By C.H. Douglas  

Chapter VII

The Results of Banking Control  

P ERHAPS the major difficulty which confronts the student of large-scale organisation is to decide to what extent it is practicable to question principles which have been regarded as axiomatic. While there has been continuous conflict of opinion in regard to forms of government, the necessity for government of some kind has not in responsible quarters seriously  been questioned. Yet on the face of it, government, in the sense in which it is commonly understood, can easily be put upon its defence, and has in fact throughout history been continuously upon its defence. There is essentially no difference between the principles of modern government and those of the most oppressive of the tyrannies of history. The mechanism is different, the results on the whole may be considerably more satisfactory, but in each case the essential consists in an infringement upon personal liberty.

It would be anachronistic to inject into the consideration of this situation any question of what are called human rights. Perhaps the clearest fact which emerges from the present flux in the world of ideas and of action is that the human individual has no rights except those which he can sustain. It does not, however, seem to require much consideration to admit that the general interest is well served by the elimination of certain courses of action on the part of the individual, murder being perhaps an instance. But having arrived at this point, we have by no means disposed of the fundamental problem. What is it which causes murder, and do we deal most satisfactorily with the problem of murder by the imposition of severe penalties upon the murderer, or on the other hand by concentrating the whole forces of society to remove any incentive to murder? Or, to put the matter another way, is murder a form of mental aberration, or is it a reaction from an environment which can bechanged?  

As a practical problem there is probably no clear answer to this dilemma in the present stage of human progress.  It is arguable that we could eliminate murder if we could with sufficient rapidity modify the predisposing causes to murder which are involved in a defective economic and social system, and at the same time remove the mental complexes which have been produced by those defects. But it cannot be done by a stroke of the pen, or by any action, governmental or otherwise, which is in the range of practical politics; and it is probably accurate to say that the most rapid progress is possible by a modification of environment accompanied by a decreasing, but not too rapidly decreasing, system of control. If the problem could be kept upon the plane of pure reason, it would still be a large problem, but it would be simplicity itself in comparison with the practical problem which confronts  the world at the present time. Each one of the factors is itself the battlefield of warring interests. Governmental systems seem to have a life of their own, with all the determination of the living organism to maintain its existence. The decay of doctrinal religion has to a large extent deprived humanity of any clear objective, attainable or otherwise, and it would appear that indirect progress, or the solution of the problems of life from day to day in the light of experience, is for the moment the only solid ground upon which to build.


At first sight this situation seems to lend powerful support to a policy of what in fact promises to be a world dictatorship. To those who have no practical experience of large organisations, which is in essence the position of bankers, there is an attractive logic about a  world planned and controlled like a machine. But, in fact, society does not work like a machine, but like a living organism. Any works manager will testify that the surest and shortest method of bringing about what is called labour trouble, is to endeavour to organise his factory as if the difference between the tools and the men in it were merely a difference of degree. At the beginning of the European War in 1914, collectivism, which is clearly allied to this idea of a machine-organised world, was almost as prevalent amongst the executive and administrative grades of industry as amongst the manual workers. Four years of organisation under war conditions, which brought into being collectivist mechanism to an extent otherwise impossible, disillusioned both the worker and the technician, not so much as to the soundness of the theory regarded as a means of attaining maximum production, as in regard to its extreme social unattractiveness.

Italy and Russia have, since the European War, had their own special forms of collectivist organisation, which it would be absurd to denounce as having failed from the purely materialistic point of view.  It would be equally untrue to suggest that in either of them is there any approach to general satisfaction with the type of civilisation to which they tend, and still less ground for supposing that the extension of the policy for which they both appear to stand, in the direction of a world state organised on the philosophy of the subservience of the individual to the organisation, would be likely to meet with any more general approbation. Without going too deeply into this aspect of the problem, it seems safe to suggest that the supposition that individuals can be regarded as units in the census figures and catered for on this basis, is a fundamental mistake not merely in ethics but in works management.

Only a cursory acquaintance with history is requisite to appreciate the fact that the major conflict of human existence is concerned with what we are accustomed to call liberty. Physical existence upon this planet requires the provision either by the individual himself, or by organised society, of bed, board, and clothes, and the maintenance and continuation of existence is the strongest force in human politics. There has never been a period of history in which this individual determination to live and to insure the continuance of human life has not been conditioned, not so much by physical facts, as by human action itself. The cave-man probably found his chief difficulty less in the lack of game, or in his peculiar housing problem arising from a shortage of eligible caves, than in the fact that his neighbour, instead of exploring new territory and finding an additional cave, preferred to take measures to expel him from the sites already developed. Not, I think, so much because he liked fighting, as for lack of ability to conceive of the existence of enough caves. Fundamentally there is little difference discernible in the outlook of man upon the situation to-day.

The world is obsessed, or possessed, by a scarcity complex. While at the date of writing Great Britain is preparing for another war, she still has a million unemployed, farms going out of cultivation and agricultural products being destroyed because they cannot be sold, publicists still inform us on the one hand that the situation is due to over-production, and on the other hand that sacrifices must be made by everyone, that we must all work harder, consume less, and produce more. Yet no economic training is necessary to assess the meaning of the existing situation. On the one hand we have an enormous and increasing capacity to produce the goods and services which are the  primary objective of civilisation and which probably form the material basis on which alone a cultural super-structure can be reared. On the other hand we have an immense population not only unable to obtain from the shops, which are so anxious to sell, those goods which they are unable to buy, but are, by the miscalled unemployment problem, prevented from producing still further goods. Ordinary common sense alone seems to be required to recognise that only one thing stands between this practically unlimited capacity to produce, and what is in fact a definitely limited capacity to consume, and that is the money system, the bottle-neck  which separates production and consumption.


Now the evidence is clear enough that this bottle-neck actually operates in fact to an extent exceeding that in which any control of economic process has operated before. He would, I think, be a bold protagonist of the existing financial system who would contend that the results are meeting with general approbation. Just to the extent that the conditions in the world have improved in the past few years—and it must be admitted that this extent is quite limited—this improvement has been obtained by forcibly depriving those persons who, by adherence to the rules of the financial system, had acquired sufficient purchasing power to release them from the pressure of the control, for the partial benefit of those not so fortunate. In passing it may be noted how the power of taxation has grown into a form of oppression beside which the modest efforts of the robber barons of the Middle Ages must appear crude. While the system is based fundamentally upon a theory of rewards and punishments, modern financial methods, in conjunction with the taxation system, would appear to suggest that the acquisition of the reward is proper ground for the imposition of punishment in the form of taxation which will distribute the reward amongst those who have not worked for it. I have very little doubt that in this we are witnessing not merely the decay of the financial system, but of the whole theory of rewards and punishments as applied to economics.

However this may be, the perfecting of the financial system of control outlined in the previous chapter has been contemporaneous with a rising wave of discontent and disillusionment, and it is obvious enough that competent financial policy as operated by those in present control of the financial system aims not so much at removing this discontent, as at removing all mechanism by which it could be made effective. That is the objective of the disarmament propaganda in its various forms. So that we seem to be in possession of a certain amount of preliminary evidence which would weigh against this centralised control of finance. A further examination, I am afraid, only strengthens this view.

Mention has been made of the outstanding prosperity in a material sense which was experienced by the population of the United States during the period 1921-1929. No serious effort has been made to deny the fact that this period was terminated by the action of the Federal Reserve Banking System, partly by the raising of rates for call money to a fantastic figure, and partly by the calling in of loans irrespective of the interest rates offered. So far as any excuse is put forward for the action taken, it is that worse consequences than did in fact ensue would have been the result of further delay. Viewed in the light of subsequent effects it seems difficult to understand in what way this could have been true. Apart altogether from this, however, the course pursued strengthens the impression which is produced by an examination of the lesser financial crises which have been a feature of the twentieth century, that there is something in the banking system and its operation, which produces a constitutional inability to look at the industrial system as anything other than the basis of a financial system. To the banker, the satisfactory conditions of industry at any time are those which make the banking system work most smoothly. If it cannot be made to work smoothly, it must be made to work, even though in the process every other interest is sacrificed.


Only the exercise of a childlike faith, which the present generation seems unlikely to supply, would secure agreement with the proposition that a system which has produced undesirable results in cumulative measure as its power increases, would produce better  results if its power became absolute. While grave criticism of the personnel of the banking system and its prostitution to politics of a peculiarly vicious character is becoming daily more common and seems in many cases to be justified, it is evident that the world is becoming daily less willing to trust  any  personnel with a system at once so powerful, irresponsible, and convulsive in its operation.

While, as previously suggested, it is the reverse of true to accuse  financiers of planning or desiring war, the financial  system, of which they are the defenders, is, beyond question, the chief cause of international friction. Since, as we have seen, no nation can buy its own production, a struggle for markets in which to dispose of the surplus is inevitable. The translation of this commercial struggle into a military contest is merely a question of time and opportunity.


Chapter VIII The Causes of War

PERHAPS the first necessity, if we wish to arrive at the truth of this matter, is to be clear on what we mean by "war". The technical definition of war is "any action taken to impose  you  will upon an enemy, or to prevent him from imposing his will upon you".  It  will be recognised at once that this definition of war makes the motive rather than the method the important matter to consider. More energy is devoted at the present time to the endeavour to modify the  methods  of war than to removing the  motive  for war. If we recognise this, we shall be in a better position to realise that we are never at peace —that only the form of war changes.

Military wars are waged by nations, a statement which is the basis for the somewhat naive and, I think, certainly erroneous idea that you would abolish war if you abolished nations. This is much like saying that you would abolish rate-paying if you abolished Urban District Councils. You do not dispose of a problem by enlarging its boundaries, and, if I am not mistaken, the seeds of war are in every village.

We can get a glimpse of the main causes of war if we consider the problems of statesmen, who are expected to guide the destinies of nations. I suppose most statesmen at the present time would agree that their primary problem is to increase employment, and to induce trade prosperity for their own nationals, and there are few of them who would not add that the shortest way to achieve this would be to capture foreign markets. Once this, the common theory of international trade, is assumed, we have set our feet upon a road whose only end is war. The use of the word "capture" indicates the desire to take away from some other country, something with which it being unable, also, to be prosperous without general employment, does not desire to part. That is endeavouring to impose your will upon an adversary, and is economic war, and economic war has always resulted in military war, and probably always will.

The so-called psychological causes of war are the response of human nature to irritations which can be traced to this cause either directly or indirectly. To say that all men will fight if sufficiently irritated seems to me to be an argument against irritating them, rather than against human nature. It is not the irritation which causes the economic war, it is the economic war which causes the irritation. Military war is an intensification of economic war, and differs only in method and not in principle. The armaments industry, for instance, provides employment and high wages to at least the same extent that it provides profits to employers, and I cannot see any difference between the culpability of the employee and that of the employer. I have no interest, direct or indirect, in the armaments industry, but I am fairly familiar with Big Business, and I do not believe that the bribery and corruption, of which we have heard so much in connection  with  armaments, is any worse in that trade than in any other.

So long, then, as we are prepared to agree, firstly, that the removal of industrial unemployment is the primary object of statesmanship, and, secondly, that the capture of foreign markets is the shortest path to the attainment of this objective, we have the primary economic irritant to military war always with us, and, moreover, we have it in an accelerating rate of growth, because production is expanding through the use of power machinery, and  undeveloped markets are contracting. Any village which has two grocery shops, each competing for an insufficient, and decreasing, amount of business, while continually enlarging its premises, is a working demonstration of the economic causes of war—is, in fact, itself at war by economic methods.


I do not believe that it is sensible to lecture the public of any or all of the nations on either the wickedness or the horrors of war, or to ask for goodwill to abolish military war or the trade in armaments, so long as it remains true that, if one of the village grocers captures the whole of the other grocer's business, the second grocer and his employees will suffer. Or if it remains true that if one nation captures the whole of another nation's trade the population of the second nation will be unemployed, and, being unemployed, they will suffer also. It is poverty and economic insecurity which submits human nature to the greatest strain, a statement which is easily provable by comparing suicide statistics with bankruptcy statistics and business depression. Suicides are less in number during wars, not because people like wars, but because there is more money about. Suicides are also less in number during trade booms for the same reason.

To know, therefore, whether war is inevitable, we have to know whether, firstly, there is enough real wealth available to keep the whole population in comfort  without the whole of the population being employed, and, secondly, if this is so, what it is that prevents this wealth from being distributed. In regard to the first question, I believe there can be no doubt as to the answer. We are all beginning to be familiar with the phrase "poverty amidst plenty", and it is generally admitted that the crisis of the past decade has been a crisis of glut and not a crisis of scarcity. Yet during that crisis, poverty has been widely extended, because  unemployment has been widely extended. So that we have experimental evidence that full employment is not necessary to produce the wealth that we require—it is only necessary to the end that we may be able to distribute wages—quite a different matter. In regard to the second question, therefore, we know it is lack of money in the hands of individuals to enable them to buy the wealth which is available, and not the lack of available goods, which makes men poor. As our arrangements are at the present time, money is primarily distributed in respect of employment, which, as the glut has shown, is in many cases not necessary, or even desirable. So that it is not too much to say that the causes of war and the causes of poverty amidst plenty are the same, and they may be found in the monetary and wage system, and that broadly speaking the cure for poverty and the beginnings of the cure for war can be found in a simple rectification of the money system.

This rectification must, I think, take the form of a National Dividend, either in a simple or more complex form, so that while there is real wealth to be distributed, nobody shall lack for want of money with which to buy. It has already been shown that money is actually made by the banking system, and not by agriculture or industry. The “Encylopaedia Britannica” states the matter clearly in its article on banking in the words: “Banks lend money by creating the means of payment out of nothing.”

It seems difficult to make it clear that the proposal for a National Dividend, which would enable the products of our industrial system to be bought by our own population, has nothing to do with Socialism, as that is commonly understood. The main idea of Socialism appears to be the nationalisation of productive undertakings and their administration by Government departments. Whatever merits such a proposal may have,  or may not have, it does not touch the difficulty we have been considering.


The provision of a National Dividend is merely to place in the hands of each one of the population, in the form of dividend-paying shares, a share of what is now known as the National Debt, without, however, confiscating that which is already in private hands, since the National Credit, is, in fact immensely greater than that portion of the National Debt which now provides incomes to individuals.

The practical effect of a National Dividend would be, firstly, to provide a secure source of income to individuals which, though it might be desirable to augment it by work, when obtainable, would, nevertheless, provide all the necessary purchasing power to maintain self- respect and health. By providing a steady demand upon our producing system, it would go a long way towards stabilising business conditions, and would assure producers of a constant home market for their goods. We already have the beginnings of such a system in our various pension schemes and unemployment insurance, but the defect for the moment of these is that they are put forward in conjunction with schemes of taxation which go a long way towards neutralising their beneficial effect. While this is inevitable under our present monetary system, it is far from being inevitable when the essentially public nature of the monetary system receives the recognition which is its due, but is not yet admitted by our bankers.

It may be asked, with reason, why the provision of a National Dividend, even if effective in removing the prime motive for aggressive war on the part of Great Britain, would so affect the motives of other nations as to prevent them from making war upon us. I think the answer to this is twofold.  In the first place, I believe it to be, while the present financial system persists, merely sentimental to suppose that a weak nation, particularly if it be also a rich nation, is a factor making for peace. Quite the contrary. It is as sensible to say that a bank would never be robbed if it had paper walls. International bankers are, almost to a man, strong advocates of national disarmament, but their bank clerks, alone amongst civilian employees in this country, are armed with revolvers, and the strength of bank premises compares with that of modern fortresses. Strength, unaccompanied by a motive for aggression, is a factor making for peace. A radical modification of the existing financial system will make it possible to build up a strong and united nation free from economic dissension, which would, by its strength, offer a powerful deterrent  to aggressive war. And, secondly the spectacle of a contented and prosperous Britain, willing to trade but not forced by unemployment to  fight for trade, would provide an irresistible object-lesson in genuine progress and would be imitated  everywhere.

Why should these modifications not be made? For an answer to that question I must refer you to the Bank of England, which is all-powerful in these matters. Mr. Montagu Norman, the Governor of the Bank of England, which is a private company, described the relations of the Bank of England and the Treasury as those of Tweedledum and Tweedledee.

It is not suggested that bankers have a wish to precipitate war. Far from it. Bankers dislike war only less than they dislike any change in a financial system with which, almost alone amongst other sections of the community, they appear to be completely satisfied.


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