It is said that the degree in commerce was originated in the United Kingdom of Great Britain and Northern Ireland because of over production of industrial goods as the result of the (first) industrial revolution in Britain in the eighteenth century which required people well trained to trade with the world.
Professor Arnold Toynbee (1852-1883), the celebrated English economic historian, popularized the term “revolution” to describe the periods of very rapid economic change.. Professor Toynbee said that the agrarian revolution took place in Britain between 1650-1750 and was followed by the (first) industrial revolution between 1760-1840.
One has to understand that before the first agrarian revolution took place, in almost all countries of Europe people lived at the subsistence level. Grain harvests were poor and livestock could not thrive due to shortage of fodder in winter. Land was thus precious, and many battles were fought for the purpose of acquiring land to produce food. Landlords became powerful, and the peasantry with no land had to work for the landlords in order to have something to eat to survive.
The agrarian revolution introduced new methods of farming, from planting to harvesting, with the invention of tools to make the farming tasks efficient and to lighten the load on human bodies. Notable amongst the agrarian reforms was the application of a four-field crop rotation introduced into the U.K. by Viscount Townshend (the Second Viscount Townsend of Raynham). The system sounds very basic in today’s world, but worked wonders in the 1600’s.
Viscount Charles Townshend copied the system tried in Belgium by having crop rotation to enrich the land. He introduced turnips as one of the rotation crops; thus he was nicknamed Turnip Townshend. For this innovation, he was granted the title Viscount Townshend of Raynham and a seat in the House of Lords in 1687.
The crop rotation scheme required that the land be divided into parcels growing wheat, barley, turnips, and clover. Then each parcel was planted with the other crop the following year. The soil was thus ready for the other crop so farmers did not have to let the land lie fallow every third year. Furthermore, it provided fodder crop and grazing crop, allowing livestocks to be bred year-round.
Because the agrarian revolution made food plentiful, it was thus possible to feed a larger number of people. So when the industrial revolution came along, requiring many people to work in factories instead of on land, the farming sector was able to produce enough surplus food to feed the non-agricultural population.
The industrial revolution between 1760-1840, when coal, iron and steel were used on a large scale for the first time, is referred to as the first industrial revolution by today’s historians who term it the metal industrial revolution as opposed to the non-metal (second) industrial revolution when plastics and nylon and other composite materials were invented after 1940.
The first industrial revolution resulted in harnessing energy sources: water, sun, and fossil fuels were used for energy. Use of such energy supported the invention of steam engines, internal combustion engines, and also electricity. These, in turn, supported the invention of machines such as spinning and weaving looms in the textile industry, locomotives, automobiles, etc. Science played an important role in this revolution. In short, technologies thus developed made use of natural resources, and mass production of goods was possible without having to resort to human labour or animals as the source of power to move tools and machines.
The agrarian and then industrial revolutions spread from Britain first to Belgium. France was too preoccupied with its political revolution and did not benefit from or copy Britain’s economic development until after 1840. Germany came in very late, not until after the unification in 1870, but made very rapid progress and almost overtook Britain in the space of about 40 years.
In the industrial revolution, two requirements were necessary: Materials and Markets, the 2 M’s. It has been argued that the industrial revolution triggered the era of colonization by European powers. After Christopher Columbus discovered America in 1492, Spain, England and many other European countries tried to steal gold and wealth from the New World, in which the wealth of the new world, including those of the Inca’s in South America, was plundered. However, the exploitation did not reach its height until the era of colonization after the industrial revolution. Starting around the turn of the nineteenth century, almost all other continents were subdued, colonized, or heavily dominated by European powers. Belgium, France, Great Britain, Germany, Holland, Italy and Portugal grabbed almost all countries and regions in Africa, Asia, and South America, in order to obtain the raw materials to feed their industrial factories and off load surplus production after their internal consumption requirements were satisfied.
In Britain, Parliament passed the first Joint Stock Companies Act. In 1600, a group of merchants in the City of London registered a company by the name of the East India Company in order to trade in that subcontinent. At that time, India was not a unified country, being ruled by princes, maharajas and rajas, depending on the wealth and size of the territory each ruled. In order to protect its merchandise from looting and thievery, the East India Company had to employ guards. But as the territories they traded in expanded, they needed an ever larger number of guards. The guards were also used to protect the market from other competitors, both local and foreign. Thus, eventually what East India Company needed was not guards but soldiers. In 1858 the company asked the Government for help, and the British Crown responded by assuming direct rule of India. In other countries in Europe, the circumstances may have been different but the end was the same: the Kings and Emperors of the European powers colonized almost all countries in Africa, Asia, and South America for the 2 M’s: Markets and (raw) Materials.
Accounting or double entry book keeping as we understand and use it today originated in Italy around 1494 with the publication of the text called “Summa de arithmetica, geometria, proportioni et proportionalita,” or in short, called the Summa by Luca Paciolo, a Franciscan friar (monk). He is remembered among the great artists such as Leonardo de Vinci and many other scientists of the Renaissance Period which started in Italy around 1450.
As production and trade rapidly developed and expanded widely, accounting kept pace, from voyage accounting to the double entry bookkeeping system. In Britain, the culmination of recognition for the accounting profession was the Royal Charter from the Crown being bestowed on the Institute of Chartered Accountants in England and Wales in 1880.
In 1776, an Englishman by the name of Adam Smith wrote his epochal “Inquiring into the Nature and Causes of the Wealth of the Nations”, which is now regarded as the first book on economics. The book dealt with optimum allocation of resources, called factors of production. It highlighted division of labour as the main principle to achieve maximum results from any given means of production.
In Britain, the first universities were created for the teaching of religion in order to groom novice priests. Later on, they added psychology and law. After Adam Smith, economics was introduced and taught, notably at Cambridge and to a lesser extent at Oxford. When the University of London was established in 1829, it started also teaching the subject of economics which culminated in the establishment of the London School of Economics in 1895.
However, as more and more goods were produced and as more factories were being set up, there was an acute need for personnel to “operate” and “manage” these business organizations. Britain had such far-flung territories that it was said that the sun never set on the British Empire. So the demand was for people who could operate overseas or foreign operations as well. Pressured by expanding trading and production, traditional craftsman training was not enough. Well qualified engineers were necessary to operate and further develop various processes in the factories.
Thus Great Britain took a very bold step in 1880 to set up 6 “new” universities in the main industrial centres of the country, namely in Birmingham, Bristol, Leeds, Liverpool, Manchester, and Sheffield. These new universities were the first to offer a Bachelor Degree in Engineering and a Bachelor Degree in Commerce in Britain.
Because of the haste to start these universities to keep up with the demand, and also because of the desire to have them all up and running in time for the Golden Jubilee Celebration of their great Queen, Queen Victoria of England (1837-1901), these universities were built of red bricks in contrast to the white stone of the colleges of Oxford and Cambridge. Thus these 6 universities were nicknamed “red brick universities”. All of them bear the name of Victoria Universities.
The curriculum of the Degree of Commerce therefore reflected the need of the British Empire at the time with far flung possessions around the world. Those involved in trading had to also understand the market. Thus the curriculum for the Degree of Commerce included not only economics and accounting but foreign languages, commercial law, economic geography and economic history as well.
Having learned from their colleagues across the Atlantic, the American industrial development took much less time to gain the same production capabilities that Britain took over a century to achieve. In the field of training and education, because geographical, historical and political environments were so dissimilar from their European counterparts, business education took a different approach. The United States of America in the nineteenth century was composed of around 48 states and territories. The demand in the home market was so large that there was no need for foreign markets at the time. Demand for goods generated by building rail lines to the western states of Washington, Oregon and California etc. made the need to produce most efficiently paramount.
The writing of management gurus of the period, including Henri Fayol in France and Frederick Winslow Taylor in the US all advocated management as a process, with time and motion studies as a key to factory production efficiency. They proposed also that management had many tasks which all organizations, be they manufacturing, banking or even charities, had to perform. Managers required a knowledge of finance, organization behavior, operations and marketing. These tasks were termed management functions or functional fields of management. The management process involved setting goals, planning, organizing, execution/operation and control.
Thus the Americans, instead of following the Bristish model, focused on management instead of trading as the central theme in their education of future business leaders. Instead of calling their degree a commerce degree, they called theirs a business administration degree with an emphasis on management process and the four functional fields of management.
In 1880, a rich merchant in the city of Philadelphia made a huge donation of $80,000 to the University of Pennsylvania to establish a school for business . The response by the University was to establish a School of Commerce and Finance. This school was later called the Wharton School after the name of the original donor, Joseph Wharton.
The curriculum of the degree of Bachelor of Business Administration was a four-year program comprised of courses in elementary economics, management principles and policies, and all four functional fields of management: finance, organization behavior, operations and marketing.
It is to be noted that the subjects of commercial law, foreign language, economic geography and economic history, which were essentially part of the Degree of Commerce in Britain, were conspicuously left out due to different philosophies and needs as previously described.
Harvard University, the most prestigious of all universities in the U.S., was late in adopting this approach. However, in 1908, Harvard University recognized the need and started the Master’s Program in Business Administration, accepting students with diverse educational backgrounds for a two-year program. Perhaps because of the illustrious name of the institution coupled with quality of the program, it was instantly accepted as the first class degree to train aspiring business practitioners. It was duplicated or copied in almost all business schools in the US and after 1945 almost worldwide.
After World War II, even Britain appointed a commission to go to the U.S. to see why and how US businesses gained such dominance in the world. The commission published a report called the “White Paper on Competitiveness” which led to the establishment of three business schools in the early 1960’s, the London Business School, the Manchester Business School, and the Strathclyde (Scottish) Business School, in the cities of London, Manchester, and Glasgow, respectively.
In 1933, Chulalongkorn University divested its Faculty of Political Science to be established as part of Thammasat University. Thus in 1938, when the University decided to expand its activities, it set up two new faculties: the Faculty of Architecture and the Faculty of Commerce and Accountancy.
The need for good knowledge of accounting at the time was paramount. It was needed in both public and private sectors. Up to 1938, only three Thais were qualified as Chartered Accountants. On the trading side, businesses were small and nearly all family owned. Larger businesses were foreign owned, with personnel brought into the country from their home countries. Demand for traders, per se, thus was not great. At the same time in Britain, accounting was treated as professional training and not taught in universities. However, there was a prototype of a Faculty of Commerce in the so-called red brick universities.
Therefore as a compromise, an independent Department of Accounting and Commerce was first set up in the Faculty of Arts in 1938 before officially becoming the Faculty of Commerce and Accountancy.
Of the three Thais who were qualified as Chartered Accountants, two were on the founding committee of the Faculty of Commerce and Accountancy, Chulalongkorn University. The first Thai Chartered Accountant was appointed Dean and held the position for 25 years until 1964.
On the commerce side, a person who obtained a Degree of Commerce from a red brick university in the UK was in charge from the start. He was appointed Dean from 1964-1971. Thus, the curriculum introduced at Chulalongkorn University was modeled exactly after the British model comprising economics, accounting, foreign language, economic geography, economic history and commercial law.
Having very few full-time instructors, the Faculty of Commerce and Accountancy had to rely on adjunct/part-time lecturers. They were very high government officials, prominent bankers and businessmen. Two of them were later made privy counselors, three became prime ministers, two became heads of the Supreme Court.
Not only was the Faculty of Commerce and Accountancy short of full-time faculty. Even the ones it had, although eminently capable, only held Bachelor’s degrees. Thus in 1961 when the Faculty was approached by the International Center for the Advancement of Management Education of Stanford University, California, USA for the training of instructors in the 4 functional fields of management, in all eight faculty members were seconded and each took four quarters of accelerated programs there. Thanks to this wonderful windfall, of the eight, two became University presidents, 3 became deans and the rest were heads of departments in their respective disciplines.
With these experienced faculty members in all functional fields of management, the Faculty of Commerce and Accountancy in 1971 reoriented their curriculum by dropping the requirement of economic history and economic geography except as elective subjects and geared all programs towards management and away from the commerce or trading approach as already described.
Upon approval of this new approach, the Administrative Board of the Faculty was satisfied that:
1. The country was on the verge of industrializing its economy, with the introduction of Investment Promotion Act. The Thai government introduced the plan to turn the Eastern Seaboard into an industrial zone. All these developments required more trained personnel in management.
2. The emphasis on trading or commerce had lost its flavor as even the British institutions were looking seriously into the American model.
3. The faculty had faculty members knowledgeable enough to administer and teach the program.
In order to prove the validity of this decision, at the end of the academic year 2007, the Faculty of Commerce and Accountancy graduated 308 Bachelors of Business Administration, compared to none with a Bachelor of Commerce, commerce being regarded as a major in the BBA degree.
So, great future still lies ahead.
September 24, 2008