Promise Fulfilled. The History of the Accounting Discipline at The University of Melbourne

Recent events have reminded us that different financial institutions fare very differently in stressful conditions. Here Peter Austin tells the story of a major bank in a turbulent emerging economy with sometimes volatile politics, and strongly reliant on the primary sector. This bank fared well in a serious financial crisis, while many of its rivals struggled or failed. The bank is Baring Brothers and the country is the United States of America in the second quarter of the nineteenth century. There are numerous parallels with important issues in modern crises and emerging market finance: the structure and development of the country’s financial system; the Darwinian failure of weak businesses and banks; the search to allocate blame; the role of political and financial elites; concern over the presidential role and that of central government; and debates over free trade, to identify but a few. There have been many published histories of merchant banks. Baring Brothers has attracted several authors over the years, a number of whom have concentrated on its 1995 failure after Nick Leeson’s disastrous derivatives trading in Singapore. Orbell (1985) and Ziegler (1988) offer relatively recent general histories of Barings, the latter much longer than the former, although neither address in depth the period and events covered inAustin’s book. Hidy (1949), described by Ziegler (p. 383) as ‘somewhat indigestible’, does deal with Barings in the US in this period, and while Austin makes use of these three histories, he is able to reflect sources and scholarship not available to, or used by, these authors. Austin’s book is not intended as a comprehensive history of Barings, but focuses on a specific episode in which the bank played a major role, the 1837 financial crisis. In Austin’s view, the question of ‘what happened’ in this crisis is largely settled, whereas the question ‘why’ to some extent remains open. This is not unusual in such situations – for example, scholars continue to debate explanations for banking crises such as those in Germany in 1931 and the US in 1929–33. This is, for the most part, a very good and clearly written book. The arrangement is chronological, with the 190 pages of the main body of the book broken into six chapters. These build slowly and carefully from the mid-eighteenth century to the culmination of the late 1830s crisis, concentrating on that final decade. A 10-page epilogue addresses Barings’problems in Argentina in 1890 and Singapore in 1995, with a further 60 pages of notes, bibliography, a useful chronology and glossary.A casual reader could easily grasp the main arguments from the introduction and conclusions. There is extensive use of contemporary newspapers and journals, of correspondence between London and Barings’ Boston agent, Thomas Ward, and of British and American literature and archival sources, including those on the Bank of England and the London discount market. Ward emerges as outstanding at the operational level, but inconsistent and at times unsound in his strategic judgement. He was sometimes frustrated by the conservatism of the London-based Joshua Bates. ‘Pawky, dour, charmless; with little imagination and less humour’ (Ziegler 1988, 123), Bates, also from Boston and a Barings’ partner from 1828 until his death in 1864, was the firm’s key partner on American business and architect of its American strategy.