This weekend gone I was happy to sign a petition objecting to the Adani development in the Galilee basin, Queensland. The information given me at my local farmers market accurately reported on a number of concerns relevant to the Adani project. At the heart of the protest lay the concern about the environmental impacts of the mine. The commitment of those involved in these campaigns is admirable, and I sense that the public is increasingly receptive to environmental issues. However, in my view the strategy of the environmental movement is critically incomplete.
In 1918 a Scottish Engineer named Clifford Hugh Douglas wrote an article called The Delusion of Super Production1 for The English Review. In it he lay out a problem he had discovered with the functioning of the economic system.
Having investigated more than a hundred companies he found that production costs always exceeded the money made available to workers, except in businesses going broke.
The reason for this was plain to see. Industrial production differs from pre-industrial production in three important ways:
- The length of time, or the production stages, from raw material to finished product (lead time) increases - modern production is increasingly reliant on automated machinery and, therefore, decreasingly reliant on human labour
- The need for human involvement in production is being displaced
- The amount of product generated by power driven machinery is much greater than things made by hand over the same period of time.
Because lead times are longer, human involvement diminishing, and rate of output greater, the costs that accrue to each piece, which forms the basis of price, cannot be met by the consumer at the rate that production appears for sale. This is because under modern-industrial-conditions labour costs – which form the bulk of incomes available for cancelling retail prices – make up a diminishing portion of total manufacturing costs. In other words there is a gap between the money in consumers’ pockets and the items they are expected to be able to purchase. In short, the market cannot clear.
Economics had (falsely-ed) accepted (and essentially still does) as a central assumption that production generates its own demand. That is, the making of a product distributes enough money to buy it. In different times that may have been true, but under the conditions described above it is demonstrably false. The thrust of Douglas’ article was first to outline this dysfunction and secondly to expose the wrongheadedness of the eternal push by government and finance for a policy of full employment.
If 'costs accumulate to products' faster than 'purchasing power is distributed to consumers', then there is no sense in promoting a plan for more work that can only increase stocks of unsaleable goods. The only known remedy to the problem, as proposed by Douglas, was to increase the purchasing power of the consumer to the point he could afford to buy production. In other words, distribute debt-free credit direct to the consumer in sufficient quantity to bridge the price/income gap.
This plan was rejected by the financial powers because it dismantled their monopoly control of credit creation. Simply put money is created from nothing when banks lend. This has been known for hundreds of years but only now is this knowledge filtering down to the ordinary person.
In the main, the public is under a combination of vague illusions about money including, among others, that banks lend deposits, that credit is leveraged against gold and that money is made by the government. Of course, none of these assumptions stand up to the slightest scrutiny2. The gap between prices and purchasing power has traditionally been addressed by governments, business and private people borrowing more money into existence. This means that we commit to work in the future in order to consume in the present and is the primary reason for exorbitant debt levels. One of the problems with creating all money as interest bearing debt is that the method itself is a cost that adds to prices and therefore cannot bridge the price/income gap.
Despite this understanding being in the public space since Douglas explained it to us, the typical approach to managing economies (and populations) remains the full employment/debt nexus. This approach leads to an over supplied market that creates the need for mass manipulation of social psychology as business engages the advertising industry to inflame material-want to compete for insufficient dollars. Thanks to the work of advertisers who manipulate our sub-conscious, the quantity of production consumed, not to mention that which cannot be consumed, is far beyond the level of normal, unstimulated demand. This manufactured appetite for material consumption lies behind another basic economic fallacy: the Malthusian idea that economics is about managing scarcity.
Over-consumption made necessary by the universal policy of full employment is not only chewing up and spitting out the natural world but has literally led us into a national health crisis. Actually, in 1918 Douglas warned in his Delusion of Super Production that:
There is no more dangerous delusion abroad in the world at this time than that production per se is wealth. It is about as sensible as a statement that because food is necessary to man he should eat continually and eat everything.
How unfortunately prophetic.
So, we have a situation that does not allow us to slow down the machines because it is the only way of distributing purchasing power to individuals. According to Quigley, in America between 1830 and 1930 the number of British Thermal Units (BTUs - a measurement of heat energy) expended per capita rose from 6 million to 245 million. I doubt the numbers can be accurately calculated today but they must be staggering. The fact is that the quantity of production is relative to the quantity of energy used by industry, not the number of people employed. It is increasingly dangerous, and patently ridiculous, when we have machinery of such immense power to run it, not for the limited goal of efficient provision of demanded goods and services, but for the open ended one of keeping everybody as busy as possible. It seems we are enthralled by a pitch-fork mentality better suited to the Middle Ages and the problem is that in place of the pitch fork we have the Komatsu PC8000 *.
* PC8000-6 Mining Shovel
Two 2010 hp diesel engines or, if you’d rather use electricity, two 1450 kW electric motors provide power for the massive hydraulic PC8000-6. The PC8000-6 is a high production truck loading system that will out cycle rope shovels and load trucks from 240 ton and higher.
Even if we managed the much-feted transition to renewable energy sources, I would expect the amount of damage done by machines powered by fossil fuels will be maintained and expanded by machines powered by the sun’s energy harvested directly. The factory system’s vast capacity for raw material throughput, and its generation of long lasting synthetic pollutants demands we operate it only when we must, regardless of the energy source. The fact is that we simply cannot achieve this moderation while incomes remain linked to work in progress. I doubt a doomed forest will register the difference between a diesel-powered bull dozer and one with solar panels on the cab. Furthermore, I can assure you that the source of energy that powers the dozer will make little difference to the driver’s motivation for destruction if his bed, beer and board remains conditional on him driving the machine.
Those concerned about the environment are always running up against the ‘jobs’ obstacle but never once have I heard its leaders declare the dangerous stupidity of full employment in an age of automation. For instance consider the Adani project. The chief political argument for allowing the mine is that it will create jobs in depressed North Queensland.
I can tell you right now that the people of North Queensland have no personal conviction that they should provide Indians with coal and more billions to billionaires; what they want is money.
Something that Douglas taught us, and something you don’t have to look far to confirm, is that you don’t need to carry out a programme of production in order to get a financial outcome. It is quite within our power to give these people money enough that would allow them to live a dignified life without having to rip a great hole in the ground. But the conditioning that connects work with money has been so effective that the relationship is never questioned.
There is absolutely no one in sight that represents the common-sense view that no longer do we need to put all the men to work on all the machines.
It is interesting to observe that the so-called Socialists and Capitalists (or whatever tag they adopt at any given time) are in perfect accord on this point. As far as the ordinary person is concerned there is no political spectrum at all - just insuperable government by debt, tax and work.
There is a lot more to be said about the material briefly touched on here, but I doubt very much that any honest person can dismiss these ideas as unimportant to the solution of our present entanglements, and specifically, the environmental crisis we are amidst. Until we pull these issues into the light and address them directly I fear that a lot of the hard work of people properly concerned with the conservation of our wonderful natural world will be wasted fighting the rear-guard actions of a retreating army.
I leave you with some quotes for your consideration:
“I do not regard it as being a sane system that before you can buy a cabbage it is absolutely necessary to make a machine gun.”
“The morality of work is the morality of slaves and the modern world has no need for slavery.”
“You live with the butterflies, you’ll die with the butterflies.”
Barnaby Joyce in an interview defending the Adani project.
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”
1. C.H. Douglas. 1918. The Delusion of Super Production.
http://www.socred.org/index.php/pages/the-douglas-internet-archive accessed 1.07.2017
2.Money Creation in the Modern Economy 2014
By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate. https://alor.org/Library/bank-of-england-money-creation-in-the-modern-economy.pdf