The New Age – January 4, 1934 – No.: 2156 – Vol. LIV. – Pages 115-116
The Sting in the Tail.
Under the heading “The Douglas Plan” an American edition of Major Douglas’s book, Social Credit (W.W. Norton Company, $2), is reviewed in The New York Times Book Review (a Sunday supplement of the paper) for November 26. The name of the reviewer is Louis Rich, and I propose to quote his effort in full, for the first three quarters of the review is a succinct statement of Major Douglas’s general argument worthy of a place beside the best of Social Credit literature, while the remaining part looks very much as if it belongs to another person altogether. The review is really interesting example of the current technique for disposing of Social Credit publications. Mr. Rich apparently is a specialty critic. His name probably carries weight. That he has brains is obvious. How he could possibly conclude his review as he has done unless he fell into a stupor and wrote to dictation, or openly allowed another mind to guide his hand, is beyond reason. But there it is, and those who know will either smile with grim toleration or itch to give Mr. Rich a biff on the boko, according to how they are made. However, here’s the good part:
An admirer, who subsequently underwent a change of heart, once called the author of the “Social Credit” theory the Einstein of economics, because it was said that only few could understand him. On reconsidering the matter, other followers of Major Douglas have proclaimed him the Darwin of modern economic thought. A diligent attempt to assimilate the “Social Credit” scheme makes it clear, however, that its propounder need not be burdened with the responsibility for being regarded as either of the two named savants. To the extent that these two have endeavoured to establish the validity of truths arising out of a relationship of things, in which what has gone on before is reflected in the present and operates as a factor in the future, they are at the antipodes to Major Douglas. The latter is anything but a relativist, or even evolutionist, in his chosen field. He is an absolutist, who believes only in conscious change, an engineer pre-occupied with natural, i.e., physical and mechanical, laws that have nothing to do with growth or development, since they are automatic, final, and inflexible.
Hence there is a little of the historical perspective in the author’s analysis. Society is invoked only for the purpose of finding a basis for freeing the individual from his enforced subordination to the group. For, above all else, Major Douglas is an individualist. He looks upon industry as a machine that needs repairing in order that it may properly perform its function, which is the production and delivery of goods and services. There is continuous improvement in the efficiency of the machine from a technical standpoint in that it increasingly dispenses with human labour and becomes more and more automatic. Unemployment, therefore is not at all a symbol of industrial break-down, but a sign of economic progress.
Owing to the fact, however, that for its moral guidance society still clings to the traditional ideas of rewards and punishments, it makes employment the sole condition for existence to a large and constantly growing section of the population and perverts industry into a means of furnishing this employment. But the rewards are withheld even from those eager to earn them. For present-day society commands that goods and services be sold at prices which are higher than those originally paid for them. The result is that a limited number of persons have gained possession of most of the purchasing power of the community, while the majority are unable to pay for their subsistence.
It is to be observed that Major Douglas does not inveigh against the accumulation and ownership of wealth as such, but only against that fact that accumulation and ownership of wealth are achieved by a deliberate restriction of industrial output. The root evil, according to him, lies in the mechanism used for the maintenance and enhancement of scarcity values, and that is the financial system which stands between demand and supply. Because of the guarantees of ownership, this system, we are told, has degenerated into one run by a powerful business ring which deals in money as a commodity, creates and controls its supply, and regulates its value at will. Through the control of credit it is able to control industry, and by controlling industry it has secured a strangle-hold on consumption.
The author contends that not only is money unsatisfactorily distributed, but that its visible form is collectively far below needs. Purchasing power issuing from production, where it represents cost, is in itself insufficient to buy back the output of production at prices which necessary include profit and overhead. It is still further diminished by the diversion of a portion of it into savings and capital investment. Hence, if producers and distributors are to continue to do business without loss, the consumers must be provided with a supply of purchasing power which is not included in the price of the goods produced. Such a supply can come from only one source, the same source which enables the bank, through the use of the check system, to lend more money than it originally received, and that is community or social credit.
This suggests the reform advocated by Major Douglas. The nation is to be incorporated at an aggregate sum equal to the total capital assets available plus the capitalised value of the population. Every individual is to be regarded as an equal shareholder in the “National Corporation,” and is to receive a monthly dividend on his capital stock. This will assure initial purchasing power to everybody. All business concerns are to be invited to register with the Government under an “assisted price” scheme. An agreed trade discount rate, representing the difference between actual production and actual consumption, is to replace the bank discount rate. Goods will continue to be sold at cost plus profit, but the purchaser will be credited with a rebate equal to the discount rate established, and this rebate will be paid out of the treasury and deducted from the buyer’s share of the “National Credit Account.”
The Douglas scheme involves two fundamental economic changes: The community deprives ownership of the right to create purchasing power in the form of credit. The community claims the product of industry as its own. But in order not to violate the appearance of ownership it buys back from industry the unsold excess of production over consumption with fiat money.
And here is the bad:
Major Douglas, therefore, may be said to urge the destruction of the power and purpose of ownership while at the same time retaining its form. The possibility of this is questioned by many competent economists. Another complicating feature is the fact that the credit of the community, consisting mostly of the accumulated results of past centuries of human effort, is already owned by private individuals. Then, again, to finance a part of the cost of industry by the mere issue of fiat money, which the payment of “social credit” really amounts to, would involve a continuous process of inflation, governed not by the increase in the demand for goods, but by the increase in the number of business transactions. “Social Credit” issued as money would become as indestructible as money and keep on adding to the pile of unbacked Government notes. Under a regime of progressive inflation, with fewer and fewer people hired to work to give effect to the enhancement of the nation’s capital assets out of which the entire consuming population is to be supported, “Social Credit” might lead to social catastrophe.
… possibility questioned… competent economist… complicating feature… mere issue of fiat money… inflation… adding to the pile… unbacked notes… progressive inflation… social catastrophe.
No, Mr. Rich!, the good part and the bad don’t honestly “belong together,” not if you did make a “diligent attempt” to understand the Social Credit scheme and thought the good part out yourself. Inflation is what Major Douglas expressly guards against.