Economic grace of ‘Social Credit’: national dividend and compensated retail prices to facilitate consumer goods distribution in an age of robotics by Wallace Klinck
Five minute video of Major C.H. Douglas, founder of Social Credit (1934)
Their monopolistic proclivities disincline both Finance-Capitalism operating under the Monopoly of Credit and every form of collectivist organization (e.g., socialism, communism or fascism) from grappling with this problem.
The solution must entail an appropriate modification of the existing financial-credit and price system so as to properly facilitate distribution of the immense output of modern technology-based industry, in the context of expanding leisure.
Nearly a century ago this emergent challenge was studied in depth by the British engineer Clifford Hugh Douglas, who not only analyzed the defects of the existing price system as it functions under present financial and industrial cost-accounting conventions, but also put forward realistic remedial proposals. Between and for a period after the World Wars, Douglas’s ideas, which he named “Social Credit”, attracted large numbers of adherents and spawned many political movements in countries around the world.
Douglas recognized that life is more than bread alone and that in order to attain his full stature man must be released from unnecessary material concerns in order to make time for matters of the Mind and Spirit. This clearly was inherent in certain much-neglected aspects of the message of Jesus, who explicitly stated that lack of faith is the reason for our obsession with toiling our own way to material survival. Jesus asked how we could doubt that God, who provides for the fish and birds and the beasts, knows our needs and will provide even better for us. On more than one occasion Jesus unconditionally distributed loaves and fishes to crowds that had gathered to hear him. To indicate how reality operates outside of puritanical human notions of morality, Jesus pointed out that his heavenly Father causes the sun to rise on the evil and the good, and lets rain fall on both the just and the unjust.
An aspect of this divine caring is the ability we have been given to accumulate understanding of natural laws, which has resulted in an endless extension of “mechanical advantage”—termed by Social Crediters the Unearned Increment of Association—from which has emerged our amazing modern technology with its outflow of material abundance. Through learning how to associate effectively in the areas of both human endeavours and material resources, we have multiplied our productive capacity many thousands, if not millions, of times over. The historical aggregation of Unearned Increments has provided the vast Cultural Heritage upon which we all so greatly, if unconsciously, depend.
This is the background of why Social Credit came to be perceived by its leading thinkers as “practical Christianity”. Although Douglas did not set out to design it as such, ongoing development of Social Credit thought has revealed it to be uniquely consonant with and revelatory of the assurances given by the founder of the Christian faith.
This realistic perception of our situation is absent from the major ideologies of our time. For example, Libertarians promote the notion that the individual must “make it on his/her own”. No one today (apart maybe from individuals lost in the wilderness) is doing this; all have the benefit of the Cultural Heritage, which ties us in a web of dependencies not only with our contemporaries but also with previous generations.
Socialism, which calls for State ownership and administration of the means of production—the central planning of the economy and of human activity—similarly endeavors to alienate people from their heritage. Besides specifically attacking the very principle of inheritance, Socialists force the energies of the members of society into mandatory employment in projects prescribed by the State. Suppression of individual initiative is an inevitable result of this constraint of access to the possibilities afforded by the richness of the Cultural heritage. This observation applies to all forms of “socialism”, whether national or international in nature.
Social Credit is the inverse of socialism and a negation of finance capitalism. Many persons have it in their minds that a sharing society necessarily is socialistic; i.e., power centralizing. Presumably they think this way on the erroneous assumption that the sharing will be accomplished by redistributing existing wealth by means of various confiscatory forms of taxation. However, Social Credit, uniquely, stands not for redistribution of earned incomes, but rather for distribution of consumer goods at source as they emerge from the production line.
Douglas enunciated and stressed the truism that production without consumption is sheer futility and waste.
The fundamental task of economic policy is to match and balance the cycles of consumption and production. Producers’ costs cannot be recovered without money received from consumers, whose incomes alone provide business its means to liquidate all financial costs of production.
In order to effect this balance, Douglas recommended that National (Consumer) Dividends and Compensated (lowered) Prices at point of retail sale must be provided and financed by a Government Agency (created or existing, whatever is most efficient and convenient) with funds not derived from taxation but drawn down from a properly constructed National Credit Account. This would be a continuously updated actuarial accounting of the nation’s real credit, being an inventory of all those resources which are available to be used for production and which, if so used, may result in the making of financial prices.
Unfortunately, the public are conditioned to reason from the false assumption that the economic “pie” is limited to the financial incomes paid out in production, and hence they perceive this as the only possible source of funding. This assumption includes the erroneous corollary that the price-system is self-liquidating; i.e., that incomes paid out as wages, salaries and dividends are not only equal to, but available to meet, the total financial costs of production. That this is a major fallacy is readily proved by the enormous accumulation of inflationary private and public debt created as loans by the banking system, which allows goods to be purchased after a fashion but does not liquidate their financial costs of production in a synchronized fashion. As a kind of stop-gap expedient, these loans merely transfer these costs into the future, to be liquidated with income derived from later cycles of production unrelated to the cycles in which they were incurred.
The physical (i.e., real) costs of production are met as production takes place. Obviously, if this were not the case, production could not proceed. This is self-evident and axiomatic. When goods are produced in finished form they are meant to be used and should be immediately available to the overall consuming public in toto and without entailing any residual financial debt.
This universal piling-up of debt is bogus and is required only because price increasingly includes, as real capital replaces labor as a factor of production, allocated charges in respect of real capital which are not distributed as income in the same cycle of production. Consumer income is cancelled prematurely, leaving a growing deficiency of income relative to the total prices of goods awaiting purchase. In other words, the flow of final prices increasingly exceeds the flow of effective financial purchasing-power. Purchasing-power is prematurely cancelled in respect of still existing real capital, whereas it should be cancelled only at the rate of actual physical consumption or depletion. Money should be issued at the rate of production and cancelled at the rate of consumption
In the face of this predicament, we can simply forgo acquisition of these goods, leaving the producer no option but to warehouse or destroy them and go bankrupt—making his endeavors a mindless exercise in futility. Or we can ensure that, while required remaining actual “workers” (i.e., recipients of remuneration from others for services rendered) continue to have the benefit of their earnings, all citizens, workers included, have access to the full output of industry by being provided adequate aggregate purchasing-power to make this possible.
Besides being a practical necessity, such an arrangement recognizes the share all have in the almost fantastic Cultural Heritage of Civilization. In a Social Credit dispensation, Inheritance would be generalized.
In stark contrast is the socialist attitude, which is that inheritance is evil and should be abolished.
Social Credit stands most definitely, unashamedly and unabashedly, for a sharing society—and as labor is increasingly reduced by technology it would become more sharing with the passage of time. Unlike Socialism, which in reality has always been more about centralized control than about sharing, Social Credit does not involve State ownership, planning or administration of the economy or of social organization as such. By giving people as individuals full access to the ever-increasing abundance made possible by technology and to concomitant economic independence, it is in fact highly decentralizing.
The rational purpose of technology is to eliminate inefficiency, and “jobs” concocted merely for the sake of distributing incomes are precisely that—mere wasted energy and materials. The solution to the problem of economic insecurity in the modern age of super-production does not lie primarily in “making” work, but increasingly in facilitating distribution. Those who clamor for “jobs” actually visualize a model along the lines of fascist and communist states, which give and demand of everyone endless work throughout their lifetime, in accordance with the rather suspect dictum that “work will make you free”—but not until you die.
The unacknowledged, but obvious, truth is that unnecessary work, imposed by either edict or contrived financial legerdemain, is slavery and servitude—totally irrational and immoral. Every engineer worthy of the name is trying to eliminate the need for human effort as a factor of production while every witless or hypocritical politician, pressured by the financial powers above and an insecure and uncomprehending population below, is professing, at least, to promote policies designed to “put people back to work.”
Frankly, if I desire “work”, then I want to do it by my own choice and at my own leisure, increasingly freed from the enforced conformity and servitude of the existing system.
We should not be striving to provide more, and more, human work but rather more technological productive efficiency with augmented effective consumer purchasing-power capable of eliminating consumer debt and liquidating industrial costs in a timely manner. Let robots do the work. Tirelessly and without complaint, they perform the vast majority of it better than people can.
You want more work? Then let’s have another war—or, better yet, continuous wars until we end up destroying the whole planet or all life upon it.
Indeed, the flaws in the current financial system provide a constant incentive for military war, which normally is just an extension of economic war. Unbalanced international trade is driven by the increasing inherent orthodox need to export—not to receive an equivalent of real wealth in return, but to capture financial credits from other nations to compensate for the internal intrinsic deficiency of consumer purchasing-power that exists in the domestic price-system of every nation.
Anyone who does not understand this compulsive destructive dynamic of the modern financial-economic system is totally unqualified even to comment on our economic position.
The abundance that technology makes possible should set men and women free from physical want, increasingly enabling them to choose independently and without duress their preferred activities in life. As opposed to the ubiquitous Keynesian, cognitively dissonant, counterfeit socialist concept of “economic democracy” as a centralized administrative proletarian Work-State, Social Credit gives real meaning to the concept of economic democracy by favoring a consumer-motivated system of production.
C. H. Douglas stressed the importance of understanding policy by tracing its pedigree. From a metaphysical standpoint, Social Credit would be a practical, physical incarnation of the Christian Doctrine of Salvation by Unearned Grace—in contradistinction to the prevailing Judaic conception, and system, of Salvation through Works. The current financial system is predicated upon a materialist philosophy characterizable as do ut des, meaning “this for that”—in other words, that nothing can be obtained except it be earned, that, as the saying goes, “There is no free lunch”. It is the underlying principle of the madness-inducing doctrine of “Salvation through Works”.
Hence, the existing financial system issues money only as debt for production and never for consumption, except in the latter case as debt which must be acquitted by future work This policy of issuing money only for work might have had some basis in equity in the primitive economy where production was primarily due to human effort. It makes no rational or moral sense whatever in the modern highly technological economy where non-human factors of production predominate and human intervention becomes increasingly a mere, although essential, catalyst within a vast productive complex.
Social Credit coheres profoundly with the Christian philosophy of Salvation through Unearned Grace–Grace being an outright gift from God. Spiritual Grace has, or should have, a physical counterpart, or incarnation, in the economic or material realm. Thus, from this philosophical standpoint access to consumer goods and services should increasingly be justified not by work alone but rather by the individual’s share in an inalienable inheritance of the communal capital that has accumulated over the ages. The effect of growth of our historic Cultural Heritage has always been to advance the potential for faster, more diversified and less wasteful productivity, with an accompanying potential for enhanced human leisure.
Christian philosophy holds that it is a major sin to make an end of a means. The rational purpose and end of production is consumption, not to create work (a means). An economic system should provide goods and services for mankind as efficiently as possible with minimal trouble and effort for all concerned.
One might ask how it is possible for a nation such as the United States of America, professedly predicated upon Christian principles, to base its entire economy and social structure upon a financial system that is a total inversion of those principles. A clue to this strange contradiction may be found in Douglas’s observation that Finance and the Established Media are concentric. As a result, he said, society has been hypnotized, with the consequence that only a drastic de-hypnotization can save it.
If society can pursue a continuous, destructive, malevolent and malignant policy of devastating the continents and populations of foreign nations, then surely we can easily pursue instead the civilized alternative of providing (Consumer) Dividends and Compensated (lowered) Retail Prices to support a secure and leisured life for our citizens. Under the existing iniquitous financial system we are driven to deliver those potential Dividends to other nations in the form of bombs. This would appear to be insanity by any rational criterion, but it satisfies the overarching irrational one of providing plenty of “jobs” and “incomes” (not to mention “profits”)—albeit at the additional cost of stupendous physical waste, human suffering and a massive, exponentially expanding financial mortgage burdening our future. This too would appear to be insanity, but apparently not to members of the banking fraternity, which finances it all with conspicuously detached equanimity.
Surely the time is long past when individuals and nations should have stopped “fighting” amongst themselves and instead concentrated their intelligence, energies and talents on demanding reality-grounded financial and economic policies.
I hope that the above commentary may help to clarify some of the major questions and issues often raised about Social Credit.
Dr. Oliver Heydorn has recently published a major informative book, comprehensively incorporating C. H. Douglas’s essential ideas. Refer: http://www.socred.org
The author was born during the so-called “Great Depression” when in 1935 the historic election of the world’s first “Social Credit” Government in the Province of Alberta, Canada startled the pundits and alarmed the global financial powers. In later years he became acquainted with several Cabinet Ministers of that Government. His close mentor was Mr. Leslie Denis Byrne, O.B.E., a British actuary and technical expert in Social Credit who was sent, with a colleague, from Britain by C. H. Douglas to advise the fledgling new Provincial Administration. The author holds baccalaureate degrees in Arts and Education. In Arts, he majored in political science, and minored in economics. In Education, he majored in social studies, secondary route.
Appreciation is expressed to Robert E. Klinck, M.A. for his considerate and patient assistance in editing this essay.