Social Credit is described by its originator,
C. H. DouglasMajor C. H. Douglas MIMechE, MIEE, , was a British engineer and pioneer of the Social Credit economic reform movement.-Education and engineering career:...
, as "the policy of a
philosophyPhilosophy is the study of general and fundamental problems concerning matters such as existence, knowledge, values, reason, mind, and language. Philosophy is distinguished from other ways of addressing these questions by its critical, generally systematic approach and its reliance on reasoned...
". Douglas called his philosophy "practical Christianity". This philosophy is interdisciplinary in nature, encompassing the fields of
economicsEconomics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
,
political sciencePolitical science is a social science concerned with the theory and practice of politics and the description and analysis of political systems and political behavior. It is often described as the pragmatic application of the art and science of politics defined as "who gets what, when and how",...
,
historyHistory is the study of the human past, with special attention to the written record. Scholars who write about history are called historians. It is a field of research which uses a narrative to examine and analyse the sequence of events, and it often attempts to investigate objectively the patterns...
, accounting, and
physicsPhysics is a natural science; it is the study of matter and its motion through spacetime and all that derives from these, such as energy and force...
. The term "Social Credit" originated from the writings of Douglas, a British engineer and originator of the Social Credit movement, (1879–1952), who wrote a book by that name in 1924.
According to Douglas, the true purpose of
productionIn microeconomics, industrial organization is the field which describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
is
consumptionConsumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally consumption is defined by opposition to production. But the precise definition can vary because different schools of economists define production quite differently...
, and production must serve the genuine, freely expressed interests of consumers. Each citizen is to have a beneficial, not direct, inheritance in the communal
capitalIn economics, capital or capital goods or real capital are factors of production used to create goods or services that are not themselves significantly consumed in the production process. Capital goods may be acquired with money or financial capital...
conferred by complete and dynamic access to the fruits of industry assured by the National Dividend and Compensated Price.
ConsumerConsumer is a broad label for any individuals or households that use goods and services generated within the economy. The concept of a consumer is used in different contexts, so that the usage and significance of the term may vary....
s, fully provided with adequate
purchasing powerPurchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing...
, will establish the policy of
productionManufacturing is the use of machines, tools and labor to make things for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
through exercise of their monetary vote. In this view, the term
economic democracyEconomic democracy is a socioeconomic philosophy that suggests transfer of decision-making authority from a small minority of corporate shareholders to the larger majority of public stakeholders...
does not mean
worker controlWorkers' control is a term meaning participation in the management of factories and other commercial enterprises by the people who work there. It has been variously advocated by anarchists, socialists, Communists and Christian Democrats, and has been combined with various socialist and mixed...
of industry. Removing the policy of production from
banking institutionsIn financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. Most financial institutions are highly regulated by...
, government, and industry, Social Credit envisages an "
aristocracyAristocracy is a form of government, in which a few of the most prominent citizens rule. This may be a hereditary elite, or it may be by a system of cooption where a council of prominent citizens add leading soldiers, merchants, land owners, priests, and lawyers to their number...
of producers, serving and
accreditedAccreditation is a process in which certification of competency, authority, or credibility is presented.Organizations that issue credentials or certify third parties against official standards are themselves formally accredited by accreditation bodies ; hence they are sometimes known as "accredited...
by a
democracyDemocracy is a system of government in which either the actual governing is carried out by the people governed , or the power to do so is granted by them...
of consumers." Assuming the only safe place for power is in many hands, Social Credit is a
distributiveDistributism, also known as distributionism and distributivism, is a third-way economic philosophy formulated by such Roman Catholic thinkers as G. K...
philosophy, and its policy is to disperse power to individuals. Social Credit philosophy is best summed by Douglas when he said, “Systems were made for men, and not men for systems, and the interest of man which is
self-developmentThe term self-help refers to self-guided improvement—economically, intellectually, or emotionally—often with a substantial psychological basis....
, is above all systems, whether theological, political or economic.”
The policy proposals of Social Credit attracted widespread interest in the decades between the world wars of the twentieth century because of their relevance to economic conditions of the time. Douglas called attention to the excess of production capacity over consumer purchasing power, an observation that was also made by
John Maynard KeynesJohn Maynard Keynes, 1st Baron Keynes, CB was a British economist whose ideas have been a central influence on modern macroeconomics, both in theory and practice...
in his book, The General Theory of Employment, Interest and Money. While Douglas shared with Keynes some criticisms of the monetary and banking systems, his unique remedies were disputed and even rejected by most economists and bankers of the time. Remnants of Social Credit still exist within
Social Credit PartiesThe name Social Credit Party has been used by a number of political parties.In Canada:*Manitoba Social Credit Party*Ralliement créditiste*Ralliement créditiste du Québec*Social Credit Party of Alberta*Social Credit Party of Saskatchewan...
throughout the world, but not in the purest form originally advanced by Major C. H. Douglas. Likewise, the
Keynesian RevolutionThe Keynesian Revolution was a fundamental reworking of economic theory concerning the factors determining employment levels in the overall economy...
of the 1940s and 1950s was eventually eroded by neoclassical economists and banking interests. Now as Keynes' ideas seem the most generally accepted response to the
Financial crisis of 2007–2009The financial crisis of 2007–2009 has been called the worst financial crisis since the one related to the Great Depression by leading economists, and it contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial...
, modern analysts like
Richard C. CookRichard C. Cook is a former U.S. federal government analyst, who was instrumental in exposing White House cover-ups regarding the Space Shuttle Challenger disaster of 1986. As a witness to the incident and a participant in the subsequent investigations, Cook provided key documents to The New York...
argue the need for a renewed interest in the long dormant ideas of Major Douglas.
Economic theory
Douglas disagreed with classical economists such as
Adam SmithAdam Smith was a Scottish moral philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
and
David RicardoDavid Ricardo was an English political economist, often credited systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith. He was also a member of Parliament, businessman, financier and speculator, who amassed a considerable...
who divided the
factors of productionIn economics, factors of production are the resources employed to produce goods and services. They facilitate production but do not become part of the product or are significantly transformed by the production process...
into
landIn economics, land comprises all naturally occurring resources whose supply is inherently fixed. Examples are any and all particular geographical locations, mineral deposits, and even geostationary orbit locations and portions of the electromagnetic spectrum. Natural resources are fundamental to...
, labour and
capitalIn general physical capital refers to any non-human asset made by humans and then used in production. Often, it refers to economic capital in some ambiguous combination of infrastructural capital and natural capital...
. He also disagreed with
Karl MarxKarl Heinrich Marx was a Germanphilosopher, political economist, historian, political theorist, sociologist, communist and revolutionary, whose ideas are credited as the foundation of modern communism...
who claimed that labour created all wealth. Douglas believed the “
cultural inheritance of societyCultural heritage is the legacy of physical and intangible attributes of the past of a group or society that are selected from the past, and inherited, maintained in the present and bestowed for the benefit of future generations...
” was the primary factor in production. Cultural inheritance is defined as the knowledge,
techniqueA technique is a procedure used to accomplish a specific activity or task:* Technology, the study of or a collection of techniques*Skill, the ability to perform a task* Scientific technique, any systematic method to obtain information of a scientific nature...
and processes that have been handed down to us incrementally from the origins of civilization. Consequently, mankind does not have to keep “
reinventing the wheelReinventing the wheel is a phrase that means to duplicate a basic method that has long since been accepted and even taken for granted.The inspiration for this idiomatic metaphor lies in the fact that the wheel is the archetype of human ingenuity, both by virtue of the added power and flexibility it...
”. “We are merely the administrators of that cultural inheritance, and to that extent the cultural inheritance is the
propertyProperty is any physical or intangible entity that is owned by a person or jointly by a group of persons. Depending on the nature of the property, an owner of property has the right to consume, sell, rent, mortgage, transfer, exchange or destroy his or her property, and/or to exclude others from...
of all of us, without exception.”
Closely associated with the concept of our cultural inheritance is the Social Credit theory of economic sabotage. While Douglas believed the cultural heritage factor of production is primary in increasing
wealthWealth is an abundance of valuable resources or material possessions. The word is derived from the old English wela, which is from an Indo-European word stem...
, he also believed that economic sabotage is the primary factor decreasing it. The word wealth derives from the Old English word
wela, or "well-being", and Douglas believed that all production should increase personal well-being. Therefore, production that does not directly increase personal well-being is waste, or economic sabotage.
"The economic effect of charging all the waste in industry to the consumer so curtails his purchasing power that an increasing percentage of the product of industry must be exported. The effect of this on the worker is that he has to do many times the amount of work which should be necessary to keep him in the highest standard of living, as a result of an artificial inducement to produce things he does not want, which he cannot buy, and which are of no use to the attainment of his internal standard of well-being."
By modern methods of accounting, the consumer is forced to pay for all the costs of production, including waste. The economic effect of charging the consumer with all waste in industry is that the consumer is forced to do much more work than is necessary. Douglas believed that wasted effort could be directly linked to confusion in regards to the purpose of the economic system, and the belief that the economic system exists to provide employment in order to distribute income.
"But it may be advisable to glance at some of the proximate causes operating to reduce the return for effort ; and to realise the origin of most of the specific instances, it must be borne in mind that the existing economic system distributes goods and services through the same agency which induces goods and services, i.e., payment for work in progress. In other words, if production stops, distribution stops, and, as a consequence, a clear incentive exists to produce useless or superfluous articles in order that useful commodities already existing may be distributed. This perfectly simple reason is the explanation of the increasing necessity of what has come to be called economic sabotage ; the colossal waste of effort which goes on in every walk of life quite unobserved by the majority of people because they are so familiar with it ; a waste which yet so over-taxed the ingenuity of society to extend it that the climax of war only occurred in the moment when a culminating exhibition of organised sabotage was necessary to preserve the system from spontaneous combustion."
Douglas claimed there were three possible policy alternatives with respect to the industrial/economic system:
"1. The first of these is that it is a disguised Government, of which the primary, though admittedly not the only, object is to impose upon the world a system of thought and action.
2. The second alternative has a certain similarity to the first, but is simpler. It assumes that the primary objective of the industrial system is the provision of employment.
3. And the third, which is essentially simpler still, in fact, so simple that it appears entirely unintelligible to the majority, is that the object of the industrial system is merely to provide goods and services."
Douglas believed that it was the third policy alternative upon which an industrial system should be based, but confusion of thought has allowed the industrial system to be governed by the first two objectives. Often, people confuse the second and third objectives of an economic system, and are concerned with the levels of unemployment within the economy. However, if the purpose of our economic system is to deliver the maximum amount of goods and services with the least amount of effort, then the ability to deliver goods and services with the least amount of employment is actually desirable. Unemployment is a logical consequence of machines replacing labour in the productive process, and any attempt to reverse this process through policies designed to attain full employment directly sabotages our cultural inheritance. Douglas believed that the people displaced from the industrial system through the process of mechanization should still have the ability to consume the fruits of the system, because we are all inheritors of the cultural inheritance, and his proposal for a national dividend is directly related to this belief.
The nature of money and credit
Douglas also criticized classical economics because it was based upon a
barter economyBartering is a medium in which goods or services are directly exchanged for other goods and/or services without a common unit of exchange . It can be bilateral or multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent...
, whereas the modern economy is a monetary one. To the classical economist, money is a
medium of exchangeA medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.By contrast, as William Stanley Jevons argued, in a barter system there must be a coincidence of wants before two people can trade – one must want exactly what the other has to offer, when and...
. Douglas argued that this may have once been the case when the majority of wealth was produced by individuals who subsequently exchanged it with each other. But in modern economies,
division of labourDivision of labour or economic specialisation is the specialisation of cooperative labour in specific, circumscribed tasks and roles, intended to increase the productivity of labour...
splits production into multiple processes, and wealth is produced by people working in association with each other. For instance, an automobile worker does not produce any wealth (i.e., the automobile) by himself, but only in conjunction with other auto workers, the producers of roads, gasoline, insurance etc.
In this view, wealth is a pool upon which people can draw, and the efficiency gained by individuals cooperating in the productive process is known as the “
unearned incrementUnearned increment is an increase in the value of land or any propertywithout expenditure of any kind on the part of the proprietor....
of association” – historic accumulations of which constitute what Douglas called the cultural heritage. The means of drawing upon this pool are the
ticketsA ticket may be a pick-up ticket, for example when retrieving clothing from a dry cleaning shop or an automobile from a repair shop, or putting things in storage at a train station, cloakroom, etc. It is also used in places where people are required to "take a number" to queue up, such as in a...
distributed by the banking system.
Initially, money originated from the productive system, when cattle owners punched leather discs which represented a head of cattle. These discs could then be exchanged for corn, and the corn producers could then exchange the disc for a head of cattle at a later date. The word “
pecuniary” comes from the Latin “pecus,” meaning "cattle". Today, the productive system and the distributive/monetary system are two separate entities. Douglas demonstrated that
loanA loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s create
depositsA deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
, and presented
mathematical proofIn mathematics, a proof is a convincing demonstration that some mathematical statement is necessarily true. Proofs are obtained from deductive reasoning, rather than from inductive or empirical arguments. That is, a proof must demonstrate that a statement is true in all cases, without a single...
in his book
Social Credit. Bank credit comprises the vast majority of money, and is created every time a bank makes a loan. Douglas was also one of the first to understand the creditary nature of money. The word
creditCredit is the provision of resources by one party to another party where that second party does not reimburse the first party immediately, thereby generating a debt, and instead arranges either to repay or return those resources at a later date. It is any form of deferred payment...
derives from the Latin "credere", meaning "to believe". "The essential quality of money, therefore, is that a man shall believe that he can get what he wants by the aid of it."
Douglas believed that money should not be regarded as a commodity but rather as a ticket, a means of distribution of production "There are two sides to this question of a ticket representing something that we can call, if we like, a value. There is the ticket itself – the money which forms the thing we call '
effective demandEffective demand , is an economic principle that suggests consumer needs and desires must be accompanied by purchasing power to be considered effective in discussions of supply and demand for the determination of price.Classical economists Adam Smith and David Ricardo embraced Say's Law,...
' – and there is something we call a price opposite to it." Money is effective demand, and the means of reclaiming that money are prices and taxes. As real capital replaces labour in the process of modernization, money should become increasingly an instrument of distribution.
Douglas also claimed the problem of production, or
scarcityScarcity is the fundamental economic problem of having seemingly unlimited human needs and wants, in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs...
, had long been solved. The new problem was one of distribution. However; so long as orthodox economics makes scarcity a value, banks will continue to believe that they are creating value for the money they produce by making it scarce. Douglas criticized the banking system on two counts:
- for being a form of government which has been centralizing
Centralisation, or centralization , is the process by which the activities of an organisation, particularly those regarding decision-making, become concentrated within a particular location and/or group....
its power for centuries, and
- for claiming ownership to the money they create.
The former Douglas identified as being anti-social in policy. The latter he claimed was equivalent to claiming ownership of the nation. Money, Douglas claimed, was merely an
abstractAn abstract object is an object which does not exist at any particular time or place, but rather exists as a type of thing . In philosophy, an important distinction is whether an object is considered abstract or concrete. Abstract objects are sometimes called abstracta An abstract object is an...
representation of the real credit of the community, which is the ability of the community to deliver goods and services, when, and where they are required.
The A + B theorem
In January 1919,
A Mechanical View of Economics by C.H. Douglas was the first article to appear in the
New Age, edited by
A.R. OrageAlfred Richard Orage was a British intellectual, now best known for editing the magazine The New Age.-Early life:...
, critiquing the methods by which economic activity is typically measured:
"It is not the purpose of this short article to depreciate the services of accountants; in fact, under the existing conditions probably no body of men has done more to crystallize the data on which we carry on the business of the world; but the utter confusion of thought which has undoubtedly arisen from the calm assumption of the book-keeper and the accountant that he and he alone was in a position to assign positive or negative values to the quantities represented by his figures is one of the outstanding curiosities of the industrial system; and the attempt to mold the activities of a great empire on such a basis is surely the final condemnation of an out-worn method."
In 1920, Douglas presented the A + B theorem in his book,
Credit-Power and Democracy, in critique of accounting methodology pertinent to income and prices. In the fourth, Australian Edition of 1933 Douglas states:
"A factory or other productive organization has, besides its economic function as a producer of goods, a financial aspect—it may be regarded on the one hand as a device for the distribution of purchasing-power to individuals through the media of wages, salaries, and dividends; and on the other hand as a manufactory of prices – financial values. From this standpoint, its payments may be divided into two groups:
- Group A - All payments made to individuals (wages, salaries, and dividends).
- Group B - All payments made to other organizations (raw materials, bank charges, and other external costs).
Now the rate of flow of purchasing-power to individuals is represented by A, but since all payments go into prices, the rate of flow of prices cannot be less than A+B. The product of any factory may be considered as something which the public ought to be able to buy, although in many cases it is an intermediate product of no use to individuals but only to a subsequent manufacture; but since A will not purchase A+B; a proportion of the product at least equivalent to B must be distributed by a form of purchasing-power which is not comprised in the description grouped under A. It will be necessary at a later stage to show that this additional purchasing power is provided by loan credit (bank overdrafts) or export credit.”
Beyond
empiricalThe word empirical denotes information gained by means of observation, experience, or experiment. A central concept in science and the scientific method is that all evidence must be empirical, or empirically based, that is, dependent on evidence or consequences that are observable by the senses...
evidence, Douglas claims this deductive
theoremIn mathematics, a theorem is a statement proved on the basis of previously accepted or established statements such as axioms. In formal mathematical logic, the concept of a theorem may be taken to mean a formula that can be derived according to the derivation rules of a fixed formal system.In...
demonstrates that total prices rise faster than total incomes when regarded as a
flowEconomics, business, accounting, and related fields often distinguish between quantities which are stocks and those which are flows. A stock variable is measured at one specific time, and represents a quantity existing at that point in time, which may have been accumulated in the past. A flow...
.
In his pamphlet entitled, The New and the Old Economics, Douglas describes the cause of "B" payments:
“I think that a little consideration will make it clear that in this sense an overhead charge is any charge in respect of which the actual distributed purchasing power does not still exist, and that practically this means any charge created at a further distance in the past than the period of cyclic rate of circulation of money. There is no fundamental difference between tools and intermediate products, and the latter may therefore be included.”
In 1932, Douglas estimated the cyclic rate of circulation of money to be approximately three weeks. The cyclic rate of circulation of money measures the amount of time required for a loan to pass through the productive system and return to the bank. This can be calculated by determining the amount of
clearingsIn banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
through the bank in a year divided by the average amount of
depositsA deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
held at the banks (which varies very little). The result is the number of times money must turnover in order to produce these
clearing houseA clearing house is a financial services company that provides clearing and settlement services for financial transactions, usually on a futures exchange, and often acts as central counterparty...
figures. In a testimony before the Alberta Agricultural Committee of the Alberta Legislature in 1934, Douglas said:
“Now we know there are an increasing number of charges which originated from a period much anterior to three weeks, and included in those charges, as a matter of fact, are most of the charges made in, respect of purchases from one organization to another, but all such charges as capital charges (for instance, on a railway which was constructed a year, two years, three years, five or ten years ago, where charges are still extant), cannot be liquidated by a stream of purchasing power which does not increase in volume and which has a period of three weeks. The consequence is, you have a piling up of debt, you have in many cases a diminution of purchasing power being equivalent to the price of the goods for sale."
According to Douglas, the major consequence of the problem is exponentially increasing debt. Further, society is forced to produce goods that consumers either do not want or cannot afford to purchase (i.e. economic sabotage). The latter represents a favorable
balance of tradeThe balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...
, meaning a country exports more than it imports. But not every country can pursue this objective at the same time, as one country must import more than it exports when another country exports more than it imports. The long-term consequence of this policy is a
trade warA trade war refers to two or more nations raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers...
, typically resulting in real war – hence, the Social Credit admonition, “He who calls for Full-Employment calls for War!”, expressed by the
Social Credit Party of Great Britain and Northern IrelandThe Social Credit Party of Great Britain and Northern Ireland was a political party in the United Kingdom. It grew out of the Kibbo Kift, which was established in 1920 as a more craft-based alternative for youth to the Boy Scouts....
, led by
John HargraveJohn Gordon Hargrave , nicknamed 'White Fox', was one of the leading figures in the Social Credit movement in British politics.Born into an itinerant Quaker family, Hargrave joined the Boy Scouts in 1908...
. The former represents excessive capital production and/or military build-up. Excessive capital production is only a temporary correction, as the cost of the capital appears in the cost of consumer goods or taxes, further exacerbating future gaps between income and prices. Military buildup necessitates either the violent use of weapons or a superfluous accumulation of them.
Labour displacement in the productive process implies that overhead charges (B) increase in relation to income (A), because "'B' is the financial representation of the lever of capital”. As Douglas stated in his first article, "The Delusion of Superproduction":
"The factory cost--not the selling price--of any article under our present industrial and financial system is made up of three main divisions-direct labor cost, material cost and overhead charges, the ratio of which varies widely, with the "modernity" of the method of production. For instance, a sculptor producing a work of art with the aid of simple tools and a block of marble has next to no overhead charges, but a very low rate of production, while a modern screw-making plant using automatic machines may have very high overhead charges and very low direct labour cost, or high rates of production.
Since increased industrial output per individual depends mainly on tools and method, it may almost be stated as a law that intensified production means a progressively higher ratio of overhead charges to direct labour cost, and, apart from artificial reasons, this is simply an indication of the extent to which machinery replaces manual labour, as it should.
Given that overhead charges (B) are constantly increasing relative to income (A), any attempt to stabilize or increase income is met with rising prices. If income (A) is constant or increasing, and overhead charges (B) are continuously increasing due to technological advancement, then prices (A+B) must also increase. Further, any attempt to stabilize or decrease prices (A+B) must be met by falling incomes. This is why deflation is regarded as a problem in orthodox economics. As the
Phillips CurveIn economics, the Phillips curve is a historical inverse relation between the rate of unemployment and the rate of inflation in an economy. Stated simply, the lower the unemployment in an economy, the higher the rate of increase in nominal wages in the economy....
suggests, inflation and unemployment are trade-offs, unless prices are reduced from monies derived from outside the productive system. As the A+B theorem suggests, the systemic problem of rising prices, or inflation, is not "too much money chasing too few goods", but is the increasing rate of overhead charges in production through the mechanization of industry. This is not to suggest that inflation cannot be caused by too much money chasing too few consumer goods, but it does demonstrate that this is not the only cause of inflation, and that inflation is systemic under the orthodox rules of cost accountancy, even if there is not enough purchasing power in existence to liquidate all the costs of production.
Compensated Price and National Dividend
Douglas proposed to eliminate the gap between purchasing power and prices by increasing consumer purchasing power with credits which do not appear in prices in the form of a price rebate and a dividend. Formally called a "Compensated Price" and a "National (or Consumer) Dividend", a National Credit Office would be charged with the task of calculating the size of the rebate and dividend by determining a national
balance sheetIn financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a...
, and calculating
aggregateIn statistics, aggregate data describes data combined from several measurements.In economics, aggregate data or data aggregates describes high-level data that is composed of a multitude or combination of other more individual data....
production and consumption statistics.
The price rebate is based upon the observation that the real cost of production is the mean rate of consumption over the mean rate of production for an equivalent period of time.
|
| where M = Money distributed for a given programme of production, C = consumption, P = production |
The physical cost of producing something is the materials and
capitalIn economics, capital or capital goods or real capital are factors of production used to create goods or services that are not themselves significantly consumed in the production process. Capital goods may be acquired with money or financial capital...
that were consumed in its production, plus that amount of consumer goods labour consumed during its production. This total consumption represents the physical, or real, cost of production.
|
where Consumption = cost of consumer goods, Depreciation = depreciation of real capital, Credit = Credit Created,
Production = cost of total production |
Since less inputs are consumed to produce a unit of output with every improvement in process, the real cost of production falls over time. As a result, prices should also fall with the progression of time. "As society's capacity to deliver goods and services is increased by the use of plant and still more by scientific progress, and decreased by the production, maintenance, or depreciation of it, we can issue credit, in costs, at a greater rate than the rate at which we take it back through prices of ultimate products, if capacity to supply individuals exceeds desire."”.
Based on his conclusion that the real cost of production is less than the financial cost of production, the Douglas price rebate (Compensated Price) is determined by the ratio of consumption to production. Since consumption over a period of time is typically less than production over the same period of time in any industrial society, the real cost of goods should be less than the financial cost.
For example, if the money cost of a good is $100, and the ratio of consumption to production is 3/4, then the real cost of the good is $100(3/4)=$75. As a result, if a consumer spent $100 for a good, the National Credit Authority would rebate the consumer $25. The good costs the consumer $75, the retailer receives $100, and the consumer receives the difference of $25 via new credits created by the National Credit Authority.
The National Dividend is justified by the displacement of labour in the productive process due to technological increases in productivity. As human labour is increasingly replaced by machines in the productive process, Douglas believed people should be free to consume while enjoying increasing amounts of leisure, and that the Dividend would provide this
freedomEconomic freedom is a term used in economic research and policy debates. As with freedom generally, there are various definitions, but no universally accepted concept of economic freedom...
.
Critics of the A + B theorem and rebuttal
Critics of the theorem argue there is no difference between A and B payments, and Social Credit policies are inflationary. "The A + B theorem has met with almost universal rejection from academic economists on the grounds that, although B payments may be made initially to “other organizations,” they will not necessarily be lost to the flow of available purchasing power. A and B payments overlap through time. Even if the B payments are received and spent before the
finished product is available for purchase, current purchasing power will be boosted by B payments received in the current production of goods that will be available for purchase in the future."
Douglas replied to this type of criticism by stating in a reply to Dr. Hawtrey, "I merely wish to establish that every manufacturer can and does both distribute costs in the form of wages and salaries and allocate costs which are not distributed as wages and salaries. These latter costs can only be distributed after he had sold all his goods, and collected both the distributed and allocated costs, and he does not distribute enough before they are sold to buy them. There is only one additional distribution to the public – dividends. He would obviously have to distribute simultaneously through the agency of dividends, etc., the average amount of the allocated charges, and apart from semi-manufactures, this average in Great Britain is probably between 125 and 150 per cent. and in the United States between to 250 and 300 per cent. It is only necessary to realize that the equilibrium to which Mr. Hawtrey refers would require the steady distribution by every single producing concern, probably not excluding farming, of dividends at the rate of 125 per cent. on turnover, or probably 500 per cent. per annum, to realize how far his contention is from representing the case. It is probable that the average dividend on industry does not exceed 2 per cent. It may not be out of place to remark that the increase in overhead charges in relation to direct charges is a direct measure of industrial progress."
And in a reply to Dr. Hobson he stated, " To reiterate categorically, the theorem criticised by Mr. Hobson : the wages, salaries and dividends distributed during a given period do not, and cannot, buy the production of that period; that production can only be bought, i.e., distributed, under present conditions by a draft, and an increasing draft, on the purchasing power distributed in respect of future production, and this latter is mainly and increasingly derived from financial credit created by the banks.
Incomes are paid to workers during a multi-stage program of production. According to the convention of accepted orthodox rules of accountancy, those incomes are part of the financial cost and price of the final product. For the product to be purchased with incomes earned in respect of its manufacture, all of these incomes would have to be saved until the product’s completion. Douglas argued that incomes are typically spent on past production to meet the present needs of living, and will not be available to purchase goods completed in the future—goods which must include the sum of incomes paid out during their period of manufacture in their price. Consequently, this does not liquidate the financial cost of production inasmuch as it merely passes charges of one accountancy period on as mounting charges against future periods. In other words, according to Douglas, supply does not create enough demand to liquidate all the costs of production. Douglas denied the validity of
Say's LawSay's law, or the law of markets, is an economic proposition attributed to French businessman and economist Jean-Baptiste Say , which states that in a free market economy goods and services are produced for exchange with other goods and services, and in the process a precisely sufficient level of...
in economics.
The criticism that Social Credit policies are inflationary is based upon what economists call the
quantity theory of moneyIn monetary economics, the quantity theory of money is the theory that money supply has a direct, positive relationship with the price level.The theory was challenged by Keynesian economics, but updated and reinvigorated by the monetarist school of economics...
, which states that the quantity of money multiplied by its velocity of circulation equals total purchasing power. Douglas was quite critical of this theory stating, "The velocity of the circulation of money in the ordinary sense of the phrase, is – if I may put it that way – a complete myth. No additional purchasing power at all is created by the velocity of the circulation of money. The rate of transfer from hand-to-hand, as you might say, of goods is increased, of course, by the rate of spending, but no more costs can be canceled by one unit of purchasing power than one unit of cost. Every time a unit of purchasing power passes through the costing system it creates a cost, and when it comes back again to the same costing system by the buying and transfer of the unit of production to the consuming system it may be cancelled, but that process is quite irrespective of what is called the velocity of money, so the categorical answer is that I do not take any account of the velocity of money in that sense." The Alberta Social Credit government published in a committee report what was perceived as an error in regards to this theory : “The fallacy in the theory lies in the incorrect assumption that money 'circulates', whereas it is issued against production, and withdrawn as purchasing power as the goods are bought for consumption."
Other critics argue that if the gap between income and prices exists as Douglas claimed, the economy would have collapsed in short order. They also argue that there are periods of time in which purchasing power is in excess of the price of consumer goods for sale.
Douglas replied to these criticisms in his testimony before the Alberta Agricultural Committee:
"What people who say that forget is that we were piling up debt at that time at the rate of ten millions sterling a day and if it can be shown, and it can be shown, that we are increasing debt continuously by normal operation of the banking system and the financial system at the present time, then that is proof that we are not distributing purchasing power sufficient to buy the goods for sale at that time; otherwise we should not be increasing debt, and that is the situation."
Political theory
C.H. Douglas defined democracy as the “will of the people”, not rule by the majority, suggesting that Social Credit could be implemented by any political party supported by effective public demand. Once implemented to achieve a realistic integration of means and ends, party politics would cease to exist. Traditional
ballot boxA ballot box is a temporarily sealed container, usually cuboid though sometimes a tamper resistant bag, with a narrow slot in the top sufficient to accept a ballot paper in an election but which prevents anyone from accessing the votes cast until the close of the voting period...
democracy is incompatible with Social Credit, which assumes the right of individuals to choose freely one thing at a time, and to contract out of unsatisfactory associations. Douglas advocated what he called the “responsible vote”, where anonymity in the voting process would no longer exist. "The individual voter must be made individually responsible, not collectively taxable, for his vote." Douglas believed that party politics should be replaced by a "union of electors" in which the only role of an elected official would be to implement the popular will. Douglas believed that the implemenation of such a system was necessary as otherwise the government would be the tool of international financiers. Douglas also opposed the
secret ballotThe secret ballot is a voting method in which a voter's choices are confidential. The key aim is to ensure the voter records a sincere choice by forestalling attempts to influence the voter by intimidation or bribery....
arguing that it led to electoral irresponsibility, calling it a "Jewish" technique used to ensure
BarabbasIn the Christian narrative of the Passion of Jesus, Barabbas, according to Greek texts Jesus bar-Abbas, , was the insurrectionary whom Pontius Pilate freed at the Passover feast in Jerusalem....
was freed leaving Christ to be crucified.
Douglas considered the constitution an organism, not an organization. In this view, establishing the
supremacyIn a hierarchy or tree structure of any kind, a superior is an individual or position at a higher level in the hierarchy than another , and thus closer to the apex. It is often used in business terminology to refer to people who are supervisors and in the military to people who are higher in the...
of
common lawCommon law is law developed by judges through decisions of courts and similar tribunals , rather than through legislative statutes or executive action, and to corresponding legal systems that rely on precedential case law....
is essential to ensure protection of
individual rightsIndividual rights refer to the rights of individuals, in contrast with group rights. An individual right is the sanction of independent action. Both natural and legal conceptions or rights may distinguish between individual and group rights, although natural rights theories often limit themselves...
from an all-powerful parliament. Douglas also believed the effectiveness of
British governmentHer Majesty's Government is the government of the United Kingdom. Under the Constitution of the United Kingdom, executive authority notionally lies with the monarch but is exercised in practice by her ministers...
is structurally determined by application of a
ChristianA Christian is a person who adheres to Christianity, an Abrahamic, monotheistic, religion based on the life and teachings of Jesus of Nazareth, who Christians believe was the Messiah prophesied in the Old Testament/Hebrew Bible, and the Son of God.The term "Christian" is also used adjectivally to...
concept known as Trinitarianism: "In some form or other, sovereignty in the
British IslesThe British Isles are a group of islands off the northwest coast of continental Europe that include Great Britain, Ireland and numerous smaller islands. There are two sovereign states located on the islands: the United Kingdom of Great Britain and Northern Ireland, and Ireland...
for the last two thousand years has been Trinitarian. Whether we look on this Trinitarianism under the names of King, Lords and Commons or as Policy, Sanctions and Administration, the Trinity-in-Unity has existed, and our national success has been greatest when the balance (never perfect) has been approached."
Opposing the formation of Social Credit Parties, C.H. Douglas believed a group of elected amateurs should never direct a group of competent experts in technical matters. While experts are ultimately responsible for achieving results, the goal of politicians should be to pressure those experts to deliver policy results desired by the populace. According to Douglas, "the proper function of Parliament is to force all activities of a public nature to be carried on so that the individuals who comprise the public may derive the maximum benefit from them. Once the idea is grasped, the criminal absurdity of the
party systemA party system is a concept in comparative political science concerning the system of government by political parties in a democratic country. The idea is that political parties have basic similarities: they control the government, have a stable base of mass popular support, and create internal...
becomes evident."
History
C.H. Douglas was a
civil engineerA civil engineer is a person who practices civil engineering, one of the many professions of engineering. Originally a civil engineer worked on public works projects and was contrasted with the military engineer, who worked on armaments and defenses...
who pursued his higher education at Cambridge University. His early writings appeared most notably in the British intellectual journal
The New AgeThe New Age was a British literary magazine, noted for its wide influence under the editorship of A. R. Orage from 1907 to 1922. It began life in 1894 as a publication of the Christian Socialist movement, but in 1907 Alfred Orage and Holbrook Jackson, who had been running the Leeds Arts Club,...
. The editor of that publication,
Alfred OrageAlfred Richard Orage was a British intellectual, now best known for editing the magazine The New Age.-Early life:...
, devoted
The New Age and later
The New English Weekly to the promulgation of Douglas's ideas until his death on the eve of his
BBCThe British Broadcasting Corporation, usually referred to by its abbreviation as the "BBC", is the longest established and largest broadcaster in the world...
speech on Social Credit, November 5, 1934, in the
Poverty in Plenty Series.
Douglas’s first book,
Economic Democracy, was published in 1920, shortly after his article
The Delusion of Super-Production appeared in 1918 in the
English Review. Among Douglas’s other early works were
The Control and Distribution of Production,
Credit-Power and Democracy,
Warning Democracy and
The Monopoly of Credit. Of considerable interest is the evidence he presented to the Canadian House of Commons Select Committee on Banking and Commerce in 1923, to the British Parliamentary
Macmillan Committee on Finance and IndustryThe Macmillan Committee, officially known as the Committee on Finance and Industry, was a committee, composed mostly of economists, formed by the British government after the 1929 stock market crash to determine the root causes of the depressed economy of the United Kingdom...
in 1930, which included exchanges with economist
John Maynard KeynesJohn Maynard Keynes, 1st Baron Keynes, CB was a British economist whose ideas have been a central influence on modern macroeconomics, both in theory and practice...
, and to the Agricultural Committee of the
Alberta LegislatureThe Legislative Assembly of Alberta is one of two components of the Legislature of Alberta, the other being the Queen, represented by the Lieutenant-Governor of Alberta. The Alberta legislature meets in the Alberta Legislature Building in the provincial capital, Edmonton...
in 1934 during the term of the
United Farmers of AlbertaThe United Farmers of Alberta is an agricultural supply cooperative headquartered in Calgary, Alberta, Canada. UFA operates 36 farm and ranch supply stores in Alberta, and over 100 cardlock and bulk fuel stations in British Columbia, Alberta and Saskatchewan.-Founding:UFA was founded in 1909 as a...
Government in that
Canadian provinceThe provinces and territories of Canada combine to make up the world's second largest country. The major difference between a Canadian province and a territory is that provinces are jurisdictions that receive their power and authority directly from the Constitution Act, 1867, whereas territories...
.
The writings of C.H. Douglas spawned a worldwide movement, most prominent in the British Commonwealth, with beachheads in Europe and activities in the United States where Orage, during his sojourn there, promoted Douglas’s ideas. In the United States, the New Democracy group was headed by the American author
Gorham MunsonGorham Bockhaven Munson was an American literary critic.Gorham was born in Amityville, New York to Hubert Barney Munson and Carrie Louise Morrow. He received his B.A. degree from Wesleyan University in 1917. He married Elizabeth Hurwitz on April 2, 1921 Brooklyn...
who contributed a major book on Social Credit titled
Aladdin’s Lamp: The Wealth of the American People. While
CanadaCanada is a country occupying most of northern North America, extending from the Atlantic Ocean in the east to the Pacific Ocean in the west and northward into the Arctic Ocean...
and
New ZealandNew Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses , and numerous smaller islands, most notably Stewart Island/Rakiura and the Chatham Islands. The indigenous Māori named New Zealand Aotearoa, commonly translated as The Land of the Long White Cloud...
had electoral successes with “Social Credit” political parties, the movement in
EnglandEngland is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west and the North Sea to the east, with the English Channel to the south separating it from continental...
and
AustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the continental mainland , the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans...
was primarily devoted to pressuring existing parties to implement Social Credit. This function was performed especially by Douglas’s Social Credit Secretariat in England and the
Commonwealth Leagues of RightsThe Australian League of Rights is a minor political organisation in Australia founded by Eric Butler with its basis in the economic theory of Social Credit expounded by C. H. Douglas. It describes itself as upholding the virtues of freedom...
in Australia. Douglas continued writing and contributing to the Secretariat’s journals, initially Social Credit and shortly thereafter The Social Crediter (which continues to be published by the Secretariat) for the remainder of his lifetime, concentrating more on political and philosophical issues in his later years.
Political history
In early years of the movement,
Labour PartyThe Labour Party is a centre-left political party in the United Kingdom. Founded at the start of the 20th century, it has been seen since 1920 as the principal party of the Left in England, Scotland and Wales, but not Northern Ireland, where it has only recently begun to organise again...
leadership resisted pressure from
Trade unionA trade union is an organization of workers who have banded together to achieve common goals in key areas, such as working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labor contracts with employers...
ists to implement Social Credit, as hierarchical views of Fabian socialism, state-socialism,
economic growthEconomic growth is a term used to indicate the increase of total GDP. It is often measured as the rate of change of gross domestic product . Economic growth refers only to the quantity of goods and services produced; it says nothing about the way in which they are produced...
and
full employmentIn macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
, were incompatible with the National Dividend and abolishment of
wage slaveryWage slavery refers to a situation where a person is dependent for a livelihood on the wages earned, especially if the dependency is total and immediate. The term is used to draw an analogy between slavery and wage labor. Some uses of the term may refer only to an "[un]equal bargaining situation...
suggested by Douglas. In an effort to discredit the Social Credit movement, one leading Fabian is said to have declared that he didn’t care whether Douglas was technically correct or not – they simply did not like his policy!
In 1935 the first
“Social Credit”The Social Credit Party of Alberta is a provincial political party in Alberta, Canada, that was founded on the social credit monetary policy and conservative Christian social values....
government was elected in
AlbertaAlberta is one of Canada's prairie provinces. It became a province on September 1, 1905.Alberta is located in western Canada, bounded by the provinces of British Columbia to the west and Saskatchewan to the east, the Northwest Territories to the north, and the U.S. state of Montana to the south....
,
CanadaCanada is a country occupying most of northern North America, extending from the Atlantic Ocean in the east to the Pacific Ocean in the west and northward into the Arctic Ocean...
under the leadership of
William AberhartWilliam Aberhart , also known as Bible Bill for his religious preaching, was a Canadian politician and Social Credit Premier of Alberta between 1935 and 1943...
. A book by Maurice Colbourne entitled
The Meaning of Social Credit convinced Aberhart that the theories of C.H. Douglas were essential for Alberta's recovery from the
Great DepressionThe Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
. Having counseled the previous
United Farmers of AlbertaThe United Farmers of Alberta is an agricultural supply cooperative headquartered in Calgary, Alberta, Canada. UFA operates 36 farm and ranch supply stores in Alberta, and over 100 cardlock and bulk fuel stations in British Columbia, Alberta and Saskatchewan.-Founding:UFA was founded in 1909 as a...
Provincial Government, Douglas became an advisor to Aberhart, but withdrew shortly after due to strategic differences. Aberhart sought orthodox counsel with respect to the Province's finances, and the strained correspondence between them was published by Douglas in his book,
The Alberta Experiment.
While the
PremierThe Premier of Alberta is the first minister for the Canadian province of Alberta. He or she is the province's head of government and de facto chief executive. The current Premier of Alberta is Ed Stelmach. He became Premier by winning the Progressive Conservative leadership elections on...
wanted to balance the provincial budget, Douglas argued the whole concept of a "
balanced budgetFrom a Keynesian point of view, a balanced budget in the public sector is achieved when the government equates the revenues with expenditure over the business cycles. In other words, a government's budget is balanced if its income is equal to its expenditure. It is a budget in which revenues are...
" was inconsistent with Social Credit principles. Douglas stated that, under existing rules of financial cost accountancy, balancing all budgets within an economy simultaneously is an arithmetic impossibility. In a letter to Aberhart, Douglas stated.:
"This seems to be a suitable occasion on which to emphasise the proposition that a Balanced Budget is quite inconsistent with the use of Social Credit (i.e., Real Credit – the ability to deliver goods and services 'as, when and where required') in the modern world, and is simply a statement in accounting figures that the progress of the country is stationary, i.e., that it consumes exactly what it produces, including capital assetThe term capital asset has three unrelated technical definitions, and is also used in a variety of non-technical ways.*In financial economics, it refers to any asset used to make money, as opposed to assets used for personal enjoyment or consumption...
s. The result of the acceptance of this proposition is that all capital appreciationAppreciation is a term used in accounting relating to the increase in value of an asset. In this sense it is the reverse of depreciation, which measures the fall in value of assets over their normal life-time....
becomes quite automatically the property of those who create and issue of money [i.e., the banking system] and the necessary unbalancing of the Budget is covered by Debts."
Douglas sent two other expert Social Credit technical advisors from the United Kingdom, L. Denis Byrne and George F. Powell. But all attempts to pass Social Credit legislation were ruled
ultra viresUltra vires is a Latin phrase that literally means "beyond the powers". Its inverse is called intra vires, meaning "within the powers"...
by the
Supreme Court of CanadaThe Supreme Court of Canada is the highest court of Canada and is the final court of appeal in the Canadian justice system...
and
Privy CouncilA privy council is a body that advises the head of state of a nation on how to exercise their executive authority, typically, but not always, in the context of a monarchic government...
in
London[]London is the capital of England and the United Kingdom. It has been a major settlement for two millennia, and the history of London goes back to its founding by the Romans, when it was named Londinium. London's core, the ancient City of London, the 'square mile', retains its medieval boundaries...
. Based on the monetary theories of
Silvio GesellSilvio Gesell was a German merchant, theoretical economist, social activist, anarchist and founder of Freiwirtschaft.-Life:...
, William Aberhart issued a currency substitute known as prosperity certificates. But these
scripScrip is any substitute for currency which is not legal tender and is often a form of credit. Scrips were created as company payment of employees and also as a means of payment in times where regular money is unavailable, such as remote coal towns or occupied countries in war time...
s actually depreciated in value the longer they were held, and Douglas openly criticized the idea:
"Gesell's theory was that the trouble with the world was that people saved money so that what you had to do was to make them spend it faster. Disappearing money is the heaviest form of continuous taxation ever devised. The theory behind this idea of Gesell's was that what is required is to stimulate trade - that you have to get people frantically buying goods - a perfectly sound idea so long as the objective of life is merely trading."
Under
Ernest ManningErnest Charles Manning, PC, CC, AOE , a Canadian politician, was Premier of Alberta between 1943 and 1968 for the Social Credit Party of Alberta. He served longer than any premier in the province's history, and was the second longest serving provincial premier in Canadian history...
, who succeeded Aberhart after his untimely death, the Alberta Social Credit Party gradually departed from its origins and became popularly identified as a
right wingIn politics, right-wing, political right, rightist and the Right are terms used to describe a number of positions and ideologies. They are most commonly used to refer to support for preserving traditional or cultural values and customs or for maintaining some form of social hierarchy or private...
populistPopulism is a political discourse that juxtaposes "the people" with "the elites." Populism may comprise an ideology urging social and political system changes and/or a rhetorical style deployed by members of political or social movements...
movement. In the Secretariat’s journal,
An Act for the Better Management of the Credit of Alberta, Douglas published a critical analysis of the Social Credit movement in Alberta, in which he said, "The Manning administration is no more a Social Credit administration than the British government is Labour". Manning accused Douglas and his followers of anti-Semitism, and went about purging all of the so called "Douglasites" from the Party. While Social Credit governments formed in
British ColumbiaThe British Columbia Social Credit Party, whose members are known as Socreds, was the governing political party of British Columbia, Canada, for more than 30 years between the 1952 provincial election and the 1991 election...
, Canada, they had little in common with Douglas or his theories. Social Credit Parties also enjoyed some national electoral success in
CanadaThe Social Credit Party of Canada was a conservative-populist political party in Canada that promoted social credit theories of monetary reform...
and in
New ZealandThe New Zealand Social Credit Party was a political party which served as the country's "third party" from the 1950s through into the 1980s. The party held a number of seats in the New Zealand Parliament, although never more than two at a time...
, with support from Western Canada and more notably from
QuebecQuebec is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking identity and the only one whose sole official language is French at the provincial level....
.
Philosophy
Douglas described Social Credit as "the policy of a philosophy", and warned against viewing it solely as a scheme for monetary reform. He coined this philosophy "practical Christianity" – the central issue of which is the
IncarnationThe Incarnation is the belief in Christianity that the second person in the Christian Godhead, also known as the Son or the Logos , "became flesh" when he was miraculously conceived in the womb of the Virgin Mary. The word Incarnate derives from Latin meaning "to make into flesh" or "to become...
. Douglas believed there was a
CanonA Biblical canon or canon of scripture is a list or set of Biblical books considered to be authoritative as scripture by a particular religious community, generally in Judaism or Christianity. The term itself was first coined by Christians, but the idea is found in Jewish sources...
which ran through the universe, and Jesus Christ was the Incarnation of this Canon. However, he also believed Christianity remained ineffective so long as it remained transcendental. Religion, which derives from the Latin word
religare (to “bind back”), was intended to be a binding back to reality. Social Credit is concerned with the incarnation of Christian principles in our organic affairs. Specifically, it is concerned with the principles of association and how to maximize the increments of association which redound to satisfaction of the individual in society – while minimizing any decrements of association.
The goal of Social Credit is to maximize
immanentImmanence, derived from the Latin in manere - "to remain within" - refers to philosophical and metaphysical theories of divine presence, which hold that some divine being or essence manifests in and through all aspects of the material world...
sovereigntySovereignty is the quality of having supreme, independent authority over a territory. It can be found in a power to rule and make law that rests on a political fact for which no purely legal explanation can be provided...
. Social Credit is consonant with the Christian doctrine of
SalvationIn religion, salvation is the concept that God or other Higher Power, as part of Divine Providence, "saves" humanity from spiritual death or eternal damnation by providing for them an eternal life...
through
unearned GraceIn Christianity, grace is "unmerited favor" from God. Divine grace is a description of the character of God, which is displayed by God's gifts to humanity. Grace describes the means by which humans are granted salvation...
, and is therefore incompatible with any variant of the doctrine of salvation through works. Works need not be of Purity in intent or of desirable consequence and in themselves alone are as "filthy rags." For instance, the present system makes destructive, obscenely wasteful wars a virtual certainty—which provides lots of "work" for everyone. Social Credit has been called the Third Alternative to the futile
Left-Right DualityLeft-right politics or the left-right political spectrum is a common way of classifying political positions, political ideologies, or political parties along a one-dimensional political spectrum. The perspective of Left vs. Right is a broad, dialectical interpretation of complex questions...
.
Although Douglas defined Social Credit as a philosophy with Christian roots, he did not envision a Christian
theocracyTheocracy is a form of government in which a god or deity is recognized as the state's supreme civil ruler, or in a higher sense, a form of government in which a state is governed by immediate divine guidance or by officials who are regarded as divinely guided. In Common Greek, “theocracy” means a...
. Douglas did not believe that religion should be thrust upon anyone through force of law or external compulsion. Practical Christian society is Trinitarian in structure,based upon a constitution where the constitution is an organism changing in relation to our knowledge of the nature of the universe. "The progress of human society is best measured by the extent of its creative ability. Imbued with a number of natural gifts, notably reason, memory, understanding and free will, man has learned gradually to master the secrets of nature, and to build for himself a world wherein lie the potentialities of peace, security, liberty and abundance." Douglas said that Social Crediters want to build a new civilization based upon absolute economic security for the individual—where “...they shall sit every man under his vine and under his fig tree; and none shall make them afraid.” In keeping with this goal, Douglas was opposed to all forms of taxation on real property. This set Social Credit at variance from the land-taxing recommendations of
Henry GeorgeHenry George was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also known as the "Single Tax" on land...
.
Social Credit society recognizes the fact that the relationship between man and God is unique. In this view, it is essential to allow man the greatest possible freedom in order to pursue this relationship. Douglas defined freedom as the ability to choose and refuse one thing at a time, and to contract out of unsatifactory associations. If people are given the economic security and leisure achievable in the context of a Social Credit dispensation, Douglas believed most would end their service to
mammonMammon is a term, derived from the Christian Bible, used to describe material wealth or greed, most often personified as a deity. The word itself is a transliteration from the Hebrew word "mammon" , which means "money."-Definition:...
and use their free time pursuing spiritual, intellectual, or cultural goals leading to self-development. Douglas opposed what he termed "the pyramid of power".
TotalitarianismTotalitarianism is a political system where the state, usually under the control of a single party or faction, recognizes no limits to its authority and strives to regulate every aspect of public and private life wherever feasible...
reflects this pyramid and is the antithesis of Social Credit. It turns the government into an end instead of a means, and the individual into a means instead of an end—Demon est deus inversus—“the devil is God upside down.” Social Credit is designed to give the individual the maximum freedom allowable given the need for association in economic, political and social matters. Social Credit elevates the importance of the individual and holds that all institutions exist to serve the individual – that the State exists to serve its citizens, not that individuals exist to serve the State.
Douglas emphasized that all policy derives from its respective philosophy and that “... Society is primarily
metaphysicalMetaphysics investigates principles of reality transcending those of any particular science. Cosmology and ontology are traditional branches of metaphysics. It is concerned with explaining the fundamental nature of being and the world...
, and must have regard to the organic relationships of its prototype.”
Social Credit rejects
dialectical materialisticDialectical materialism is the philosophy of Karl Marx, which he formulated by taking the dialectic of Hegel and joining it to the Materialism of Feuerbach.According to many followers of Karl Marx's thinking, it is the philosophical basis of Marxism....
philosophy. "The tendency to argue from the particular to the general is a special case of the sequence from materialism to collectivism. If the universe is reduced to molecules, ultimately we can dispense with a catalogue and a dictionary; all things are the same thing, and all words are just sounds - molecules in motion."
Douglas divided philosophy into two schools of thought that he labeled the "classical school" and the "modern school", which are broadly represented by philosophies of
AristotleAristotle was a Greek philosopher, a student of Plato and teacher of Alexander the Great. He wrote on many subjects, including physics, metaphysics, poetry, theater, music, logic, rhetoric, politics, government, ethics, biology, and zoology.Together with Plato and Socrates , Aristotle is one of...
and
Francis BaconFrancis Bacon,1st Viscount St Alban KC , son of Nicholas Bacon by his second wife Anne Bacon, was an English philosopher, statesman, scientist, lawyer, jurist, and author. He served both as Attorney General and Lord Chancellor of England...
respectively. Douglas was critical of both schools of thought, but believed that "the truth lies in appreciation of the fact that neither conception is useful without the other".
Relationship to anti-Semitism
Social Crediters, and Douglas himself, have been criticized for spreading anti-semitism. Douglas was critical of
"international Jewry"Jewish population refers to the number of Jews in the world. Precise figures are difficult to calculate because the definition of "Who is a Jew" remains a source of controversy.-Total population:...
, especially in his later writings. He asserted that some Jews controlled many of major banks and were involved in an international conspiracy to centralize the power of finance. While some have claimed that Douglas was anti-Semitic, it is clear that his criticism of Jews had nothing to do with Jews as a race. "There is probably no single piece of evidence existing which would justify the growing dislike of Jews as a race". Douglas was critical of Jewish philosophy, arguing that “It is not too much to say that one of the root ideas through which Christianity comes into conflict with the conceptions of the Old Testament and the ideals of the pre-Christians era, is in respect of this dethronement of abstractionism.”
Social Credit is opposed to abstractionist philosophies, as Douglas believed these philosophies inevitably led to the elevation of
abstractionAbstraction is the process or result of generalization by reducing the information content of a concept or an observable phenomenon, typically to retain only information which is relevant for a particular purpose. For example, abstracting a leather soccer ball to a ball retains only the information...
s, such as state, over individuals. He also believed that what he called Jewish abstractionist thought tended to lead them to
communistCommunism is a socioeconomic structure and political ideology that promotes the establishment of an egalitarian, classless, stateless society based on common ownership and control of the means of production and property in general. Karl Marx posited that communism would be the final stage in human...
ideals and the emphasis of the group over the individual. “Anti-Semitism of the Douglas kind, if it can be called anti-Semitism at all, may be fantastic, may be dangerous even, in that it may be twisted into a dreadful form, but it is not itself vicious nor evil.”
In her book,
Social Discredit: Anti-Semitism, Social Credit and the Jewish Response, Janine Stingel claims, “Douglas's economic and political doctrines were wholly dependent on an anti-Semitic conspiracy theory". John L. Finlay disagrees with Stingel's assertion in his book,
Social Credit: The English Origins arguing that "It must also be noted that while Douglas was critical of some aspects of Jewish thought, Douglas did not seek to discriminate against Jews as people. It was never suggested that the National Dividend be withheld from them."
Canada
Federal political parties:
- Social Credit Party of Canada
The Social Credit Party of Canada was a conservative-populist political party in Canada that promoted social credit theories of monetary reform...
/Canadian social credit movementThe Canadian social credit movement was a Canadian political movement originally based on the Social Credit theory of Major C. H. Douglas. Its supporters were colloquially known as Socreds...
- Ralliement créditiste
Historically in Quebec, Canada, there was a number of political parties that were part of the Canadian social credit movement. There were various parties at different times with different names at the provincial level, all broadly following the social credit philosophy; at various times they had...
- Abolitionist Party of Canada
The Abolitionist Party of Canada was a Canadian political party founded by perennial candidate John C. Turmel. The party ran on a platform of: monetary reform, including the abolition of interest rates and the income tax, the use of the local employment trading system of banking, and introducing a...
/Christian Credit PartyThe Christian Credit Party was a short-lived Canadian political party founded in 1982 by perennial candidate and social credit activist, John C...
- Canadian Action Party
The Canadian Action Party is a Canadian federal political party founded in 1997. It promotes Canadian nationalism, monetary reform, and electoral reform and opposes neoliberal globalization and free trade agreements.- Background :The Canadian Action Party was founded by Paul T...
(active)
- Global Party of Canada
Provincial political parties:
- Alberta Social Credit Party (active)
- British Columbia Social Credit Party
The British Columbia Social Credit Party, whose members are known as Socreds, was the governing political party of British Columbia, Canada, for more than 30 years between the 1952 provincial election and the 1991 election...
(active)
- Manitoba Social Credit Party
The Manitoba Social Credit Party was a political party in the Canadian province of Manitoba. In its early years, it espoused the monetary reform theories of social credit....
- Social Credit Party of Ontario
The Social Credit Party of Ontario was a minor political party at the provincial level in the Canadian province of Ontario from the 1940s to the early 1970s. The party never won any seats in the Legislative Assembly of Ontario...
- Ralliement créditiste du Québec
The Ralliement créditiste du Québec was a provincial political party in Quebec, Canada that operated from 1970 to 1978. It promoted social credit theories of monetary reform, and acted as an outlet for the expression of rural...
- Social Credit Party of Saskatchewan
The Social Credit Party of Saskatchewan was a political party in the Canadian province of Saskatchewan that promoted social credit economic theories from the mid-1930s to the late 1960s....
Organizations:
- Pilgrims of Saint Michael
The Pilgrims of St. Michael is a Roman Catholic organization in Canada that promotes social credit economic theories in Canada and other countries.The Pilgims of St...
- Committee on Monetary and Economic Reform
The Committee on Monetary and Economic Reform is an international publishing and education centre based in Toronto, Canada.Its mandate is to study the destabilization that its members believe current economic and monetary policies have caused, and are causing, for the citizens of Canada and other...
- See also: Prosperity Certificate
In 1936, the Alberta Social Credit Party-led government of the Province of Alberta, Canada, introduced prosperity certificates in an attempt to alleviate the effects of the Great Depression...
New Zealand
- Country Party
The Country Party of New Zealand was a political party which based itself around rural voters. It was represented in Parliament from 1928 to 1938. Its policies were a mixture of rural advocacy and social credit theory....
- Democratic Labour Party
The Democratic Labour Party was a left-wing political party in New Zealand in the 1940s. It was a splinter from the larger Labour Party, and was led by the prominent socialist John A. Lee....
- New Zealand Democratic Party
The New Zealand Democratic Party for Social Credit is a small leftist political party in New Zealand. It is based around the ideas of Social Credit, an economic theory which also attracted some degree of support in Canada and Australia...
(active)
- New Democratic Party (New Zealand)
The New Democratic Party of New Zealand was a small political party established in 1972. It was a splinter group from of better-known Social Credit Party, having been founded by former Social Credit leader John O'Brien. O'Brien was considered a powerful and energetic orator, but had a controversial...
- Real Democracy Movement
- Social Credit Party (New Zealand)
The New Zealand Social Credit Party was a political party which served as the country's "third party" from the 1950s through into the 1980s. The party held a number of seats in the New Zealand Parliament, although never more than two at a time...
- New Zealand Social Credit Association (Inc)http://www.nzsocialcredit.blogspot.com
United Kingdom
- Douglas Social Credit Secretariat
- Social Credit Party of Great Britain and Northern Ireland
The Social Credit Party of Great Britain and Northern Ireland was a political party in the United Kingdom. It grew out of the Kibbo Kift, which was established in 1920 as a more craft-based alternative for youth to the Boy Scouts....
Literary figures in Social Credit
As lack of finance has been a constant impediment to the development of the arts and literature, the concept of economic democracy through Social Credit had immediate appeal in literary circles. Names associated with Social Credit include
Charlie ChaplinSir Charles Spencer Chaplin, KBE was an English comedic actor and film director. Chaplin became one of the most famous actors as well as a notable filmmaker, composer and musician in the early to mid Classical Hollywood era of American cinema.Chaplin acted in, directed, scripted, produced and...
,
William Carlos WilliamsWilliam Carlos Williams , also known as WCW, was an American poet closely associated with modernism and Imagism. He was also a pediatrician and general practitioner of medicine...
,
Ezra PoundEzra Weston Loomis Pound was an American expatriate poet, critic and intellectual who was a major figure of the Modernist movement in the first half of the 20th century. He is generally considered the poet most responsible for defining and promoting a modernist aesthetic in poetry...
,
T. S. EliotThomas Stearns Eliot, OM , was a poet, playwright, and literary critic. He received the Nobel Prize in Literature in 1948. Among his most famous writings are The Love Song of J...
,
Herbert ReadSir Herbert Edward Read, DSO, MC was an English anarchist poet, and critic of literature and art. He was one of the earliest English writers to take notice of existentialism, and was strongly influenced by proto-existentialist thinker Max Stirner.-Early life:He was born in Kirkbymoorside in North...
,
Aldous HuxleyAldous Leonard Huxley was an English writer and one of the most prominent members of the famous Huxley family. He spent the later part of his life in the United States, living in Los Angeles from 1937 until his death in 1963...
,
Storm JamesonMargaret Storm Jameson was an English writer, known for her 45 novels, and criticism.She was born in Whitby, Yorkshire, and studied at the University of Leeds. She moved to London, where she earned an MA from King's College London in 1914 and then went on to teach before becoming a full-time writer...
, Eimar O’Duffy, Sybil Thorndyke,
Bonamy DobréeBonamy Dobrée , British academic, was Professor of English Literature at the University of Leeds from 1936 to 1955....
,
Eric de MaréEric de Maré was a British photographer, described as one of the greatest British architectural photographers.Eric de Maré, writer and photographer, was born in London on the 10 September 1910 of Swedish parents, Bror and Ingrid de Maré. He was educated at St Paul’s School in London prior to...
and the American publisher
James LaughlinJames Laughlin was an American poet and literary book publisher who founded New Directions Publishers.- Biography :He was born in Pittsburgh, Pennsylvania, the son of Henry Hughart and Marjory Rea Laughlin...
. In 1933
Eimar O’Duffy published
Asses in Clover, a science fiction fantasy exploration of Social Credit themes. His Social Credit economics book
Life and Money: Being a Critical Examination of the Principles and Practice of Orthodox Economics with A Practical Scheme to End the Muddle it has made of our Civilisation, was endorsed by Douglas.
Robert A. HeinleinRobert Anson Heinlein was an American science fiction writer. Often called "the dean of science fiction writers", he was one of the most popular, influential, and controversial authors of the genre. He set a high standard for science and engineering plausibility and helped to raise the genre's...
described a Social Credit economy in his first novel,
For Us, The Living: A Comedy of CustomsFor Us, The Living: A Comedy of Customs is a science fiction novel by Robert A. Heinlein, written in 1938 but published for the first time in 2003...
, and his
Beyond This HorizonBeyond This Horizon is a science fiction novel by Robert A. Heinlein. It was originally published as a two-part serial in Astounding Science Fiction and then eventually as a single volume by Fantasy Press in 1948.-Overview:The novel depicts a world where genetic selection for increased health,...
describes a similar system in less detail. In Heinlein's future society, government is not funded by taxation. Instead, government controls the currency and prevents inflation by providing a price rebate to participating business and a guaranteed income to every citizen.
More recently,
Richard C. CookRichard C. Cook is a former U.S. federal government analyst, who was instrumental in exposing White House cover-ups regarding the Space Shuttle Challenger disaster of 1986. As a witness to the incident and a participant in the subsequent investigations, Cook provided key documents to The New York...
http://www.richardccook.com/, an analyst for the
U.S. Civil Service CommissionThe United States Civil Service Commission was created by the Pendleton Civil Service Reform Act, which was passed into law on January 16, 1883. The commission was created to administer the civil service of the United States federal government in response to the assassination of President James...
,
Food and Drug AdministrationThe Food and Drug Administration is a Government agency of the United States Department of Health and Human Services and is responsible for regulating and supervising the safety of foods, tobacco products, dietary supplements, Medication drugs, vaccines, Biopharmaceutical, blood transfusion,...
,
NASAThe National Aeronautics and Space Administration is an agency of the United States government, responsible for the nation's public space program. NASA was established by the National Aeronautics and Space Act on July 29, 1958, replacing its predecessor, the National Advisory Committee for...
, the
U.S. Treasury DepartmentThe Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
, and author of the books
Challenger Revealed and
We Hold These Truths, has written several articles relating to Social Credit and
monetary reformMonetary reform describes any movement or theory that proposes a different system of supplying money and financing the economy than the current system.Monetary reformers may advocate any of the following, among other proposals:...
at Global Research, an independent research and media group of writers, scholars, journalists and activists.
http://www.globalresearch.ca/ Frances Hutchinson, Chairperson of the Social Credit Secretariat
http://douglassocialcredit.com/, has co-authored, with Brian Burkitt, a book entitled
The Political Economy of Social Credit and Guild Socialism.
Further reading
- Economic Democracy, by C. H. Douglas
Major C. H. Douglas MIMechE, MIEE, , was a British engineer and pioneer of the Social Credit economic reform movement.-Education and engineering career:...
(1920) new edition: December 1974; Bloomfield Books; ISBN 0904656063
- Major Douglas: The Policy of Philosophy, by John W. Hughes, Edmonton, Brightest Pebble Publishing Company, 2004; first published in Great Britain by Wedderspoon Associates, 2002
- Major Douglas and Alberta Social Credit, by Bob Hesketh, ISBN 0-8020-4148-5
Fiction and poetry
- For Us, The Living: A Comedy of Customs
For Us, The Living: A Comedy of Customs is a science fiction novel by Robert A. Heinlein, written in 1938 but published for the first time in 2003...
, by Robert A. HeinleinRobert Anson Heinlein was an American science fiction writer. Often called "the dean of science fiction writers", he was one of the most popular, influential, and controversial authors of the genre. He set a high standard for science and engineering plausibility and helped to raise the genre's...
- Beyond This Horizon
Beyond This Horizon is a science fiction novel by Robert A. Heinlein. It was originally published as a two-part serial in Astounding Science Fiction and then eventually as a single volume by Fantasy Press in 1948.-Overview:The novel depicts a world where genetic selection for increased health,...
, by Robert A. HeinleinRobert Anson Heinlein was an American science fiction writer. Often called "the dean of science fiction writers", he was one of the most popular, influential, and controversial authors of the genre. He set a high standard for science and engineering plausibility and helped to raise the genre's...
- The Cantos
The Cantos by Ezra Pound is a long, incomplete poem in 120 sections, each of which is a canto. Most of it was written between 1915 and 1962, although much of the early work was abandoned and the early cantos, as finally published, date from 1922 onwards. It is a book-length work, widely considered...
, by Ezra PoundEzra Weston Loomis Pound was an American expatriate poet, critic and intellectual who was a major figure of the Modernist movement in the first half of the 20th century. He is generally considered the poet most responsible for defining and promoting a modernist aesthetic in poetry...
External links