“I am certainly not here as a moralist; but as an engineer. I have an appreciation of the importance of foundations. I find it incredible that a stable society can persist founded on the most colossal lucrative fraud that has ever been perpetrated on society”. - - C. H. Douglas, 1936
THE STUDENT ECONOMIC REVIEW VOL. XXVII
Introduction, Senior Sophister
The name of Clifford Hugh Douglas (or Major Douglas, as he was more commonly known) will not be familiar to many students of economics, but the economic writings of this engineer are of great relevance in coming to terms with what Keynes (1936: 371) labelled ‘the outstanding problem of our economic system’: the problem of deficient demand.
This paper revisits Major Douglas’ social credit theory and describes how it seeks to solve the problem of insufficient demand, which is a general precursor to economic decline and unemployment, this analysis will have important implications for our current economic predicament, given the nature of the recent financial and economic crises and the proposed remedies to their effects by policymakers around the world.
Indeed, it was with the issue of finance that major Douglas was primarily concerned. Douglas’ criticism of the economic system focuses on the financial structure present at the foundations of the economy.
He strongly thought that the structure was ultimately built on false foundations, hence the ‘colossal lucrative fraud’ imposed on society.
Social credit, in its entirety, is an expansive theory, covering areas of economic theory, financial economics, political economy, and democratic development. It can be narrowly grasped in its aim to offer proposals for a decentralised and democratically controlled economy through democratising credit and thus policy.
Unfortunately, a fair analysis of each of these themes covered by Douglas is beyond the scope of this paper. I will instead focus primarily on Douglas’ theory of finance since it provides the foundation for his whole system.
One of the theory’s most notable conclusions is that of debt-free money, available to finance and ultimately consume the entire production of an economy.
With the unprecedented increases in central banks’ balance sheets over the past years, attention has been drawn to the nature of money. In this topical essay, Marc Morgan revisits the financial theory laid out by Major Douglas: for the theorist, the system is built on society-wide fraud and deception, the paper then transposes the theory to our contemporary problems…