actually can be non-identical to itself and can produce a different relationship to the world, to visuality, etc. It just strikes me that there’s probably a lot more work to be done interdisciplinarily thinking about the history of art, the history of different media, how they’re used, and what that might mean for accounting and vice versa.

Paolo Quattrone: Absolutely. Also, a couple of things come to mind about what you just said, Scott. One is that in pre-modern times, let’s say in early modern times, you would use numbers to reduce the complexity and interrogate what cannot be actually seen by and through the numbers. While with modernity, we stopped at the moment of reduction. So we believe that what the numbers tell us is actually the truth. We forget that by focusing on certain targets rather than others, I see only certain things and not others. So it misses the second point of that rhetorical technique, which is reduction argumentation. 

Historically, and also, in genealogical terms, if we look at all the business visualizations, or most of the business visualizations, that are used nowadays, you mentioned Excel, Excel is a rhetorical grid. It was a rhetorical machine, una machina rhetorica, because in the Latin machina means frame. So that is the way in which you build and rebuild knowledge. The basketwork is a rhetorical wheel. This is why I guess in English you say, “reinventing the wheel.” Because all of these things were not there to represent things; they were there to make you invent new things. They were not there to focus on what you can see, but to make you focus on what you cannot see, what you have to speculate about. 

If you’ve got time, it is up to you, we can pick this up later if you want. The example of the grid is fantastic. Because if you’re a good orator and you’re paid well because you speak well in public, you may accept to speak in public even for things that you do not know very well. So the good rhetoricians, they had a series of techniques to organize their speeches. And there were all these visualizations that we use nowadays. So the grid, the modern version would be Excel, rhetorical wheel, balanced scorecard, Instagram, and things like that. But the grid is very interesting, because the idea was, let’s assume that I have to give a talk about something that I do not know. Okay, whatever, so the unknown. I have to deal with the unknown, with the mystery of the object. Let’s assume it’s this iPhone, and I know very little about this iPhone. So what was the rule? The first one is to take a piece of paper and write a certain line vertically, and horizontally, and then assign to each of these lines a grammatical value. So who, what, when, why, whether, how, and so forth and so on. 

Then, take the object, the topic of your conversation, okay. Make it float above the grid, and then you start to interrogate the unknown. You say, “Who built this? Apple.” Okay, then you take note, and write Apple. “When is it used? In how many different ways?” Then, “Why is it used?” God knows, for many different reasons. “How is it used?” In many different ways, and you take notes, you start to interrogate the unknown and start to build your speech.

Then, the third rule was be careful, never let the object fall into one of the cells, into one of the places, or into one of the topics there. Because otherwise, this becomes a commonplace. You believe that this is actually a phone, you lose the opportunity to understand that this is actually not just the phone. To understand this technology, which everyone has got in his or her pocket, it’s much better to think in negative terms. Again, this is not a phone, this is a bank, this is a cinema, this is a camera, this is a church, this a square, this is a matching agency. It’s whatever you want this to be, to become, but never let it fall into the grid because otherwise this becomes a commonplace. 

What do we do nowadays? We concentrate on the numbers which are on the grid rather than using those numbers to interrogate what cannot be representing the grid. This goes back to this idea on means and ends. The Jesuits said very clearly that accounting has always said very clearly that you use numbers, the means, to interrogate the ends. It’s when means and ends become the same thing that it’s the end of the world. In a sense, it is when the means becomes an end in itself, when speculation becomes speculation. “I want to make money,” that is my end. So means and ends began isomorphic, and that is the end of the world. And I say that is the end of the world because you mentioned that film director and I mentioned another film director, which is Paolo Sorrentino and his film on Giulio Andreotti. At the end, there is a wonderful monologue in that film. If you’re not familiar with Sorrentino’s films, he won the Oscar a few years ago. 

But in many of his films, he interrogates the mystery, the mystery of power, beauty, love, and the mystery of life. And at the end of Il divo, there’s this wonderful monologue. Andreotti is the most important Italian politician of the 20th century. He has been charged with all kinds of crimes including being a partner with the mafia and having asked people to kill some of his friends as well, like Aldo Moro. At the end of this monologue, he calls all these people that he asked to be killed, and he says, “Aldo, Carloberto…” All of these people who are in love with truth, they don’t understand that truth is not the end of the world. If you believe in truth, if you believe that that target is truth, that it is the end of the world, then there is no room for mediation, there is no space for discussion. This is why I teach my students to forget about alignment. Alignment is epistemologically, politically, and practically impossible. What you need is tension. What you need is to use rhetoric to create opposites and explore the ambiguity of what is in the in-between. That brings wisdom. The rest brings, I would say, atrocity. 

Maxximilian Seijo: It’s really remarkable how you draw out this rhetorical, logical and analytical schema with means-ends. And it reminds me, to sort of make the connection that I think is already hovering there and make it explicit for our listeners, of the way throughout the history of economics people study money. There’s the sense in which the vast majority of it is the study of the commodity that represents money. And it’s the way that it behaves within a system. We could look to Marx and Smith and a lot of others, especially in the classical tradition, who do this. But in some sense, in studying the object of money, even if you know it goes beyond gold, as such an object without letting it hover over the grid, as you said, by “submerging it into the fixity of that systemic process,” you perform that means-ends analytical structure. But not just at the level of diagnosing the fact that money becomes the means and the ends at the same time. But in the sense of, in how to fix the problem of money becoming means and ends at the same time, you submerge money analytically into that status. So that doesn’t allow for an alternative reprocessing of the accounting medium of money in that particular logical schema. And I think it’s just so fascinating how you, in such a lucid way, put that together as a matter of rhetorical argumentation.

Scott Ferguson: I’ll just piggyback here and say that, I think, for us on this show, and the work we do as scholars and public intellectuals, I think we have a different understanding of what Marxism calls “reification.” We see money as being reified and we make criticisms of how Marxist analyses often don’t interrogate their own reifications of monetary mediation and as accounting. And your work helps, I think, flesh out a language that is new to us and really helpful and illuminating.

Paolo Quattrone: I hope it does. But that means and ends separation and tension, for me, it’s a really important thing to wisdom. Because what it does is to ensure that you never reify things. So that reduction is what we have talked about during the whole of this chat. In order to avoid that reduction, you need to make sure that means and ends are always separated. I have another TEDx talk where I talk about my college at Oxford. I didn’t study at Oxford, I was employed by them. So it was a lecture in accounting at Saïd Business School and Christchurch. And it’s interesting how the layout of the room where the governing body in Christchurch, it’s telling, of how that basically still medieval institution defines good governance. You have the seat of the Dean. There are some signposts so the Dean always sits in the same seats. The Dean is appointed by the Monarch who was chosen by God. That is the idea. So the Dean is the spokesperson for celestial matters and wisdom, and who sits opposite to the Dean in a clear opposition is the Treasurer.

The Treasurer, the person who deals with dirty stuff, money. Because the Treasury is the means. And the Dean is the spokesperson for the purpose and the end of that institution. It is in that space between the two that they have to find that compromise–compromise, another wonderful word. And the college collapses in a sense, either when there is no dialogue between the two or when the two collude. The college would go bankrupt if you pursue your ends without thinking about your means. You would be corrupt if you pursue your means, so if you pursue money, but not the celestial matters that bring us close to institutions. This is why, for instance, universities are losing their power, because it’s all about money. So it’s not about education. It’s not about the role of the university in keeping democracies together, or in keeping the nation-state together. It’s all about making money. The moment in which money is no longer a means to pursue a bigger and greater end, then institutions collapse. When you have states where the Treasury is much more powerful than the other departments, then the state and democracy is at risk.

Maxximilian Seijo: I think moving now to perhaps a case study, which you sort of already gestured at a little bit there, in your work, you talk about how accounting is vital for governance in the sense that you just explicated. Specifically, in one instance, you study the history of the IRI, or the Italian Institute for Industrial Reconstruction, which served as an administrative arm of the Marshall Plan. And as you suggest, it underwrote the mid century period of prosperity known as “La Dolce Vita.” So for our listeners, could you perhaps say what is the IRI’s history? How did it approach planning and budgeting? And how did IRI’s approach to “rationality” conflict with the ideology of profit maximization promulgated by the United States?

Paolo Quattrone: So IRI first of all was established by Mussolini during the fascist regime in 1933. But then, before the war, he changed its mission. It was set up for saving the banking system, or restructuring the banking system, after the crisis of 1929. But then he changed its nature and it became an instrument of industrial policy for the fascist regime. Already in 1940, the Vatican understood that Mussolini entering the war was a big mistake. And they started to understand what they had to do in order to build what came after the fall of Mussolini. And IRI was particularly important in this strategy also, because quite a few leaders of IRI in the 40s were very strong Catholics, and in particular a couple of guys, Pasquale Saraceno was a professor of Industrial Economics in Bocconi University in Milan. Also, Sergio Paronetto was an adviser to the Vatican, to Einaudi, and a very close friend of Giovanni Battista who then became Pope Paul the Sixth.

So when Italy gets out of the Civil War, which followed the end of the Second World War, the Americans come to Europe and come to Italy and tell the Italians, “Okay, we will give you money. But we will also help you to turn the companies that you have, and then sell them on the market. And in order to do that, we will also give you accounting and business techniques and knowledge.” The idea was to add efficiency as the main criteria for the allocation of resources. So this is the Marshall plan. Now, if they followed efficiency as a criterion for the allocation of the resources of the Marshall Plan, all of the resources in Italy would have been invested in Lombardy, which was the very industrialized region of the North. But the people of the country at that time were Catholics. The Vatican understood in 1940 that things would have not played well for the fascist regime. They started to organize a series of meetings where the Catholic intelligentsia met to define the contours of what would have been a modern social democracy. People like Aldo Moro, Giulio Andreotti, Paronetto, Saraceno, Ezio Vanoni, and some others started to meet in Paronetto’s house, Via Reno.

Then, after a few years, they issued that code to a what’s called the “Camaldoli code.”  In the Camaldoli code, they defined what a good Catholic would have done. They were the principles to drive the good Catholic. The core principle of that code, of the Camaldoli code, was the idea of “common good.” So in everything that you do, if you’re an accountant, if you’re a lawyer, if you’re a politician, if you’re an administrator, you have to pursue the common good. But they define the common good in a very interesting way. Because it was defined in this very ambiguous way where the common good was the series of conditions that allow individuals to pursue their personal interests. So in pursuit of the common good, inevitably, you have to compromise and you have to mediate with others. You have to allow the others to pursue their individual interests, which means that you have to constrain yours, but the others had to constrain there’s for you to pursue yours. That was the basis for the typical Catholic mediation and compromising attitude. 

Now, they managed to translate that into accounting terms, because as I said before, the Americans came and said, “Okay, we give you the money with the Marshall Plan, but we also give you instruments and techniques through which you can make this money work.” Not lastly, principles like efficiency, but also accounting techniques to measure this efficiency and to pursue this efficiency. The Italians of that time were a bit smarter than the Italians that we have recently, I would say. And they said, “Hmm, that is not what we like.” Because an income statement where you have profits and dividends at the bottom line, it’s indeed a political statement that tells you that the most important institution in the economy and society is the corporation and the shareholder. For us, the most important issue is the family and possibly what drives our activity is not profit or efficiency, but common good. 

So after a few years of negotiation, they managed to tame the Americans. And towards the end of the 50s, they started to define planning and budgeting not based on the idea of profit, but based on the idea of value added. So how value is produced is by selling goods and services and then acquiring raw material and basic production factors that creates a bunch of, or a basket if you like, of value. And that value then is distributed amongst the equals, including the workers. Interestingly, you see how we got back to the idea of the account being a space for social interaction. The worker in this new format of the income statement is no longer a resource to be utilized, but is actually a resource to be remunerated in the same way in which capital is. It’s an interesting story because the people who came out with this form of budgeting, not only for IRI, but also for the state, were Pasquale Saraceno, a professor of Bocconi, Paronetto and Ezio Vanoni. Three people from the same village in the north of Italy, Morbegno, all relatives. 

So Saraceno was married to Vanoni’s sister, and Vanoni and Paronetto were relatives. Vanoni became Minister of Finance and he organized planning and budgeting based on value added at the national level. Saraceno had various roles within IRI and he was called the architect of the planning era within IRI. That planning was organized according to the idea of value added so that value added could work all the way up and down, from the state down to the subsidiary where it was owned by one of their holdings that IRI was made of. IRI was also an interesting solution, an interesting model that was apparently copied in many other countries, because the holding was a public holding, so full in the end of this of the state, but the subsidiaries operate in the market.

Again, you have that need to balance a trade off between the need for pursuing profit and efficiency but also the need for pursuing social equality and welfare. The two things add to balance. That is the key to wisdom. So being Catholic, these people understood it very well and they reached a compromise. And it is since the very beginning of this chat that I wanted to tell you the etymology of the word compromise. It is compromisum, or “with the promise.” The com means “with” and “promisum” means “promise.” So with the promise that eventually we will agree, but we know that we can never be aligned, that is impossible, and it’s actually counterproductive. It’s much better to be misaligned and have an instrument of mediation. The key instrument of mediation in contemporary times, or in financial times as the newspaper would say, is indeed accounting.

Scott Ferguson: You have this lovely way of painting the picture of “La Dolce Vita,” this mid century prosperity moment. Maybe you can, for our listeners who know nothing about the history of Italy and what was happening, what was it like? What was it like to really benefit from this?

Paolo Quattrone: In relation to this, there’s a five or six volume of the history of IRI that we have a chapter in. There is also a chapter that begins in this way to give you an idea of how important IRI was, and then I’ll give you some anecdotes on what the 50s, 60s and possibly the early 70s allowed. So the story of that chapter begins in this way. If in the 60s you were a tourist and wanted to go to Italy or you wanted to travel to Italy, you would fly there or you would take a boat. If you fly, you would possibly go with Alitalia, which by the way now has disappeared. With Alitalia, my friend told me, “Paolo, do you know what Alitalia stands for? It stands for ‘Always late in taking off, always late in approaching.’” 

So you would fly with Alitalia or you would take one of the wonderful transatlantic boats, the Michelangelo. Alitalia was owned by IRI. Michelangelo was built by Fincantieri, and it was owned by IRI. Then, you’d get to the airport or the port. You’d rent an Alfa Romeo Duetto, which was then owned by IRI. Then, you’d take the first and longest motorway in Europe that was built by Autostrada. Autostrada was owned by IRI. Then, you get to Milan. And after having survived Italian traffic, you’d get to your hotel, you’d make a phone call with SIP. SIP was owned by IRI. And things started to become a bit complicated in terms of striking a good compromise when you’d go downstairs to buy a Panettone, the typical Christmas cake in Milan and Malta. The manufacturer was also owned by IRI. So IRI exporting became too big to be managed. The history, I don’t know, I was not there. I can tell you that Italy during the 50s and 60s must have been an interesting country. First of all, it allowed a lot of social mobility. My grandmother was born in 1900. She only did the first three classes of the elementary school. I began in the faculty at Oxford in the span of two generations. My mother didn’t have a high school qualification. She stopped after the second cycle of school. I made it into Oxford. 

The sisters, no, her brothers all became doctors, lawyers, very successful entrepreneurs in the span of one generation. We had a wonderful system of state schools in Italy. And for me, that is “La Dolce Vita,” the fact that you can actually aspire to a better life while enjoying yourself rather than putting effort into what you do. I think that is gone somehow in Italy. Okay, I would say that the state schools are still good, but you have this emergence of private English speaking schools. Because the idea is that your kids will not find a job in Italy and that they will have to be ready for the international market. That is a bit sad, it is no longer dolce. It’s actually quite bitter, I would say. Dolce means sweet in Italian.

Maxximilian Seijo: So before we wrap up, we wanted to perhaps speculate a little, to use your refrain there, about Modern Monetary Theory, which as listeners will know is what is the sort of guiding framework for this podcast. While recognizing you’re no MMT expert, I do want to go through some of the assumptions and then see perhaps if we can reflect on them. So for MMT, money is not private, or a finite chit of circulating value which governments can tax or borrow away from the private sector. It’s a political and thus public system of accounting, credit and debt, in which private firms variously participate. So on MMTs analysis, money’s “futurity” is not flatly predicated upon inert past data in the form of receipts or revenue. Money’s “futurity” then derives from mobilizing accounting practices, as we’ve discussed, to create new credit and debt relations endogenously in response to shifting circumstances, perhaps different ends that we might want to pursue. So for us, this is where MMT as an economic discourse stops, and your work precisely begins. What we’ve said is how much we appreciate that your work gives us this rich and non-positivist language for reimagining money as endogenous accounting. We’re wondering if you could reflect on that and perhaps talk about how you see accounting and going forward as a discipline but also a practice for pursuing just ends?

Paolo Quattrone:  First of all, let me say I’m not an expert in MMT, although I do know where you’re coming from. I would say, yeah, definitely money is not a finite resource. The beauty of double entry bookkeeping since the Middle Ages is that you can create money with a stroke of a pen. I’m actually quite surprised that there is all of this enthusiasm about blockchain to create new money. Creating money was so simple with double entry that you did not need all of this fancy technology, costly and environmentally unfriendly, to create. You can create it in a much, much easier way if you have strong institutions that make sure that relationships are managed wisely. 

Then, it goes back to the point that we’ve been discussing for this entire chat: it’s means and ends. I guess that if you treat money as a scarce resource, it becomes an end in itself. If instead it is a means that you can create as, in fact, it happens in banks–banks create money with a stroke of a pen, with the financial multiplier–if you instead think of money as a means to pursue different ends, then the issue is to make sure that you balance the two things and you do not create too much money and too little money. And it depends on what you want to do. 

But of course, that requires a strong governance around this relationship between the creation of money and the use of money. At the moment, I don’t see that happening. I don’t see that happening at the state level. I don’t see that happening at the company level. I don’t see that happening anywhere. I don’t see that happening in any kind of modern institution, which led to a century of prosperity, at least in the Western world. So I think there is a lot of work to be done. Maybe we can have another chat on the reform of the auditing profession and the need to rethink the relationship between auditors and auditing, because that is also part of the lack of proper institutional arrangements to make sure that this relationship between means and ends is governed properly.

Scott Ferguson: Absolutely. One final thought that I am curious if you would want to reflect on with us is you draw on this word and this notion of balance a lot. And this is the promise of ratio in its deepest, genealogical sense. But in the predominant discourse around governance, we hear a lot about balance, we hear a lot about balancing budgets and balancing state budgets. And this becomes the foundation, the unquestioned foundation, for bad governance, for austerity, for destitution, for systemic abandonment and exclusion. So I was wondering, if you have thoughts about these two different understandings of balance. Because I don’t think that that’s what you mean when you talk about the rhetorical machine of the grid allowing for a kind of balance.

Paolo Quattrone: Now, as I said before, it is the same word, speculation, it is the same technique, double entry, but it is for completely different reasons. So the balance does not have to be done in the interest of money. The balance has to be done in the interest of the various interests that rotate around the idea of money. If you reduce everything to money, then that is not balanced. It’s a reduction. I don’t know whether that helps, Scott. Money and finances are one of the different interests that need to be balanced. It’s not the thing in which the balance has to be achieved or pursued. So that is, I believe, what makes the difference between the contemporary forms of governance that are based on that equilibrium and the medieval forms of governance that were based on balance. Balance was a much more poly-focal, poly-vocal issue than to be made or be pursued in the interest of one thing only, which is financial capital.

Scott Ferguson: I think with that, we’re going to close out this beautiful discussion. Thank you, Professor Quattrone for joining us on Money on the Left

Paolo Qauttrone: Thank you Scott, thank you Maxx. Thanks also for the wonderful pronunciation of my surname.

Scott Ferguson: We try, we try. 

Paolo Qauttrone: Okay thank you guys. Perfect.

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Aditya Sudhakaran (transcription), & Meghan Saas (graphic art)