Habermas, law and accounting

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andSodefy, Vol. 21, No. 5, pp. 441-465, 1996

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HABERMA!KLAW AND ACCOUNTING* MICHAEL POWER The London School of Economics and Political

Science

and RICHARD LAUGHLIN University of Essex

lUsessayprovidcsacriticalreviewofHabemUs theory of law in FuktizMt und Geitung against the backdrop of attempts to apply his work to the fieldof accounting. First, we analysethe core themes of this thewy: the tension between facticity and validityfrom which Habermas’book takes its title; the pr&em of the foundationsof critical the-; IMxxmas views on public adm&stmtion and the role of expatlse. Second, we consUer the implicationsof this theory for critical accountiqg research. This discussionlddrrssesHabemMs theory of money and the signiiicanceof the ficticity of accounting. We alsomakesomesugge&ionsabouthow&bermas’ counterfactualsensibilitiesremain relevant to critical accounting. Copyright 0 19% ElsevierScience Ltd.

In recent years the “applied turn” in critical

thinkhg and increasing interest in its implicatheory has gathered pace. Researchers dissatis- tions for the practice of social research. An important issue for critical efforts which fied with both the prevailing methodological canons of their discipline and the expert cul- take Habermas work as their centre of gravity ture of its object domain have turned increas- is a tension between a certain doctrinal purity ingly to the work of the Frankfurt School, and regarding his work and a recognition that creaHabermas as its second generation inheritor, tive extensions and modifications of it are required in applied contexts. This tension is for guidance
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abstract social theorizing at the very point at which its heuristic potential to ill~te concrete forms of social ordering is most needed. Some applied critical theorizing simply chooses to avoid such doctrinaire issues, preferring instead to appropriate social theory selectively and to construct a critical project directly from the discursive resources of the practice in question. Indeed, some work counts as “critical’ in this sense which takes no explicit guidance from Habermas or his predecessors in the Fmnkfurt school; it is unconsciously critical in spirit. It is not our intention to address these studies directly or to engage in demarcation& debates about which studiesfallinto which category, which are “really” critical and so on. However, whatever explicit intellectual allegiances such applied critical work takes, Habermas’ own “applied turn” in his recent treatise on law (Habermas, 1992) will be of interest. In this essay we consider the implications of Faktizittit und Geltung pacticity and Validity, FV hereafter) for critically oriented accounting research.’ The book is timely for two main reasons. First, it represents Habermas’ own attempt to apply his theory of communicative action, the need for which he recognizes (Habermas, 1987a, p. 374). Second, given recent and growing preoccupations with the relations between accounting and the law (Bromwich & Hopwood, 1992; Freedman & Power, 1992; Laughlin & Broadbent, 1993) it makes sense to explore the linkages between critical theorizing in each of these fields. Indeed, this project takes on an added pertinence given an emerging interest in recovering Weber’s conception of legal - rational authority and its implications for the “legalistic” organization (Sitkin & Bies, 1994). The argument is divided into three substantive sections. First, we consider the general problem that Habermas poses: the “rationali-

’ All stand-alone page

references are to the

zation of the lifeworld.” While much of this material may be familiar to critical accounting researchers, it provides necessary background to Habermas’ theory of law and highlights the theme of expertise. Second, we follow Habermas’ analysis of legal juridiiication into FV and address its core themes: the so-called tension between facticity and validityfrom which the book takes its title; the problem of theory acceptance and the foundations of critical theorizing; Habermas’ views on public administration and the role of expertise. We follow this with some more critical remarks about FV concerning Habermas’ relation to the tradition of critical theory and the priority which he ascribes to the legal system within his theoretical architectonic. Third, we draw the elements of this more general discussion together and consider its implications for critical accounting research. This discussion has three principal themes: a critique of Habermas’ theory of money; an exploration of the “facticily” of accounting which follows from this; and some tentative suggestions about how Habermas’ counterfactual sensibilities remain relevant to critical accounting despite the difficultiesraised by FV.

THE HABEBMASEFFECT: DERATIONALIZINGTHE LIPEWOBLD Habermas’ (1972) seminal study Knowledge and Human Interests (KHI) has had an enormous influence on theorists in applied fields. The tripartite structure of knowledge constituting interests in KHI has informed numerous attempts to break the stranglehold of positivistic orthodoxies and to ground a distinctively “critical” methodology.2 Within accounting, the threefold distinction between cognitive interests has been offered as an antidote to

German edition (Hahemlas, 1992).

’ Such attempts have often equivocated on the question as to whether critical social science would be a distinctive approach or a reflective reappraisal of existing approaches.

HABERMAS, LAW AND ACCOUNTING

the perceived dominance of positivistically conceived accounting research (see, for exarnple, Chua, 1986), although there has also been a tendency to use Burrell and Morgan’s (1979) framework to organixe this critique (Ton&ins & Groves, 1983; Willmott, 1983; Laughlin & Lowe, 1990). Accordingly, some of the early interest in and application of Habermas’ thought within accounting has tended to focus primarily on the values and methods of the accounting research process rather than accounting practice. Habermas’ early work continued the preoccupations of the Frankfmt School with the constitutive force of science and technology. In KHI Habermas pursued this substantive analysis of what he calls the “scientization of politics” at the level of a theory of knowledge. this epistemological orientation However, gave way to a theory of communicative action (Habermas, 1984, 1987a) his “linguistic turn” - which enabled a wider set of concerns to be embraced. From this point onwards the problem of scientism gave way to. a broader preoccupation with the “rationalization of the lifeworld” and it is this that must be considered in order to set the stage for a consideration of Habermas’ recent theory of law and its implications for accounting.

The rationalization of tbe lifeworld The pessimistic romanticism of some members of the Frankfmt School and their negative evaluation of the heritage of the enlightenment has been extensively documented (Jay, 1973; Held, 1976). Although he is heir to these ideas, Habermas rejects their negative character, a difference evident in his critique of Marcuse’s views on natural science (Habermas,1971).Where Marcuse holds out the possibility for a radically reconstructed form of

’ It follows that Habermas is not as committed

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science and technology in which instrumental reason is displaced by more mimetic values, Habermas rejects the romanticism of this position arguing that this would simply not be science. For Habermas, the cognitive fruitfulness of science is intimately bound up with, if not instrumental reason, something like an “objectifying attitude” which is a necessary component of social life. The task of critical theory is not to articulate a new “non-objectivist” form of science and technology but to express a new balance between science and technology and other forms of life, between “fertile complexes” of thought and action governed by different rationalities.3 This question of balance between different cognitive styles and their respective forms of praxis is at the centre of Habermas’ theory of communicative action (Habermas 1984,1987a). This combines elements of Parson’s cybernetic systems theory with a recognition of an ideal normative potential at the heart of communicative processes. Against Weber’s somewhat gloomy vision of modernization Habermas argues that the cultural differentiation, and the rationalization of world views that accompanies such differentiation, releases learning potential in a number of directions - not merely within the orbit of instrumental reason. Habermas elaborates three culture spheres in which learning, cognition and institutional practice are grounded: the objective sphere, the inter-sub jective sphere and the subjective sphere. This schema and its numerous diagrammatic variations have been criticized by a number of commentators.* But Habermas’ overall objective is to (re)construct a model of rationalization as the release of differentiated and specialized forms of learning and argumentation. It is this differentiation in general, not purposive rationality in particular, which characterizes modernization

to paradigm incommensurability

as other writers on methodology.

4 For exampk, his concept of a dhcurslve aesthetics has received particular critical attention since it is at the level of a&ctlve experience that his uam commitment to a discursive model of rationality seems most questionable (see Giddens, 1982; Thompson, l!B3; Ingram, 1987).

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and which permits the articulation of a potentiality which has been distorted. Againstthe pessimistic vision of an impermeable instrumentality - the totalized society Habermas’model of rationalizationencloses the counterfactual basis for the possibilityof reconstituting a public sphere in which citizens can engage in the discussion of ends. At the ideal limita “balanced’ modernizationprocess is posited in which the three fundamental spheres of social reproduction can at all times be mediated by communicative action, that is, action which explicitly raises claims to truth, rightness and sincerity within mstitudonal contexts in which such claims may be consensually resolved. This involves something like sustaining the lines of substantive public accountability between quasi-autonomous sub-systems, such as the economy, and a public sphere of dialogue and debate concerning fundamental ends. Habermas’ theory of communication also depends upon a binary anulyticulstructure: between “systems” and “lifeworld”. Although Habermas often talks as if this distinction corresponded to two empirically discrete spheres of society, especially with regard to issues of “steering”, it functions primarily heuristically or methodologically as a basis for organking empirical enquiry. As the debate with Luhmann and others demonstrates, Habermas is committed to the concept of a lifeworld as a symbolic space which is not just another social sub-system but which is a normative context within which culture, tradition and identity can be reproduced.5 The lifeworld must be distinguished from the concept of “system” as a functionally definable arrangement of operations. Indeed, it is from the lifeworld that systems can draw on normative resources for steering purposes. Unlike systems theorists, for whom steering collapses into the bumping together (structural coupling) of distinct self-

reproducing systems, Hslberrmsarguesfordk+ tinct administrative and structural arrangements which “mediate” system and l&world and which allow the normative priorities of the latter to flow into the former. Indeed, it is this mediating role which gives law such special status for Habermas and which is relevant to critical theories of accounting. For Habermas, system steering problems, such as macro-economic management or the provision of “corrective” welfare benefits, are not simply technical in form. These problems do involve ‘unintended systemic etfects” (Habermas, 1987a, p. 385) for which technical solutions are needed. However, there are also problems of mediation which arise from the increasing distance between the lh@stic resources of a shared lifeworld and diverse and specialized sub-systems.Although the pro cess of rationalization can never be entirely complete and the lifeworld cannot be entirely absorbed by systemic imperatives, there is nevertheless a tendency toward disintegration whereby complex differentiated structures, which depend upon a symbolic space for normative guidance, sever the institutionallyexplicit links between that space and their own operational imperatives. This results in what Habermas describes as the “internal colonization of the lifeworld”, a reversal of the order of dependency between system and lifeworld. The thesis of intemal colonisation states that the sub systems of the economy and the state become more and more complex as a consequence of capitalist growth and penetrate ever deeper into the symbolic teproduction of the lifeworld. (Habermas 1987a, p. 367)

Another way of putting this is that regulatory systems intended to mediate popular will and specialized contexts of action in fact increasingly impose the system’s imperatives on the institutions which are intended to express pop

’ It is importantto recognka the equivocal nature of the “l&world” for Habermas. On the one hand it repre8enta an unditkentiated mixture of totalitarian and romantic elements: spontaneous solkiarity, muMon and instinctual recognition of authority all wtapped up together. On the other hand, Iiabennas undoubtedly Mends It to be the ground of ndial democratic instincts which can in turn energise a public sphere.

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tical work is the idea that accounting might be “rationally justifiable”. Tbls meum t&at existing accountingpractices can be cbaUenged as “‘distorting” because tbey violate their implicit and criticizable &aims to validity. Laughlin (1987X Arrin@on & Puxty (1991) and Broadbent & Laughlin (1994) develop a direct application of Habermas’ theory of communicative action to accounting. Typically, technocratic understandings of accounting locate it within what Habermas describes as an objective world whose form of action is essentiallyteleological and whose basis of validity is instrumental success. Arrington and Puxty problematize and enrich this model by adding Habermas’ notions of norm - conformative action oriented towards generalizable interests and embodying a validity claim to rightness, and a dramaturgical private domain implying a claim to truthfulness.6 In general, all these studies attempt to establish the contestability of accounting across three, rather than just one, domain of validity: the interpersonal and the subjective as well as the technical. Overall, the applied turn in critical theory has given rise to radical democratic sensitivities about the constitutive role of information: “the monopoly of capital is now reinforced and occluded by the monopoly of information and dialogue” (Agger, 1985, p. 6). Accounting and information systems lie at the centre of hi-tech capitalism in which The applied turn in critical theory There is now quite broad agreement that “fragmented” political consciousness results accounting is a “contestable” practice which in the transfer of power to technical elites. is informed by and informs a multiplicity of These managerial elites “must legitimate their interests (Morgan & Willmott, 1993). Overall, monopoly of system administering privileges, this consensus reflects a general reaction notably through a theory of problem solving against positivistically oriented research that cedes all conversational and symbolic which, so it is said, assumes that the economic rights to an allegedlytalented technocratic mininterests embodied in capital market behavior ority” (Agger, 1985 pp. 11-12). This question of who can monopolize public exhaust the explanatory possibilities. What makes studies which take a lead from Haber- dialogue opportunities suggests how Habermas a distinctive sub-set of this “broadly” cri- mas’ idea of the internal colonization of the

Steering media expand to constitute the lifeworld rather than mediate on its behalf. It is hardly surprising that these general claims at the level of social theory have been attractive to critically inclined researchers in applied areas. The motifs of “colonization” and “distorted communication” have been at the very centre of studies which have attempted to extend Habermas’ insights into particular forms of action and practice, such as accounting. Indeed, in The Tbeoly of Communicative Action (TCA, hereafter) Habermas responds briefly to the criticism that his theory lacks empirical indicators and reference points. He recognizes the need to “test empMcu& the assumption that systemic imperatives force their way into domains of cultural reproduction, social integration and socialization”. This testing process needs to address what he calls the “real abstractions” in “the core zones of the lifeworld” (Habermas, 1987a, p. 374). It is these and similar remarks that applied studies have taken as their point of departure. In particular, Habermas’ obscure notion of a “real abstraction” can be illuminated in terms of the well-known potential of accounting systems to abstract from complexity and measure only that which can be measured easily. Accounting is an abstracting and delinguistifying agency (Arrington & Puxty, 1991, p. 49). ular will.

L o Broadheadand Laughlin(1994)

have developed the emotional dimensionsof the force of the better aqument. Against the idea that Habermas’ concept of discourse is too cognitive they point to the affective dimensions of accounting hlformat.ion.

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lifeworld might be developed in practical settings. Habermas’ abstract theoretical suuctures can be unpacked in terms of the expertise base of subsystems which reproduce occupational exclusions (Collins, 1979) and which maintain public authority via undisputable claims to expertise (Fischer, 1990). Accordingly, much of what passes for the “applied turn” in critical theory focuses upon the legitimacy of particular forms of expertise and on Habermas’ (1978a, pp. 397-398) question of how “expert cultures can be mediated with everyday practice.” This brings critical theory face to face with existing preoccupations with corporate governance and the problem of making expert insiders accountable to outside “stakeholders”.

Tbe critique of expertise For Habermas, unlike Marcuse, it is not the differentiation of the lifeworld per se which gives rise to cultural impoverishment but the rise of an Expertenkultur which tends to be self-legitimating and remote from the wider polity of the lifeworld. It is generally accepted that a rhetoric of technical validity is essential to the legitimacy of expertise (even positivistic accounting researchers have drawn attention to the role of knowledge as an “excuse”).’ Expertise may even perform the functional equivalent of an ideology in so far as the interests of a few can be “technically persuasive” as being the interests of the many. In this sense expertise may “fragment” consciousness such that “everyday knowledge” can no longer be legitimately articulated. For example, accounting expertise constantly tries to insulate itself from criticizability across all three of the domains that Arrington and Puxty describe. However, it increasingly encounters legitimacy problems not just from its own apparent technical failure to deliver expected forms of cor_

porate control but also from noneconomic discourses of need and effectiveness which it cannot easily absorb. To the extent that the applied turn in critical theory focuses on the legitimacy of expertise, this is also a shift in attention from formal knowledge to institutionalized roles, from accounting to accountants (Hopwood, 1990). It has been argued that the technical ambiguity and “aura” (Gallhofer & Haslam, 1991) of accounting is important in sustaining the prominence of accountants in the U.K., a point that Abbott (1988) has made more generally. This means that claims to technical prowess rest less on demonstrable performance than on a certain style of quantification which has widespread social legitimacy as the solution to perceived problems of control. In this respect, accounting experts produce important symbols of rational ordering which can be extended to more and more areas of social and economic life. Notwithstanding evidence about looselycoupled organization structures, accounting becomes embedded in forms of discourse which permeate and constitute organizational values around notions of “efficiency” (Hop wood, 1984) and “resource management” (Broadbent et al., 1991; Laughlin & Broadbent, 1993). The fabrication of budgets (Preston et al., 1992) creates visibilities (“facticity” in Habermas’ terms) which express certain possibilities for organizational intervention and in which the boundaries between the sacred and profane elements of organizations can be reworked (Laughlin & Broadbent, 1993). It is now well established that expert practices of calculation cannot be regarded as neutrally representative, even socalled “positive” accounting theorists would agree with this. Accounting shapes the reality within it operates (Hines, 1988) and its practitioners reproduce a system of knowledge

’ This explains why capital market research and posit&e accounting theory challenge the expezdse of accounting by demonstrating that tinancial accounting’s claims to be an ioformational medium are doubtful and that accounting practice is “interested”. Whlle thls work might not be “cfitlcaV’ ln the sense of extending thls challenge to explore the constitutlvc role of accounting or to challenge its relation to capltallsm, it ls nevertheless crltlcal ln the limited sense of chsllenglng official images of accounting expertke.

HABERMAS,IAWANDACCOUNTING which shapes preferences (Arrington & Puxty, 1991, pp. 51-52) and influences the boundaries of individual and collective decision making. The colonizing potential of accounting consists not only in the instrumental reach of its information systems technology but also in its capacity to capture organizational self-understandings and reframe them in accounting terms, thereby insulating accounting from systemic inquiry other than in terms of technical success or failure. Hence, accounting can be regarded as a disciplinary practice (Roberts & Scapens, 1990) which colonizes areas of social life by creating newly internalized facts and vocabularies which potentially undermine the capability of actors to question its selfevident mission. But, following Habermas, accounting, like science, cannot be dismissed out of hand. Habermas, recognizes and wishes to preserve a legitimate regulative function for administrative practices, such as accounting, a role in which the constituting, colonizing tendencies described by critical accounting researches can be contained and reversed. The critque of expertise is far from being the unique province of Habermas and his followers in accounting and other applied areas. There is a much wider subscription to the view that practices like accounting increasingly control the language and categories within which social management can be conceived. In this way expertise generates new forms of conformity, normality, indifference and cynicism. For example, the categorical shift from citizens to clients, from persons to calculable lndividuals (Miller, 1994) corresponds to Forester’s (1985) notion of “socially structured silence.” Thus, as clients of the welfare state, we are constituted as “subjects” in Foucault’s sense and much of what Habermas (1987a, p. 369) says about “bureaucratic intervention and judicial control” reflects similar preoccupations at the empirical level. Habermas also recognizes the

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“tension between the expansion of private and civic autonomy, on the one hand, and the Foucauldian normalization of the passive enjoyment of paternalistically dispensed rights on the other” (p. 105). Indeed, Habermas is sympathetic enough to Foucault in FV to recognize that: the legal and adminbative means arenot a passive medium with no properties of their own. On the contrary they are iinked with a practice that isolates individual facts, a practice of normalisation and surveillance. Foucault has traced the rei@ing and subjectivizbg power of this practice down to it.5finest capillary ramificatiotts in everyday practice (Habermas, 1992, pp. 58-

59). From thispointof view, Habermassian notions of juritication and Foucauldian ideas of normalization are complimentary. Habermas even shares some of Foucault’s scepticism for a public sphere which is mere “pseudo-politicization” and the “shamming of communicative relations” (Habermas, 1982a, p. 386). Corporate mimicking of the public sphere may be one example of this (Dee& 1992a, b; Willmott, 1993). And while Foucault would not have accepted a formulation of the issue in such broad terms as “lifeworld” and “system”, he seems to share with Habermas the problem of “how to extricate (a) potential from the hermetic closure of expertise and infuse everyday life with its effects” (White, 1988, p. 150). Thus, from the point of view of substantive empirical analyses of expertise, Habermassian and Foucauldian resources seem manifestly compatible with one another. It is only when one looks more closely at these two thinkers that fundamental differences emerge. In essence these differences relate to the possibility of some form of ratfonal adjudfcatfon of expertise. For Foucault, like other critics of Habermas, attempts to institutionalize “validity redemption” may lead to new forms

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of expert tyranny.’ Rorty (1989, p. 61) argues that “Michel Foucault is an iron&t who is unwillingto be a liberal, whereas Jtirgen Habermasisaliberalwhoisunwillingtobeanironist.” In other words, Foucault’s critical instincts are deeply wary of institutionalized humanism in the form of a public sphere, which speaks on behalf of the individual. But for those who follow Habermas “there comes a point where the question of weighing degrees of constraint against degress of enablement must be faced” (White, 1988, p. 145)9. What remains important to a critical theory of accounting which follows Habermas’ later work is not so much an ability to give ex ante a clear criterion for distinguishing between legitimate and illegitimate roles of accounting and the law, but some kind of exphtit commitment to this as a regulative ideal which moves in the theoretical space between the actual and the possible. We shall return to this theme below. In the end the question of steering or colonixation, of the regulative or constitutive status of rules, cannot be answered solely at the analytical level. These are matters for empirical enquiry. As Laughlin & Broadbent (1993) suggest, expert practices of accounting and audit may well exemplify the growing “detachment

of admin&mtion from public will formation” (Habermas, 19839,p. 61) and the notion of cola nixation suggests the creation of new forms of expert dependency rather than participation in administrative systems. For Habermas, so&I dependency on experts is evident in the evolving ‘ ‘juridification” of mediating processes, such as law and administration, which are supposed to link lifeworld and system, allowing the normative resources of the former to intluence the latter. From this standpoint we can dMnguish p~~~ascs of jurid&ation according to whether they are linked to antecedent institutionsof the lifeworkland juridicaUy superimposedon socially integrated areas of action or whether they metely increase the den&y of legal relationships that are constitutive of systcmaticauy integrated areas of action (Habermas, 1!%7a, p. 366).

Or, as White (1988) puts the same point: Juridi6cation. . . exerts a mf&fng lntluence on the Ufeworld which. when corntied with the enhanced chimes to *e&se of social workers and other admh~istrators in the newly redetlned categories of life, ptoduces an Inskliouslyexpcmdinsdomain of dependency. Thisdomaincomes to in&de the way we d@ne and norm areas of life such as famity relations, education, old Ige as well as physical and mental health and well being(whltc,l&, P. 113, emphasis in ori@naD.

s Gordon (1986) has argued that Foucault’s essay on Kant and tbe BtJisbtenment provides a basis for discerning an underlyingkinshipwith the substantivepreoccupations with the FmnkfiutSchool (see also Neimark, W94, footnote 7, p. 104). Poucaultseems to rework the problem of critique in terms of an “aestheticsof existence” which expresses a fear of the tyranny of communication.At the level of a “debate” between accounting theorists, it is important to recognize this common ground in the analysisof expett&. Debate about the relationshipbetween Foucault and Habermas,and between accounting theorists with intellectualallegiancesto each, has been a subset of a wider confrontationbetween neomarxist theorists and others. For example, Gtey (1994, p. 4) argues that Foucault is simplynot bothered by the problem of selfgrounding which so preoccupies Habermas. Although Foucauk does not o&r a political progmmme, his work nevertheless informsa process of social and political change. He may look “neoconservative”as compared with Habcnnas, but only because he gives up on any notion of rational social ordering (Hoskin, 1994, p. 66). Againstthis Armsrrong(1994, p. 31-32) has argued that Foucault and those who bortow his ideas flatten out the differencesbetween di!%rent systemsof accountability;the concept of “discipline”is simply too blunt for analyticalpurposes. However, Armstfongisfarfrom takingsideswith Habermasand one could make sin&r criticismsof Haconcept of colonization.Indeed, as is clear from Ncimark’s(1994) contribution to this debate, Hzbermasmaybeaminorfigure. 9 White observes that in TCAHabermasseems to return to the pessimismof earlier critical theorists since the concept of ‘YragmentatiotP seems to express the impossibilityof critical consciousness. For White this over-estimatesthe power of ,S~W&&&W*: Habermas,“merely assertsthat insulatedexpert cultures and fragmentedconsciousnessare functionalfor advvlced capitalism”(White, 1988, p. 188). He argues that Habcrmasneeds to provide a more comprehensiveaccount of exW.

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InitiallyHabermas articulates the concept of juridification in the context of concerns about the expert cultures of welfare state admlnistratots, social workers and so on. Ironically, it is precisely these groups whose expertise is now threatened by the financiallogic of accountants which extends ever deeper into the core activities and values of these groups (Broadbent et al., 1991). Certainly Habermas does not confront what is at stake in conflicts between different expert cultures (doctors, social workers, teachers, lawyers, accountants) within the circuits of capital. In any event, the concept of juridilication and its applications to accounting (Miller & Power, 1992; Iaughlin and Broadbent, 1993) require further attention and lead directly into Habermas’ theory of law.

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justification embedded in communicative networks, networks which supply more than slmply an appeal to formally established entitlements. In other words, juridiiication implies a proceduralixation of relations which are morally substantive and this is corrosive of lifeworld values. ln the end, the generality of legal-situation delinitions is tailored to bureaucratic implementation, that is, to administration that deals with the social problems as presented by the legal entitlement. The situation to be regulated is embedded in the context of a lit% history and of a concrete form of life: it has to be subjected to violent abstmction, not merely because it has to be subsumed under the law but so that It can be dealt with administratively (Habermas, 1987a, pp. 362-36).

Accordingly, the great contradiction of the welfare state is that the juridification of pro grammes intended to support social integraJuridifzcation tion ends up achieving just the opposite. For In TCA Habermas alludes to the tendency Habermas the problem hangs on the difference towards an increase in formal, positive and between legal norms which are justified solely written law (Habermas, 1987a, p. 357). He is by appeal to procedure and those-which still not alone in identifying a process of juridificaadmit of “substantive” justi6cation at the level tion which is not simply an expansion of the of the lifeworld. Habermas’ critical preoccupavolume of regulation but its movement into tion here is with the colonizing, constitutive new areas and an increasing density of legal process which fragments into expertocrucies. and (con)densing force that law exerts over For Habermas, juridiiication is a specific mani- social action in contrast to its potential for a festation of the dialectic of the enlightenment facilitating, regulative one. The formal procein which welfarist intentions culminate in the duralization of the law serves to create a new “violent abstraction” of regulation. Elsewhere non-adjudicatory “positivity” of the legal prohe has referred to the tendency towards self- cess (Murphy, 1990). On the basis of this diaglegitimating regulatory procedure as the “new nosis the critical task is to: obscurity.” According to Teubner (1987) the juridificaprotect areas of life that are functionaUy dependent on tion process has dysfunctional consequences social integration through values, norms, and consensus arising from a conflict between increasing forformation, to preserve them from fall@ prey to the systemic imperatives of economic and admhistmtive malization/specialization on the one hand and subsystems growing with dynamics of their own, and increasing material demands and expectations to defend them from becoming converted over, on the other. But, unlike Teubner’s systems through the steering medium of the law, to a principle theoretic orientation, lo Habermas articulates of sociation that is, for them, dysfunctional (Habermas, this conflict in terms of the loss of substantive 19g7a, pp. 372-373). HABEEMASAND LAW

‘” See Laughlin and Broadbent (1993) for a critical exegesis of Teubner’s position.

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The tension between positivity normativtty

and

In FV the flavour of Habermas’ engagement with law is different from TCA. The language of “juridification” and “colonization” is largely absent as Habermas sets himself the task of theoretically reconstructing the role of law within a constitutional democracy. One might say that in FV Habermas puts the relatively abstract theory of communication to work while retaining its core claims. Thus, he holds on to the idea of a “moment of ideal&y” in all forms of communication which has relevance for the preservation of social order: “interacting participants must consider themselves mutually accountable” (p. 36). In FV Habermas develops the tension between this ideal moment of validity (normativity) inherent in all forms of communication and the facticity (positivity) of social practices in which decisions must be made: “The validity we ciaim for our utterances and practices of justification differsfrom the social vaZfdftyof standards we actually Iind established and expectations whose stability is based merely on settled custom or achieved through the threat of sanctions” (pp. 36-37). As Arrington & Puxty (1991, p. 50) have noted, Habermas is concerned in TCA with the tension between discourse, which may tolerate a plurality of interests, and action which generally cannot. For Habermas, this tension is primarily a theoretical problem requiring a theoretical solution, a point which is difficult to grasp. Throughout FV Habermas emphasizes that this tension is not simply that between words and deeds, Although he is aware of the issues, he is not directly interested in sociolegal studies which attend to the role of administrative discretion in operationalizing legal programmes. The tension is rather between _.

two theoretical insights: the abstract conditions of legitimate communication chamcterized by an ideal speech situation and the necessary materiality of forms of practice which “unburden” citizens from the constant need for moral and other forms of reflection. Although reflective consideration may be valued itself and may not always be onerous, Habermas is suggesting by the notion of “unburdening” only that many action contexts require participants to ussr.4methat norms are valid because there are no resources to enable reflection. In other words, the tension between validity and facticity which Habermas describes arises not primarily from the gulf between theory and practice, as one might be forgiven for think& It comes from the problem of trying to theorize about practice and, in particular, from trying to analyse those elements of a practice which concern its value base and those material or technological elements which give the practice its operational role, its facticity in Habermas’ terms. For Habermas, a (reconstructed) theory of law is uniquely positioned to deal with the relation between these two sides of a practice because law, as he constantly reminds us, must be understood as both a system of knowledge and of action; it must be understood in some sense as both theory and practice. Law is a fusion of epistemic (discursive) and practical (operational) sources of validity, sources which often pull in different directions as an unstable “alloy” of validity and facticity within the validity dimension itself. Unlike purely moral discourses which have no determinate institutionalform, law as a concrete set of institutions is uniquely positioned to “unburden” citizens of moral deliberations while simultaneously securing its own legitimacy.” FV is an extended working out of

” Habermas characterizes the “lifeworld” in terms of a “levelling+ut” lifcwodd unmediated certaiuty of tacit and unquestioned knowledge unretlective side of the lifeworld concept and sits a little uneasily with primitive communicative reciprwity, a kind of mutual accountability source of social integration.

of the tension between facticity and validity. In the is predominant. This emphasizes the intuitive and elements of the lifeworld concept which point to a between individuals (Roberts, 1991) which is the

HABEIMAS, L4W AND ACCOUNTING

how a legitimate legal order can and must restrict the very reflective justificatory discourse which is the source of that legitimacy. According to Habermas, legitmacy must have a factual and concrete force which is nevertheless fundamental to the operation of law because the burden of social integration cannot be handled at a level of abstract reciprocity characterized in terms of ideal speech.12 This brings us back to the basic issue for Habermas in FV: mechanisms for reaching understanding are constantly overtaxed in practice. Any system of rules must provide “de facto restrictions that alter the relevant data in such a way that the strategic actor feels compelled to adapt her behaviour in the objectively desired way; on the other hand, they must at the same time develop a socially integrative force by imposing obligations on the addresses” (p. 44). Habermas believes that legal rules necessarily tolerate a strategic attitude towards themselves; the rule is a de facto barrier with calculable consequences (p. 48). Accordingly, systems of rules must be theorized in such a way as to capture both dimensions of validity: their normativity and their positivity. Such a process of theoretical reconstruction necessarily takes issue with a number of existing paradigms of legal analysis.

Theory acceptance of critical theory

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and the self-grounding

According to Habermas, the tension between facticity and validity outlined above is also reflected at the level of intellectual paradigms of legal analysis: The tension between the idealism of constitutional law and the materahsm of a 1egaI order, especlagy a commet-&I law that only reflects the tmequaI distribution of social power, Iinds its echo in a drifting apart of phllo sophicll and empirical approaches to Iaw @. 60)

Habermas poses this drifting apart in terms of an opposition between “external’ sociological views of law, epitomized by systems theory, and “internal” reconstructions, epitomized by liberal jurisprudence. The former are too absorbed in the explorations of the facticity of law while the latter are too preoccupied by its validity (this is a distinction which echoes that between positive and normative accounting theory). For Habermas, systems theory typifies a sociological disenchantment of the normative content of law; for systems theorists and others, what counts for social agents as justification shrinks to the format of a constitutively necessary fiction (p. 70).13 But Habermas is also enough of a sociologist to recognize that his critique of systems theory cannot be grounded by appeal to transcendental reference points. In FV he turns to Rawls to

iz Arrington and FQxty (1991, p. 45), like many other social theorists, are ambivalent about the realizability of the ISS. Much of this dIiTicuItyarises because the very concept of a regulative ideal is not fully unpacked by Habermas. In leaning towards the grounding of vahdlty in warrants which, for practical purposes, must be trusted @. 47), Arrlngton and Puxty endorse the tnuea&A i&y of the ISS and anticipate the fundamental problem which Habermas addresses In IV. If we agree with Habennas’ chvlaaizlhon of the problem, then criticisms of the I.9 on the grounds that it Is unreaIIzable ate both tmhir and fair. They are unfair to mlsrecognize the regulative status of ideaI speech: it is not itself a realizable state of a&it-s but it expresses the possibility of rea&ing counterfacmaI states of the world. But they are fair to pose the problem of how substantive questions of social integration can be addressed at so abstract a level. l3 Habermas atgues that the posited autopoletlc character and mutuaI Indifference of law is not compatible with the observed interdependencles @. 73). Against Teubner he claims that actions having different and multiple systems references (e.g. legal, economic and scientllic) should be able to intersect in the same act of communication @. 74). Teubner, he argues, must assume a shared medium of communication that enables transIation between different codes and this breaks his systems theoretlc l%amework @. 76). Accordingly, Habermas defends the i&a of the lifeworld as not another systemic mechanism but a general communIation medium beneath the threshold of functionagy specified codes. This critique of systems theory supports Broadbent et uZ.‘s (1991) unpacking of the system/Iifeworid distinction at the organizational level.

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help characterixe the process of selfgrounding and self-stabilization of legal norms: rational reconstruction and reflective equilibrlum meet. Rawl’s work is attractive for Habermas precisely because the distinction between philosophical grounding in a classical sense and the enterprise of reaching a political self-understanding is deliberately bhured @. 82). But even though there is this blurring, there are two dMnguishable theoretical components in Rawl’s work which attract Habermas: theory formation and theory acceptance (p. 85). The former provides normative justification of a well ordered society (validity) and the latter acknowledges that these derived principles can only find entry into a culture where liberal conditions are already rooted (facticity). In other words, Rawlsian theorizing refers reflexively to the facticity of its own context; the relationship between theory and practice is one of mutual bootstrapping. The implications of Habermas’ appropriation of Rawls arc epistemologically significant for applied extensions of his theory. Habermas solves the problem of theory acceptance, which has dogged critical theorists since Horkhelmer’s (1976 [19371) famous paper, by taking a neo-liberal turn. The resistant reality or “institutions and action systems” (p. Ss) which was both the inspiration for critical theory and the source of its pessimism has now been accommodated as the basis for a reconstructive approach to law. For Habermas, as we saw above, this amounts to a “reorganization of legal validity” (p. %) in which justification (validity) and enactment (facticity) have an internal theoretical relation. The former is no longer detached in the concept of an ideal speech situation and the latter is no longer merely an object of sociological fascination. The self-grounding conception of law as a constitutionally legitimate practice now takes the following form. Rights are constituted within a mutually supporting circular relationship between the discourse principle, democracy and law. This is also a circular relation between the abstract, ideal conditions of validity and concrete practices in which the philo-

sophical discourse principle is applied to law and then to the idea of constitutional democracy in terms of an equal chance to participate in opinion formation (p. 1%). From this NeoRaw&n point of view, the legitimacy of legal process can emerge from itself. This is not as paradoxical as it sounds: “Nothing is given prior to the citizen’s practice of self-determination other than the discourse principle, which is built into the conditions of communicative sociation in general and the legal medium as such” (pp. l6l162). The system of rights brings private and public autonomy into a relation of mutual autonomy (p. 162). This is more “bootstrap ping” language which amounts to looking at the basic rights that are necessary to institutio nalize the public use of communicational liberties. The legal system must be imagined as a circular process that recursively feeds back into and legitimates itself @. 165). A system of rights does not exist in transcendental purity (p. 163). To summarize: the foundations of Habermas’ theory of law and its role in constituting the democractic state rests on the apparently paradoxical production of legitimacy (validity) from legality (facticity). Law plays a crucial theoretical role for Habermas because it is slmultaneously normativity and positivlty, validity and facticity, norm and action system. For Habermas these are internal dimensions of law which can only be artiIiciallyisolated; the internal (jurisprudential) and the external (sociological) views of law are reworked by Habermas into a relation of mutual presupposition. The importance of this reconstructed theory of law to accounting theorists is Habermas’ understanding of facticity and his recognition of the importance of action systems. This has signWant implications for the theme of expertise which we considered earlier, since it ls experts who are now entrusted as mediators and interpreters between lifeworld and sub-systems via the system of law. It is to the role of administrative expertise within Habermas’ theory of expertise that we now turn.

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Administration and expertise The tension between validity and facticity that Habermas describes has many facets. One of these is the difference between legal (judicial) and administrative (executive) power which reflects both a constitutional tension as well as an epistemological one. According to Habermas, law is a form that power makes use of. Law is only a source of even pseudolegitimation as long as it is also, if only potentially, a resource of justice (p. 180). Even corrupted appropriations of the law presuppose its potential legitimacy, otherwise there would be simply power without the need of the trap pings of law. From this Habermas argues for the mutual constitution of law and political power as the “structural interpenetration of fact grounding acceptance with the claimed acceptability of validity claims” (pp. 57-58). The institutional stabilization of this mutual presupposition takes place via codification and the creation of a layer of secondary rules as organizational norms which steer state power (p. 180). It is at this secondary level of rules that Habermas’ theory becomes a little more concrete. Here we find government institutions, procedures and professional competencies which draw on communicatively produced power (a concept that Habermas borrows from Hanna Arendt) as a “scarce resource which organizations compete for and officials manage, but which none of them can produce” (p. 186). “[Llaw is the medium through which communicative power is translated into secondary level administrative power. Administrative power should not reproduce itself, but should only be permitted to regenerate from the conversion of communicative power” @. 187). Once again, this formulation emphasizes the role of law in mediating between the lifeworld, as the source of communicative power, and administrative systems, as its consumers. Monetary and administrative structures .-

It Ibbemas likwodd.

makes extcnslvc use of “elecuical imagery”

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(Habermas’ terms for markets and hierarchies) must be “anchored via legal institutionalization in lifeworld structures” @. 59). Moreover, “because law is just as intermeshed in this way with money and administrative power as it is with solidarity, its integrative achievements assimilate imperatives with diverse origins” (p. 59). Habermas recognizes that this diversity embodies risks and that different sub-systems, such as the economy, can “serve themselves with the legitimating force of legal form to cloak their merely factual capacity to assert themselves” (p. 59). But, in contrast to earlier emphases on the problems of juridi&ation, he argues that the legitimatingrhetoric of law only makes sense because of the ideal validity that law mfgbt have. Law solves the action burdens and motivational uncertainty of morality through the legal institutionalization of markets, business and administration (p. 150). In this way, the law is a hinge between system and lifeworld (p. 77) a transformerl* (p. 78) which responds to the need for integration and which mediates the lifeworld and specialized subsystems: “The steering media of money and administrativepower are anchored in the lifeworld by way of the legal institutionalization of markets and bureaucratic organizations” (p. 101). And it is through the idea of “communicative power” that the lifeworld is institutionallyeffective. In contrast to morality, legal norms are valid if they can be justified“not only with moral but also with pragmatic and ethical-political reasons” (p. 193). Such contingencies of legislative process distinguish the political from the moral domains (p. 195). This makes “pragmatic” discourses (p. 198) and “discourses of application” concerned with “appropriateness” rather than universalization @. 201) important for Habermas. Bragmatic discourses are part of a constellation of resources to overcome the motivations deficit of morality. They in W in charaetcrizing the relation bctwccn law and the

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and R. LAUGHLIN

extend only to the construction of possible programs and the estimation of their consequences (p. 203). Justification in these pragmatic discourses depends on the “correct interpretation of the situation and the appropriate description of the problem to be dealt with” (p. 203). Accordingly, Habermas argues that “a certain expert knowledge is requisite, which is naturally fallible and rarely value neutral” @. 203). For Habermas, the state is a network of discourses through which the transformation of communicative power into administrative power takes place (p. 209). This architectonic rests on the single idea that “the organization of the constitutional state is ultimately sup posed to serve the politically autonomous selforganization of a society that has constituted itself with the system of rights as an association of free and equal consociates under law” (p. 2 17). The legal medium is really a “step up transformer for the weakly integrative electrical pulses of a communicatively structured lifeworld” (p. 217). law defines, protects and structures the spaces in which argumentation takes place, an idea similarto Teubner’s (1987) concept of “reflexive law”. As Habermas has always recognized, the ideal speech situation “can only be approximately fuhilled” but the legal system offsets this fallibilismby guaranteeing timely, unambiguous and binding decisions” (p. 220). Administrative technologies are articulated by Habermas primarily in terms of operationalizing communicatively pre-formed strategies which are mediated and organized by law. The constitutional state simply regulates the “conversion of communicative power into administrative power” for the purpose of “steering” various sub-systems. ln this way, Habermas recognizes the necessity of experts in the administration of the legal system. He even comes close to making an explicit statement about auditing: “The improvement of parliamentary surveillance (Kontrolle) of the administration and above all of administrative courts point in the same direction; both of these supplement the legislator’s ex ante sur-

veillance with

ex post facto surveillance” (p. 217). Given the recent interest in the constitutional status of institutions such as the National Audit Office in the U.K. and practices of “value for money” auditing (Bowerman, 1994;Power, 1994b; Lauglin & Broadbent, 1995b) these comments are tantalizing. When Habermas argues that “ . . . pragmatic and legal discourses . . . are best understood as matters for experts” (p. 221) he has not abandoned earlier critical preoccupations about juridi&ation and expertise. He says that such expert discourses “must remain porous” via a concept of publicity (Fischer, 1990; Laughlin& Broadbent, 1995a) and still recognizes, as an empirical matter, the risk of “expert capture” and administrative colonization. For example, he observes that “one response to the expanded discretionary leeway of welt&e state bureaucracies consisted in, for example, building new forms of participation and opportunities for discourse into the decision-process of administration itself, in order to avert the danger of improper self-programming” (p. 225). And, “an administration limited to pragmatic discourses must not disturb anything in this (normative) universe by its contributions; at the same time, it draws therefrom the normative premises that have to underlie its own empirically informed, purposive rational decision making” (p. 235). However, while these concerns mark a continuity with earlier critical preoccupations, the theoretical task in FV is to work out how the legitimacy of such practices can emerge from their pragmatic necessity. This is a project that requires an accommodation between Habermas’ radical democratic instincts, which have intluenced the “applied turn” and have inspired~critiquesof expertise, and his (neolib eral?) recognition of the functional necessity of expert administrative systems. Accordingly the normative validity of expert practice cannot be worked out solely and directly by appealing to the ideal speech situation but only by reference to constitutional democracy as a whole. Tbis creates problems for critical accounting theorists for whom concepts of “public interest”,

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which are often invoked to support expertise, in fact function to suppress and obfuscate the validity basis of accounting. But it is not so much that Habermas is completely blind to this as a possibility. Rather, he is concerned to unpack the counterfactual potential of expertise within the democratic state. Naturally this will look naive from certain critical points of view but equally Habermas seems to be suggesting that the elimination of specialized pockets of expertise is equally unrealistic. With this difficulty in mind we need to examine Habermas’ theory further. The end of critical theory? We provide a very selective reading of FV above and conclude with a fundamental issue: is Habermas continuing or abandoning the tradition of critique? FV is manifestly a treatise in liberaldemocratic political theory. One might explain this charitably as a shift in Habermas’ think@ or, uncharitably as “selling out”. On close inspection it can also be argued that FV represents an almost inevitable development for a critical theory explicitly concerned with the problem of its own foundations (Power, 1995; 1996). So where does this leave critical theory? Over the years Habermas has raised the stakes for critical theorizing and has brought its fundamental epistemological problem into the open; the paradox of self-grounding. In order to be “critical’ such theories must be relatively extewzal to the ideas and institutions which currently prevail; they cannot share too much of the conceptual framework of the object of critique in order to count as “critical’. Bur equally critical theory cannot entirely sever its links to this framework since it emerges as its radical self-reflection. (For Horkheimer and Adorn0 the “framework’ in question was the enlightenment tradition.) Critical theorizing must also attach itself immanently to ideas and institutions in order to express a “not-yet-realized” and counterfactual potential within them, otherwise it remains merely utopian. It is this dialectical tension between the possible and the actual, between validity and

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facticity, which lies at the heart of all political theorizing but which is particularly acute for critical theory. Connerton (1980, p. 137) expresses the difficulty for critical theory in terms of its need to appeal to, and on behalf of, a “critical public sphere which is never firmly localized.” In KHI Habermas worked out the selfgrounding of critical theory in terms of knowledge constitutive interests which were both empirical and transcendental - a source of considerable misunderstanding of his position (Power, 1992). In the theory of communication this problem of self-grounding culminated in the regulative idea of speech conditions embedded in ordinary language and he applied this theory to the critique of post-structuralism (Habermas, 1987b). In FV, although the theory of communicative action is presupposed, the theoretical emphasis switches from ideal conditions of speech in the form of an abstract normativity to the contexts of legally institutionalized action in which agents are unburdened of the need to engage constantly in discourse. Habermas’ concept of law is of a mechanism by which communicative action is unburdened on the one hand but is not compromised on the other. In this way Habermas confronts the essential problem of critical theory as the pro blem of reconciling the de facto restrictive role of legal rules with integrative and liberty preserving mechanisms which can, in turn, only be traced to possibilities for intersubjective recognition and the redemption of validity claims. Critical theory has always been self-conscious of its status as mere argument, of a certain remoteness from the practices on the “far side of discourse”. As Habermas has developed and refined the theory of communicative action, his status as a critical theorist in its classic sense has become more problematic, especially as the grounding process appealed to abstract communicative principles. in FV the theoretical pendulum partly swings back from these abstract principles towards the necessity of embedding them in concrete practice. In doing this Habermas rescues the un@

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of critical theory at the expense of raising the question whether it is still critical theory at all. The unity of me&critique in KHI has been replaced by the unity of reflective equilibrium; Marx has been replaced by Rawls. But it may be inevitable that the project of critical theory, conscious of its own foundations, draws both its strength and its weakness from the “incongruity between publicity as a pene trative fact and publicity as a tenuous WZZM” (Connerton, 1980, p. 137, emphasis added). If one substitutes “legality” for “publicity” here, one has an expression of the tension between facticity and validity which Habermas is attempting to stabilize in FV. This threatens to collapse under the weight both of positivist scepticism about the search for validity and critical scepticism about the potential for benign state institutions in the capitalist system. As far as the latter are concerned, Habermas may be giving too much theoretical priority to the legal system. The priority of law For Habermas, law provides the perfect theoretical solution to the essential tension of critical theory. Law is a distinctive system for Habermas because it is, or seems to be, fundamentally about arguments; it can be seen as a communicative practice par excellence and thereby provides the material correlate of the theory of communication. Thus, in contrast to legal pluralists such as Teubner (1992, 1993), Habermas conceives of law as more than just one system among others; it embodies privileged connectivities with lifeworld sources of “communicative power”. The law steers systems on behalf of the lifeworld. But this also implies that the legitimacy of aU differentiated systems, such as the economy, derives ultimately from public law as the highest legitimate order. From this point of view administrativeaction systems, such as accounting, merely execute and materialize the law subject to internal methods of self surveillance. What does this imply for critical accounting theory? FV is directly concerned with public law and reflects distinctively German preoccu-

pations with the Recbtsstaut (see Jehmbruch, 1992). In TCA Habermas already indicates that private law, such as company law, is of a lower order and less in need of legitimation than pub lit law. This is even more apparant in FV but we are not given any insights into problems within private law, such as the institutional location of accounting rules. As Napier and Noke (1991,1992) have shown, there is a complex mtellectual and instnutional croa+fertihxation between accounting and law. Even in Germany, the production of accounting rules is far from being a simple matter of company law; levels of expert interpretation exist. This process of accounting rule production is riddled with tensions not least at an epistemo logical level between the calculative aspirations of accounting and the judgemental tradition of law (Freedman % Power, 1992; Miller h Power, 1992). Financial accounting practices, which have emerged with a complex mixture of regulatory and informational characteristics are traditionally distinguished from management accounting for internal decision making. But it is increasingly recognized that internal practices are shaped by a certain legalization of the organixation, either directly through regulatory programmes or indirectly via processes of imitation and isomorphism. For critical accounting theorists famiharwith these empirical themes, it will be diEcult to accept that all critical roads lead to the lifeworld via constitutional law. Indeed, the diversity of institutionalized relations between law and accounting .and the relative autonomy of economic action systems and calculative practices suggest that the legal sphere is indeterminate in its effects; very different accounting technologies and programmes can be coupled to the constitutional arrangements for the monitoring of executive bodies. In trying to decide whether an accounting practice is enabling or distorting, facilitative or colonixing, the route back to the constitudonality of the legal medium will prove to be an unsatisfactory one, a blunt instrument of ana+is. In short, Habermas’ theory of law requires a highly idealixed

HABERMAS, LAW AND ACCOUNTING

theory of administration to solve the tension between facticity and validity.is FV may provoke critical accounting theorists to reflect on questions of legality since this is central to any normative order, but it nevertheless relegates to the analytical status of minor subsystem a practice whose empirical signi& cance suggests precisely the opposite: accounting is itself a crucial medium not only between economy and lifeworld but also a basis for linking different sub-systems; accounting has emerged as an important technology for the state. Critical accounting is interesting precisely because accounting, rather than public law, has become the language of system mediation itself. It is accounting that operates at the interface between markets and hierarchies and it is accounting which may or may not mediate system and lifeworld. Accounting is variably implicated in the legal juridification process in which concrete areas of life subject to legal intervention have also been opened up to the possibility of calculative strategies (Miller & Rose, 1990). The emergence of new calculative positivities inherent in both financial and managerial accounting can be understood as analogical variants of judification which generate the possibilityof external and internal administrative intervention, respectively. However, Habermas approaches the phenomenon of juritication from the top down; he conceives of it primarilyin terms of legal procedure which is enacted in administration. In contrast, critical accounting researchers have approached juriditication from the bottom up, as a concept relevant to administrative systems such as accounting. The two angles of approach may not look substantively different but, in Habermas’ case, he is already predisposed to prioritize the legal system and the overarching role of constitutional law. Perhaps the theoretical priority and purity of the legal system, evident in TCA and made explicit in FV, reflects a corresponding lack of attention to other societal media such as

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money and the forms of accounting practice which supposedly contribute to its operation. Accordingly, we need to consider FV in the light of Habermas’ remarks about money and their implications for accounting.

MONEY, ACCOUNTING AND ORGANIZATIONS In this final section we develop some critical observations about FV in the light of Habermas’ views on money. First we consider Habermas’ views on “steering media” - namely power and money. Second, we develop the relevance of Habermas’ views on money to accounting as a technology of monetary representation. Third, we reconsider the nature, role and potential for a critical theory of accounting which takes its lead from Habermas’ work. The problem of money Habermas’ model of social evolution and the distinction between system and lifeworld have been criticized extensively (see S&mid, 1982). We have already suggested that the lifeworld/ system distinction is best understood in analytical or heuristic terms. However, as Giddens (1982) and Broadbent et al. (1991) argue, the related concept of a “steering” also requires analytical attention, especially given its importance for the notion of colonization and its role in making sense of the distinction between system and lifeworld. In FV it is clear that the steering medium of law stands in priority to, and constitutes, those of money and power, which steer economic and admi&trative sub systems, respectively. Indeed Habermas is less inclined to talk of law as a steering medium at all since this implies a certain functional rationality. Colonization in general and juridiflcation in particular occur when the law no longer acts as “step up transformer” for the lifeworld but is coopted by sub-systems and media which sever this link, such as markets and money.

I5 Habcrmas rcks heavily on Mashaw’s (1985) theory of administration.

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For Habermas, “money’s mediation of the relationship between system and lifeworld provides the sharpest illustration of his theory of the internal colonization of the lifeworld” (Dodd, 1994, p. 59). Like Parsons, Habermas follows the cybernetic insight that money encodes information and releases agents from the burden of communication. (This is also a claim he makes on behalf of law in FV.) Unlike Parsons, Habermas understands the relationship between money and language differently: whereas for Parsons money is a “functional specfjkfatfon of language”, for Habermas (and to some extent Marx) it is a “substitite for special functions of language” (Habermas, 1987a, p. 262). As Dodd argues, this difference underlies Habermas’ empirical interest in the normative control of steering media such as money (and administrative power). For Habermas, as Dodd (1994, p. 70) notes, “Changes in the legal framework, itself part of the social system, have underpinned the separation of economic life from values and activities associated with politics and tradition.” Money gets normative support from legal regulation and state backing. However, Habermas also maintains that administrative power requires a “more demanding normative anchoring” (Habermas, 1987a, p. 271) than money. Administrative power requires legitimation at the level of collective goals enshrined in public law whereas money’s power needs only to be secured in “private legal terms”. This theoretical asymmetry explains why Habermas says relatively little about money both in TCA and IV. It is really the field of administrative power where ques tions of legitimation are most acute for him. According to Habermas, the money medium, while it does get connected back to the communicatively structured lifeworld via legal institutions, is not made dependent on processes of consensus formation in language as is the medium of administrative power still in need of legitimation (ibid, p, 272). This is very debateable and provides the point of departure for Dodd’s (1994) critique of Habermas. Dodd

a fundamental ambiguity in Habermas’ treatment of the money medium: money both needs no legitimation and yet depends on the support of the state. Some commentators have tried to make sense of this in terms of a distinction between money in general and its speciiic forms which require private legal backing. Habermas runs together an anuZytfcuZproblem about how money in general functions at the interface between economic system and lifeworld and an empirical question to do with what Dodd describes as “money’s recurring raids into the lifeworld”. The problem is that “money possesses contradictory qualities as both a medium which requires normative support throughout society in order to exist and an economic instrument which symbol&s and generates major assymmetries of wealth and power” (Dodd, 1994 p. 75). Habermas does not capture this tension because he defines monetary codes solely in terms of utility and a rationality criterion of “profitableness” (Habermas, 1987a, p. 274). According to Dodd, Habermas’ account of money narrows its communicative scope down into just one of its aspects, a point he also makes against Marx’s theory of money. Habermas ignores “lifeworld principles in the ongoing transaction of money” (Dodd, 1994, p. 76-77). This is not just an empirical point: Dodd argues that even at the analytic level money must be understood as “chronically embroilled” in the lifeworld. The same can be said of accounting and these doubts go to the very heart of the system-lifeworld distinction as Habermas sometimes uses it. Habermas, like Marx but unlike Simmel, articulates a narrowly instrumental account of money, just as he did with science in KHI, in order to sustain the richness of communicative rationality inherent in the lifeworld. In short, Habermas is allowing the system/lifeworld distinction to carry too much empirical weight; it is this that squeezes out accounting. Dodd’s sympathies with Simme1 emerge at this point: “Individualtransacting strategies must be the subject of empirical inquiry for monetary analysis in sociology, not an upshot of schematically accommodating h&blights

HAEiERhiAS, LAW AND ACCOUNTING

assumptions” (Dodd, 1994, p. 78). Habermas’ characterization of the relationship between money and lifeworld is ultimately shallow. Furthermore+ concerns about money cannot be severed from the legitimation issues of state administrative power. Habermas’ theory of money is therefore constrained by his wider theoretical objectives. If Dodd’s criticism are fair then they have serious implications for critical accounting studies which attempt to stay too literally faithful to Habermas. In one sense, accounting as an aid to monetary calculation is an uninteresting practice from the point of view of critical theory: “itis . . . a necessary condition that the values embodied in the media [of money and power] be such that they can be measured, circulated and deposited” (Habermas, 1987a, p. 272). This is about as close as Habermas has ever come to talking about accounting directly. But accounting is not simply a monetary phenomenon, it is also an administrative one. It is a practice which straddles Habermas’ distinction between money and power as steering media. And it is this that retrieves accounting within the intentions of Habermas’ framework even if we agree with Dodd that his theory of money is problematic. Tbe facticity of accounting Habermas states repeatedly that law is a system of norms and action and it is this which underwrites the distinctive theoretical role which he gives to it. Public law mediates the lifeworld and administrative power. But equally Habermas concedes too much instrumentality to the role of money and monetary measurement. Whereas this made calculation interesting for Weber, for Habermas it assumes a minor theoretical role. Somewhat against Habermas, we can retrieve a role for accounting both as medium between the economy and administrative systems, between markets and hierarchies and directly between both of these domains and lifeworld. In this respect FV will disap point many critical accountants for its idealized theory of administration. One of the problems both for Habermas and

459

for critical theories of accounting is the manner in which accounting must be caricatured as a functionally closed, deling&tSed medium. In other words, as Dodd noted in relation to money, the technocratic view of accounting must be “set up” in order to get critique going. The problem is that, as noted above, there is a wealth of studies which demonstrate the technical ambiguity and problematic nature of accounting. Habermas overfunctionalizes modern forms of administrative action, probably because he locates them GrmIy within his category of “system” rather than “lifeworld”. In his view only “archaic institutions” are characterized by a fusion of facticity and validity, a fusion which places “ceremonially fixed restrictions on communication and screens out challenges to authority” (pp. 39-40). In these contexts validity retains the force of the factual, a “bewitching authority internally withdrawn from challenge”. According to Habermas, these institutions embody an “alloy” of facticity and validity which is only broken down in modem, differentiated action systems. One obvious challenge to Habermas’ view is evident from the new wave of institutional theory (Powell & DiMaggio, 1991) which takes as its object the “moral density” of organizational complexes, a density in which the normativity of facticity is a fundamental theme. Meyer & Rowan (1977) and others effectively “de-modernize” (in Habermas’ terms) the formal organization, emphasizing the symbolic and ritualistic properties of rational-formal systems of rules, such as accounting. From the point of view of institutional theory, processes of differentiation between the technical (modem) and symbolic (archaic) have been overstated. Furthermore, law is simply one possible institutional environment for organizational action among others. The idea that the legal environment might uniquely steer organizational settings, and mediate speciaIized and everyday action contexts, both oversimplifies such contexts and overburdens the public legal function with mediating a lifeworld which is aheady latent in the “modem” organization. The

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enduring danger for critical theory in general, and for Habermas’ theory of communication in particular, is to overinstrumentalize the “jurisdiction of money” (Abbott, 1988). Institutional theory is instructive because it draws attention to the durable “facticity” of practices like accounting, their capacity to become taken for granted organizational routines, without confusing this with an often problematic functional instrumentality. In our view, critical theOriZiflg of accounting must recognize empirically that the facticity and validity of accounting practices is often fused in Habermas’ sense. Indeed, the problem for the critical theorist is precisely that of recovering ques tions of validity from taken for granted interpretations of accounting systems. To summarize the argument so far: critical accounting theory which takes its lead from Habermas must also depart from an unerring acceptance of his claims in a number of important respects. First it must adopt a non-functionalized conception of accounting; it is too easy to set accounting up as a “technical” straw man. Second, it must reject the analytical priority that Habermas gives to public law in FV. Third, it is around questions of expertise, in which issues of knowledge and social legitimacy go hand in hand, that critical work must proceed tather than in terms of the intrinsic instrumental nature of economic calculation (Arrington & Puxty, 1991). With these three factors in mind, critically theorized empirical research in accounting, which takes as its object conflict and immanent potential for change, is both possible and credible. On this view, such research has the realization of the “counterfactual organization” as its goal.

have also emerged. Indeed, extensive research on the limits of government and on new possibilities for the self-organization of regulation (e.g. Ayres & Braithwalte, 1992; Farmer % Teubner, 1994) suggest that corporations are becoming the new “public sphere” (Deetz, 1992b), even though this potential is only imperfectly expressed in existing models of corporate governance. From this point of view, FV reads as a modern& defence of pub lit law institutions as the foundations of constitutional democracy. Consequently Habermas theoretically undervalues the domain of “prlvate” corporate law and the practices of accounting which are variably constituted around it. These are matters of merely subsystemic interest for Habermas as compared with the unique function of public law in mediating sub-systems and lifeworld. Critical accounting research provides a remedy to this public law centred viewpoint which can nevertheless retain Habermas’ counterfactual intuitions. One undoubtedly important theme concerns the formal constitution of an organization as a “corporate entity” and its implications for democracy. Today extensive debates about corporate governance raise questions not merely about the control of corporate rogues but also about the whole question of stakeholders, of the distinction between insiders and outsiders and of their respective rights of access to information. The modem company is a juridical product of a number of external forces (Deetz, 1992a). Against Habermas, the company is not so much an autonomous sub-sy~ tern as the point of intersection for variable subsystems, with their associated bodies of expertise, and the lifeworld (Laughlin, 1987). But if we also follow Habermas, the question Accounting and tbe counterfactual arises as to the extent to which the modem organization corporation derives its legitimacy from substanThe idea of postmodernity alludes, in part, to tive justificationrooted in the lifeworld or from an unsettling loss of confidence in existing a conformity to legal process (Sitkin & Bies, institutions (Giddens, 1990, p. 53). But 1994) - a conformity in which accounting although there are concerns that the tradi- expertise plays a key role (Puxty, 1990). Certional economic and political structures have tain readings of institutional theory are compabecome irrelevant to the reproduction of tible with a recognition of the “colonizing” social life, new potentials for social integration power of formal administrative systems. As

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HALIERMAS, LAW AND ACCOUNTING

we suggested above, institutional theorists provide studies of how complex routines and expert understandings till the normative universe; they suggest that organixations are the sites of complex intersections and fusions of the formal (system) and the informal (lifeworld). An obvious critical line of development on the back of this work concerns the potential for “alternative” accounting practices as a basis for realizing new organizational realities, latent but not yet active. In other words, applied crklcal theory must in some sense posit a “counterfactual organization” which is nevertheless Immanent in existing structures’6 and which builds on the broad consensus about the role of accounting expertise in constructing organizations around @zanciaZ facticity. Many constraints on the realization of discursive spaces for collective will formation, the maintenance of a public sphere, are cognitive or informational in character (Agger, 1985). For public companies it can be argued that the social contract which sustains their legitimacy is founded on a shallow principle of “publicity” or disclosure. And the creation of new facts around the organization which challenge and disturb (Laughlin, 1991) the factual universe of strategic decision making may provide the basis for realizing counterfactual elements of organizational life. “New accountings”, along the lines suggested by Broadbent & Lauglin (1994), could provide the possibility for new domains of intra-organizational communicative action, new forms Of linkage between formal and lifeworld organizational structures and new conceptions of the boundaries between organizations and their natural (Power, 1994a) and social environments. In the end, the issue is one of the coherence of Habermas’ fundamental concepts such as system, lifeworld and steering as a basis for the critical theorizing of accounting. In our view, it is less that these concepts are stretched to breaking point at the level of organizations but ‘O To this extent, meta-thcoretical

questions

of “grounding”

that they become markers for a form of critical empirical enquiry which is neither bewitched by accounting as it is nor merely utopian about what it could be.

CONCLUSION In this essay we have attempted to take another look at accounting through the lens of Habermas’ theory of communicative action, this time with his recent treatise on law as the stimulus. IV reminds critical accounting theorists of certain essential tensions in the critical project. Forms of critique that move from the abstract shape of an ideal speech situation directly to practices of accounting may move too fast. Any accounting practice, whether actual or desired, must move in the space of what Habermas calls pragmatic discourse. In addition, the whole point of any system of accounting must be to relieve social agents of the burden of redesigning an Information system for every decision. Habermas also reminds us that the romanticism of an abandonment of accounting is no longer possible. We must face up to the fact that all accountings are shnultaneously non-accountings, that making things visible makes other things invisible (Broadbent et al, 1994) and that the structure of an ideal speech situation is, as a matter of necessity and even desirability,compromised in concrete action settings. The question for Habermas ln FV is how the legitimacy of de facto arrangements can unfold if the unreality of the ideal conditions of speech is admitted. The answer has something to do with the image of “reflective equilibrium” between normativity derived from first principles and a normativity already implicit, if not fully realized, in existing institutions and practices. But if this metatheoretical reminder is important for accounting, there are stilIenormous problems. FV suggests to accounting theorists something that was already evident in

are not entirely irrelevant in the accounting

context

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M. POWER and R. LAUGHLIN

TCA. The special theoretical position that Habermas atfords to public law reflects a corresponding disattention to private law, money, markets and practices of money measurement such as accounting. Borrowing the concept of juridiIication from Habermas and extending its application to accounting makes some sense but it also reflects Habermas’ preoccupation with a legal system whose de facto presence exerts considerable theoretical weight. Monetarixation and economic calculation are for him theoretically subordinate. And, strangely perhaps, Habermas sees the solution to the cola nizing effects of money and markets in terms of the legitimizing role of public law. This contrasts starkly with the terms of reference of much applied work in critical theory. If critical theorizing fails to be properly dialectical it ends up on the one hand as wishful thinking, a woolly utopia of ideal or non-exis tent accountings and, on the other hand, as mere fascination with the mechanics of normalization. Notwithstanding problems about Habermas’ relation to an earlier generation of Critical Theorists, critical accounting theory needs to work witb, rather than eradicate, the tension between facticity and validity. Accounting is also a system of action and norms, as Airington & Puxty (1991) imply. Because of this essential tension, which FV teaches us, it is important to acknowledge that critical accounting research is always subject to what may be called neoconservative pressures; the necessary facticity of any accounting system, whether existing or planned, ensures this. Hence some accommodation with “pragmatic discourses” in Habermas’ sense must be made. But critical accounting research must

also be more than this; modestly exploring the counterfactual possibilitiesinherent in contexts of action, constantly committed to questions of legitimacy and perhaps suitable ironic about concepts of ideal speech. In the end this is as much a question of research style as it is of explicit intellectual allegiance, of concepts of system, lifeworld and steering as useful analytical categories for exploring the problem of expertise rather than as substantive, discrete and discontinuous spheres. Only in this way can the theorist begin to reconstruct the counterfactual possibilitieslatent in institutionalized forms of life. Finally, the theoretical decision is whether there is still enough left in Habermas to interest critical accounting theorists. Substantive similarities between differently theorized critiques of expertise suggest that these differences may only be a matter of style and citation preferences. But this is only partly true. We have argued that Habermas’ position, for all its difliculties, provides a dlstinctive intellectual resource. The motif of a “reflective equilibrium” between norms and institutions suggests that the distinction between accounting practices as “distorting” or “enabling” can never be made absolutely but is nevertheless a constant problem that must be worked out in empirical research. We emphasize the process of critical tbeorfzIng over the doctrinaire temptations of “Critical Theory”. And Habermas has reminded us that the norms of critical accounting research have no transcendent reference point but must emerge from its internal reflection, in the space between what is and what might be: between facticity and validity.

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