Home / THE HISTORY OF SOCIAL CREDIT
This article is about the philosophy, economic theory and history of Social Credit.
For political parties,
See Social Credit Party.
Social Credit originated from the writings of C. H. Douglas (1879–1952), a British engineer, who wrote a book by that name in 1924. Social Credit is described by Douglas[1] as “the policy of a philosophy“; he called his philosophy “Practical Christianity”.
This philosophy is interdisciplinary in nature, encompassing the fields of economics, political science, history, accounting and physics. Assuming the only safe place for power is in many hands, Social Credit is a distributive 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–development, is above all systems, whether theological, political or economic.”[2]
According to Douglas, the true purpose of production is consumption, and production must serve the genuine, freely expressed interests of consumers. Each citizen is to have a beneficial, not direct, inheritance in the communal capital conferred by complete and dynamic access to the fruits of industry assured by the National Dividend and Compensated Price.[3] Consumers, fully provided with adequate purchasing power, will establish the policy of production through exercise of their monetary vote.[3]
In this view, the term economic democracy does not mean worker control of industry.[3] Removing the policy of production from banking institutions, government, and industry, Social Credit envisages an “aristocracy of producers, serving and accredited by a democracy of consumers.”[3]
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 Keynes in his book, The General Theory of Employment, Interest and Money.[4] While Douglas shared some of Keynes’ 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 parties throughout the world, but not in the purest form originally advanced by Major C. H. Douglas. Likewise, the Keynesian Revolution 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 2007–2010,[5] modern analysts like Richard C. Cook argue the need for a renewed interest in the long dormant ideas of Major Douglas.[6]
Economic theory
Douglas disagreed with classical economists such as Adam Smith and David Ricardo who divided the factors of production into land, labour and capital. He also disagreed with Karl Marx who claimed that labour created all wealth. Douglas believed the “cultural inheritance of society” was the primary factor in production. Cultural inheritance is defined as the knowledge, technique and processes that have been handed down to us incrementally from the origins of civilization. Consequently, mankind does not have to keep “reinventing the wheel”. “We are merely the administrators of that cultural inheritance, and to that extent the cultural inheritance is the property of all of us, without exception.”[7]
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 wealth, 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.”[8]
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 organized sabotage was necessary to preserve the system from spontaneous combustion.”[9]
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.”[10]
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. 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. Douglas proposed that 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 also 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 he suggested that we are all inheritors of the cultural inheritance, and his proposal for a national dividend is directly related to this belief.
Douglas criticized classical economics because it was based upon a barter economy, whereas the modern economy is a monetary one. To the classical economist, money is a medium of exchange. 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 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 increment of association” – historic accumulations of which constitute what Douglas called the cultural heritage. The means of drawing upon this pool are the tickets 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”[11] comes from the Latin pecus, meaning “cattle”.[12] Today, the productive system and the distributive/monetary system are two separate entities. Douglas demonstrated that loans create deposits, and presented mathematical proof in his book Social Credit.[13] Bank credit comprises the vast majority of money, and is created every time a bank makes a loan.[14] Douglas was also one of the first to understand the creditary nature of money. The word credit 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.”[15]
Douglas believed that money should not be regarded as a commodity but rather as a ticket, a means of distribution of production.[16] “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 demand‘ – and there is something we call a price opposite to it.”[16] 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 scarcity, 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.[17] Douglas criticized the banking system on two counts: for being a form of government which has been centralizing its power for centuries, and for claiming ownership to the money they create.
The former Douglas identified as being anti-social in policy.[18] The latter he claimed was equivalent to claiming ownership of the nation.[19] Money, Douglas claimed, was merely an abstract 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. Orage, 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.”[8]
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.”[3]
Beyond empirical evidence, Douglas claims this deductive theorem demonstrates that total prices rise faster than total incomes when regarded as 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.”[20]
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 clearings through the bank in a year divided by the average amount of deposits held at the banks (which varies very little). The result is the number of times money must turnover in order to produce these clearing house 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.“[21]
According to Douglas, the major consequence of the problem is exponentially increasing debt. Further, he believed that 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 trade, 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. Douglas proposed that the long-term consequence of this policy is a trade war, 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 Ireland, led by John Hargrave. The former represents excessive capital production and/or military build-up. Douglas believed that excessive capital production is only a temporary correction, because the cost of the capital appears in the cost of consumer goods, or taxes, which will further exacerbate 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”.[3] As Douglas stated in his first article, “The Delusion of Superproduction“[22]:
“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.”
If 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 according to this analysis. Douglas suggested that this is the reason why deflation is regarded as a problem in orthodox economics. As the Phillips Curve suggests, inflation and unemployment are trade-offs, unless prices are reduced from monies derived from outside the productive system. According to Douglas’ A+B theorem, 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 due to the mechanization of industry. Douglas did not suggest that inflation cannot be caused by too much money chasing too few consumer goods, but according to his analysis 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 sheet, and calculating aggregate 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 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 fewer 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.”.[3]
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 freedom.
Critics of the A + B theorem and rebuttal
Critics of the theorem, such as J.M. Pullen, Hawtrey and J.M Keynes argue there is no difference between A and B payments. Other critics, such as Gary North argue that 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.”[23]
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.”[24] 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. [25]
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 Law in economics.
The criticism that Social Credit policies are inflationary is based upon what economists call the quantity theory of money, 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.”[24] 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.”[26]
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.”[21]
Political theory
C.H. Douglas defined democracy as the “will of the people”, not rule by the majority,[27] 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 box 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.”[28] 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.[29] 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 ballot arguing that it led to electoral irresponsibility, calling it a “Jewish” technique used to ensure Barabbas was freed leaving Christ to be crucified.[29]
Douglas considered the constitution an organism, not an organization.[28] In this view, establishing the supremacy of common law is essential to ensure protection of individual rights from an all-powerful parliament. Douglas also believed the effectiveness of British government is structurally determined by application of a Christian concept known as Trinitarianism: “In some form or other, sovereignty in the British Isles 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.”[28]
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.[30] 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 system becomes evident.”[31]
History
C.H. Douglas was a civil engineer who pursued his higher education at Cambridge University. His early writings appeared most notably in the British intellectual journal The New Age. The editor of that publication, Alfred Orage, 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 BBC 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[22] 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[32] in 1923, to the British Parliamentary Macmillan Committee on Finance and Industry in 1930, which included exchanges with economist John Maynard Keynes, and to the Agricultural Committee of the Alberta Legislature in 1934 during the term of the United Farmers of Alberta Government in that Canadian province.
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 Munson who contributed a major book on Social Credit titled Aladdin’s Lamp: The Wealth of the American People. While Canada and New Zealand had electoral successes with “Social Credit” political parties, the movement in England and Australia 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 Rights 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 Party leadership resisted pressure from Trade unionists to implement Social Credit, as hierarchical views of Fabian socialism, state-socialism, economic growth and full employment, were incompatible with the National Dividend and abolishment of wage slavery suggested by Douglas. In an effort to discredit the Social Credit movement, one leading Fabian, Sidney Webb, is said to have declared that he didn’t care whether Douglas was technically correct or not – they simply did not like his policy.[33]
In 1935 the first “Social Credit” government was elected in Alberta, Canada under the leadership of William Aberhart. 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 Depression. Aberhart added a heavy dose of fundamentalist Christianity to Douglas’ theories; the Canadian social credit movement, which was largely nurtured in Alberta, thus acquired a strong social conservative tint that it retains to this day.
Having counselled the previous United Farmers of Alberta 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.[34]
While the Premier wanted to balance the provincial budget, Douglas argued the whole concept of a “balanced budget“ 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.[35] In a letter to Aberhart, Douglas stated.[35]:
“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 assets. The result of the acceptance of this proposition is that all capital appreciation 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 vires by the Supreme Court of Canada and Privy Council in London. Based on the monetary theories of Silvio Gesell, William Aberhart issued a currency substitute known as prosperity certificates. But these scrips actually depreciated in value the longer they were held,[36] 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.”[37]
Under Ernest Manning, who succeeded Aberhart after his untimely death, the Alberta Social Credit Party gradually departed from its origins and became popularly identified as a right wing populist movement. In the Secretariat’s journal, An Act for the Better Management of the Credit of Alberta,[38] Douglas published a critical analysis of the Social Credit movement in Alberta,[39][40] 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. The British Columbia Social Credit Party won power in 1952 in the province to Alberta’s west, but had little in common with Douglas or his theories.
Social Credit Parties also enjoyed some national electoral success in Canada. The Social Credit Party of Canada was founded with support from Western Canada, and eventually built another base of support in Quebec. Social Credit also did well at the national level in New Zealand, where it was the country’s third party for almost 30 years.
Philosophy
Douglas described Social Credit as “the policy of a philosophy”, and warned against viewing it solely as a scheme for monetary reform.[41] He coined this philosophy “practical Christianity” – the central issue of which is the Incarnation. Douglas believed there was a Canon 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.[42] 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.[43] The goal of Social Credit is to maximize immanent sovereignty. Social Credit is consonant with the Christian doctrine of Salvation through unearned Grace, 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 Duality.[44]
Although Douglas defined Social Credit as a philosophy with Christian roots, he did not envision a Christian theocracy. 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.[28] “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.”[45] 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.”[46][47] 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 George.[48]
Social Credit society recognizes the fact that the relationship between man and God is unique.[49] 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 mammon and use their free time pursuing spiritual, intellectual, or cultural goals leading to self-development.[50] Douglas opposed what he termed “the pyramid of power”. Totalitarianism 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.[51] 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.[52]
Douglas emphasized that all policy derives from its respective philosophy and that “… Society is primarily metaphysical, and must have regard to the organic relationships of its prototype.”[53] Social Credit rejects dialectical materialistic philosophy.[53] “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.”[54]
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 Aristotle and Francis Bacon 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”.[55]
Relationship to anti-Semitism
Social Crediters, and Douglas himself, have been criticized for spreading anti-semitism. Douglas was critical of “international Jewry”, 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. Some people have claimed that Douglas was anti-Semitic because he was quite critical of Jewish philosophy.
In his book entitled Social Credit, he wrote 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.”[56]
Douglas was opposed to abstractionist philosophies, because he believed these philosophies inevitably led to the elevation of abstractions, such as state, over individuals. He also believed that what he called Jewish abstractionist thought tended to lead them to communist ideals and the emphasis of the group over the individual. John L. Finlay, in his book, Social Credit: The English Origins, wrote “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.”[57]
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.”[58]. John L. Finlay disagrees with Stingel’s assertion and argues 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 a people or race. It was never suggested that the National Dividend be withheld from them.”[57]
Groups influenced by Social Credit
Australia
Canada
Federal political parties:
Provincial political parties:
Organizations:
New Zealand
Solomon Islands
United Kingdom
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 Chaplin, William Carlos Williams, Ezra Pound, T. S. Eliot, Herbert Read, Aldous Huxley, Storm Jameson, Eimar O’Duffy, Sybil Thorndyke, Bonamy Dobrée, Eric de Maré and the American publisher James 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. Heinlein described a Social Credit economy in his first novel, For Us, The Living: A Comedy of Customs, and his Beyond This Horizon 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.
In his novel The Trick Top Hat, part of his Schrödinger’s Cat Trilogy, Robert Anton Wilson described the implementation by the President of an alternate future United States of an altered form of Social Credit, in which the government issues a National Dividend to all citizens in the form of “trade aids,” which can be spent like money but which cannot be lent at interest (in order to mollify the banking industry) and which eventually expire (to prevent inflation and hoarding).
More recently, Richard C. Cook, an analyst for the U.S. Civil Service Commission, Food and Drug Administration, NASA, the U.S. Treasury Department, and author of the books Challenger Revealed and We Hold These Truths, has written several articles relating to Social Credit and monetary reform at Global Research, an independent research and media group of writers, scholars, journalists and activists. Frances Hutchinson, Chairperson of the Social Credit Secretariat, has co-authored, with Brian Burkitt, a book entitled The Political Economy of Social Credit and Guild Socialism.[59]
Notes
^ a b c d e f g Douglas, C.H. (1933 publisher=The Social Credit Press). Credit-Power and Democracy. Melbourne, Australia. pp. 4, 108. Retrieved 12-11-2008.
^ Keynes, John M. (1936 publisher=MacMillan & Co Ltd.). The General Theory of Employment, Interest and Money. London, England. pp. 32, 98–100, 370–371.
^ Chris Giles in London, Ralph Atkins in Frankfurt and,Krishna Guha in Washington. “The Undeniable Shift to Keynes”. The Financial Times. Retrieved 2009-04-11.
^ Douglas, C.H. (January 22, 1934). “The Monopolistic Idea” address at Melbourne Town Hall, Australia. The Australian League of Rights: Melbourne. Retrieved on February 28, 2008.
^ a b Douglas, C.H. (1919), “A Mechanical View of Economics” (PDF), The New Age, 1373 (38 Cursitor Street, London: The New Age Press) XXIV (9): 136, retrieved 2008-03-14
^ C.H. Douglas. “Warning Democracy”. Australian League of Rights. Retrieved 2008-12-18.
^ Pollock, Fredrick (1996), The History of English Law Before the Time of Edward I, Lawbook Exchange Ltd, pp. 151
^ Douglas, C.H. (April 22, 1927), Engineering, Money and Prices, Institution of Mechanical Engineers: Warning Democracy, pp. 15, retrieved 2008-02-28
^ a b Douglas, C.H. (February 13, 1934). “The Use of Money” address at St. James’ Theatre, Christchurch, New Zealand. The Australian League of Rights: Melbourne. Retrieved on February 28, 2008.
^ Douglas, C.H. (1973 publisher=Gordon Press). Social Credit. New York. pp. 47.
^ C.H. Douglas. [http://douglassocialcredit.com/resources/resources/possible_social_credit_in_alberta.pdf “FIRST INTERIM REPORT ON THE POSSIBILITIES OF THE APPLICATION OF SOCIAL CREDIT PRINCIPLES TO THE PROVINCE OF ALBERTA”] (PDF). Social Credit Secretariat. Retrieved 2008-12-18.
^ Douglas, C.H. (November 24, 1936). “Dictatorship by Taxation” address at Ulster Hall, Belfast. The Australian: Melbourne. Retrieved on February 28, 2008.
^ Douglas, C.H.. The New and the Old Economics. Sydney, n.d.. ISBN 0858550040.
^ a b Douglas, C.H. (1934), The Douglas System of Social Credit: Evidence taken by the Agricultural Committee of the Alberta Legislature, Session 1934, Edmonton: Legislative Assembly of Alberta, pp. 90
^ a b C.H. Douglas (December 1918). “The Delusion of Superproduction” (PDF). The Delusion of Superproduction. The English Review. Retrieved 2008-12-11.
^ Pullen, J. M.; G. 0. Smith (1997). “Major Douglas and Social Credit: A Reappraisal”. Duke University Press. pp. 219.
^ a b Douglas, C.H. (1933), “The Birmingham Debate”, THE NEW AGE Vol. LII, No. 23
^ C.H. Douglas. “The Nature of Democracy”. Australian League of Rights. Retrieved 2008-04-13.
^ a b c d C.H. Douglas. “Realistic Constitutionalism”. Australian League of Rights. Retrieved 2008-02-28.
^ Douglas, C.H. (March 7, 1936). “The Approach to Reality“ address at Westminster. Australian League of Rights: Melbourne. Retrieved on February 28, 2008.
^ Douglas, C.H. (October 30, 1936). “The Tragedy of Human Effort” address at Central Hall, Liverpool. Australian League of Rights: Melbourne. Retrieved on 2008-02-28.
^ Douglas, C.H. (1937). The Alberta Experiment. London: Eyre and Spottiswoode.
^ Glenbow Museum. “Prosperity Certificate”. Glenbow Museum. Retrieved 2008-02-27.
^ C.H. Douglas. “The Approach to Reality”. The Australian League of Rights. Retrieved 2008-02-27.
^ Douglas, C.H. (1947), “An Act for the Better Management of the Credit of Alberta”, The Social Crediter (Liverpool: K.R.P. Publications Ltd.) 17 (23), February 8, 1947
^ Douglas, C.H. (1947), “Social Credit in Alberta”, The Social Crediter (Liverpool: K.R.P. Publications Ltd.) 20 (26), August 28, 1947
^ Douglas, C.H. (1947), “Social Credit in Alberta”, The Social Crediter (Liverpool: K.R.P. Publications Ltd.) 21 (1,2), September 4-11, 1947
^ C.H. Douglas. “The Policy of a Philosophy”. Australian League of Rights. Retrieved 2008-03-01.
^ E. S. Holter (1978). The ABC of Social Credit. Vancouver: Institute of Economic Democracy, Sixth Printing, Dec.1978. ISBN 0920392245.
^ Munson, Gorham (1945). Aladdin’s Lamp: The Wealth of the American People. New York: Creative Age Press.
^ Alberta Post-War Reconstruction Committee Report of the Subcommittee on Finance. 1945.
^ Douglas, C.H. (1954), “Cover”, The Douglas Quarterly Review, The Fig Tree, New Series (Belfast, Northern Ireland: K.R.P. Publications) 1 (June): Cover, 1954-55
^ Douglas, C.H. (1943). The Land for the (Chosen) People Racket. London: KRP Publications Ltd.
^ Monahan, Bryan (1971). Why I am a Social Crediter. Sydney: Tidal Publications. pp. 3. ISBN 0858550016.
^ Monahan, Bryan (1971). Why I am a Social Crediter. Tidal Publications. pp. 7. ISBN 0858550016.
^ Douglas, C.H. (1920). Economic Democracy. Melbourne: Heritage for Institute of Economic Democracy. pp. 33. ISBN 0904656004.
^ a b C.H. Douglas letter to L.D. Byrne, March 28, 1940
^ C.H. Douglas. “Static and Dynamic Sociology”. Social Credit. Mondo Politico. Retrieved 2008-03-01.
^ Douglas, C.H. (1973 publisher=Gordon Press). Social Credit. New York. pp. 22.
^ a b Finlay, John L (1972 publisher=McGill-Queen’s Univ. Press). Social Credit: The English Origins. Montreal: McGill-Queens University Press. pp. 105. ISBN 9780773501119.
^ Stingel, Janine (2000). Social Discredit: Anti-Semitism, Social Credit and the Jewish Response. Montreal: McGill-Queen’s University Press. p. 13.
^ Hutchinson, Frances (1997). Political Economy of Social Credit and Guild Socialism. UK: Routledge. ISBN 9780415147095.
Further reading
Economic Democracy, by C. H. Douglas (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
See also
External links
Reproduced by
