salvation through inflation the economics of social credit phần 4 docx

70 SALVATION THROUGH INFLATION from a bank in a nation not yet under a Social Credit government. It would have meant the bankruptcy of all Scottish banks, which would have had zero borrowers at this mandated interest rate. 11 would have meant the nutwnalization of all Scotthh banking. The government would overnight have become the sole legal lender. This, of course, is the whole point of Social Credit: the nationalization of credit. Douglas knew exactly what he was recommending, but he never called it what it really was: the forced nationalization of banking and credit. This is a program to destroy private property A government places a price control - in this case, a price floor – on commer- cial interest rates, thereby bankrupting many businesses and all private banks within its borders. This is a system for destroying the capital invested in many businesses and all privately owned banks. It is the deliberate, systematic destruction of private wealth without compensation. Why is Social Credit regarded as conservative? Price Controls Price controls are established by governments in order to thwart the decisions of buyers and sellers, i.e., to thwart consumer sovereignty. Price controls make private bargaining illegal. This is why the French Revolutionary government im- posed them. When a price ceiling is set below the price that would have prevailed on the free market, sellers start withholding supplies, while too many buyers show up. Shortages are the result. Simi- larly, when a price floor is set above the price at which ex- changes would take place voluntarily, suppliers bring more goods to market than there is demand. Gluts are the result. Thus, only when prices are set by the government where the free market would have set them anyway does the economy avoid either shortages and gluts. We come to clause 5: “Simultaneously an announcement to be published that any or all business undertakings will be ac- Sociul CreditJs Blueprint ’71 cepted for registration under an assisted price scheme.”24 These prices “shall, as far as practicable, be maintained at a figure to include such average profit, where this is agreed as equitable for the type of business concerned. . . .“2 5 Average profit? Major Douglas completely misunderstood how profits arise and what their economic function is. Profits are residuals that remain after all expenses have been met. Except in government-regulated public utilities, no one guarantees profits. No one can; they are residuals. Innovative firms make large profits initially, while inefficient firms make low or no profits. Profits stem only from the ignorance among one’s competitors. “Buy low, sell high” is the rule of profits, but this rule proves impos- sible to follow unless some entrepreneur spots a bargain and buys it for resale later. He must buy it before his competitors raise its price by bidding for it in the open market. A Social Credit government is supposed to guarantee all firms an equitable rate of profit. Equitable? In whose eyes? We can guess: in the eyes of establ ished, inefficient firms that are fhcing competition from innovators. This was a scheme to re- structure Scotland’s entire economy along the lines of a gigantic public utility: mandatory average profit, mandatory price controls. What firm would voluntarily want to register to become part of such a bureaucratic regulatory nightmare? Only the nation’s less profitable firms. So, Douglas added this incentive: no wgi.s- tration, no credit from the government. Clause 7 establishes that all business credit must go through the banking system. But the private banking system will be forced to charge 25% on its loans. Registered firms will have access to government credit - “below cost”2b - while unregistered firms will have to pay 2590 per annum; minimum. “Unregistered firms will not be supplied 24. Social Credit, p. 208. 25. Ibid., pp. 208-9. 26. Credi&Power and Democracy, p. 143. 72 SALVATION THROUGH INFLATION with the necessary bill forms for treatment in this manne~ with the result that their prices will be 25 per cent, at least, higher than those of registered firms. (It is obvious that the larger the discount rate can be made, the greater will be the handicap of the non-registered firms.)”27 This is coercion, pure and simple. It is a law against those individuals with money seeking out other individuals who want to borrow. This law monopolizes credit transactions inside the nation’s banks, and then it bankrupts all private banks inside the nation. If passed and enforced, the nation’s businesses would become totally dependent on either foreign lenders or the national government and its paid agents, State-employed credit masters. Why is Social Credit regarded as conservative? Make-Work Plans Clause 8 specifies: “The hours of Government offices will be reduced to four hours per day. To meet the temporary conges- tion of work, additional staff will be employed. . . .“2 8 This will be a second shift of workers doing identical work. In other words, it mandates the training of two or more sets of bureaucrats when only one set can accomplish the same task. Why is Social Credit regarded as conservative? Cutting Wages Clause 9: “Wage rates in all o~anised industries will be reduced by 25 per cent where such reduction does not involve a loss to the wage-earner exceeding 20 percent of the sums received in the form of national dividend. . . . Any trade union violating a wage agreement to render its membership liable to suspension of national dividend, and any employers’ organisa- 27. Socwl Credit, p. 209. 28. Ibid., p. 210. Social Credit’s Blueptint 73 tion committing a similar offence, to be liable to suspension of price assistance or wage reducti.on.”2g Any person who quit work for the next five years forfeited his national dividend. He had to keep working “in whatever trade, business, or vocation he was classified in the last census. . . .“sO This scheme might be regarded by some as conservative because it is opposed to trade unions, but it is equally opposed to employers. Tues Finally, clause 10: the abolition of property taxes. Only a non-graduated (flat) income tax or a sales tax was to be im- 31 Here is the only conservative recommendation in the posed.’ proposed. credit scheme. His bock ends here. In Warning Demouacy, he announced: “Modern taxation is legalised robbery, and it is none the less robbery because it is effected through the medium of a political democracy which is made an accessory by giving it an insignificant share in the loot.”~2 But what is to distinguish ethically between this kind of robbery through taxation and Social Credit’s version, where the State, in order to gain a monopoly over credit, sets an interest rate floor that bankrupts many businesses and all private banks? I see no difference. Guaranteed Income: The Dole The heart of Social Credit’s economic reform is its creation of a stream of lifetime income t!hat does not require people to work or invest. There is no relationship between tik and reward in Sociul Credit: no extra reward to the investor for having invested wisely in a- consumer-satis~ing production process, and no 29. Zbid., pp. 210-11. 30. Ibid., p. 211. 31. Ibid., pp. 211-12. 32. Warning Democracy (2nd cd.; Lend on: Stanley Nott, 1934), p. 61. 74 SALVATION THROUGH INFLATION penalty for having invested in a process that produced some- thing that consumers did not want to buy. The rich receive no dividend payments. Everybody except the rich receives the same percentage of the national dividend just for being alive. Also, the larger this dividend payment is in relation to income from wages, the less the economic relevance of the reward for good work and the penalty for poor work. Here is the moral center of Social Credit: its rejection of sanctions. One method by which it is possible to visualise in a familiar form the embodiment of such a set of relationships is in the conception of, let us say, Great Britain, fimited. If we imagine a country to be organised in such a way that the whole of its natural born inhabitants are interested in it in their capacity as share- holders, holding the ordinary stock, which is inalienable and unsalable, and such ordinary stock carries with it a dividend which collectively will purchase the whole of its products in excess of those required for the maintenance of the “producing” population, and whose appreaation in capital value (or dividend- earning capacity) is a direct fimction of the appreciation in the real credit of the community, we have a model, though not necessarily a very detailed model, of the relationships outlined. Under such conditions every individual would be possessed of purchasing-power which would be the reflection of his position as a “tenant-for-life” of the benefits of the cultural heritage hand- ed down from generation to generation.w A Social Credit economy supposedly will progressively remove economic inequality. There will be an equalization of income based on equal shares in the nation’s capital: one @rson, one share. No one can be deprived of his claim to a share of everyone else’s productivity (except, of course, when he violates a directive from the bureaucracy: see above, clause 9, on wage rates). Everyone is a tenant for life. This is a very good thing, 33. Social Credit, p. 18.5. Social Credit’s Blueprint 75 Douglas said. “It is both pragmatically and ethically undeniable that the ownership of these intangible factors vests in the members of the living community, without distinction, as tenants-for- life.”~ Social Credit would put all but the rich on the dole. Why is Social Credit regarded as conservative? The Premises of Socialism Social Credit is socialistic in its basic philosophy. It begins with a false intellectual prem’~se, namely, “the community” (society) owns all the capital within the State’s borders. This means that society is the same us the State: the familiar assumption of all radicals and socialists. Social Credit proposes the estab- lishment of a national system of compulsory State credit. When Douglas says “community” he means individuals who are members of a national political order. They exercise economic control through State coercion, not the free market. “If the community can use the plant it is clearly entitled to it. . . .“3 5 Douglas referred to the “real owners” in society: all members of the political order. They exercise their ownership through the threat of legal violence: the creation of the State’s monopolistic credit masters. Douglas insisted that “the power to draw on the collective potentiul capacity to do work, is clearly subject to the control of its real owners through the agency of credit.”~b This is the essence of all socialism: cldlective ownership. Douglas sometimes retainecl the language of free market individualism. “It is a fact inherent in the nature of the case that ownership must vest in an individual, and any attempt to get away from this law of nature results as a practical conse- quence in the appointment of an administrator whose power increases as- the number of his appointees increases.”~’ This is 34. Ibid., p. 190. 35. Ecumnnic Democracy, p. 114. 36. Ibid., p. 115. 37. Wa~m”ng Democracy, p. 8. 76 SALVATION THROUGH INFLATION quite true: ownership under God does “vest in the individual,” But the problem for Douglas was that his system did not recon- cile his view of communal ownership - no real estate sales, no private banking, price controls, etc. - with this rare defense of individual ownership. Douglas began his economic anaIysis with a false socialistic premise: “Natural resources are common property and the means for their exploitation should also be common property. “98 What are these means? Anything bought and sold through the use of credit, including human labor. Further- more, Douglas maintained that improvements in economic productivity must be distributed to the entire community not just to the innovator and those consumers who buy from him. In his first book, Douglas announced that “all improvements in process should be made to pay a dividend to the community. “3Y This is the heart of economic error of Social Credit: it would put the nation on the dole. Entrepreneurship would die. The free market rewards consumer-satis~ing innovators with profits. Profit is a residual that remains after all costs have been paid for. Profit stems, as we have seen, fi-om the fact that some entrepreneurs recognize that, in terms of fhture demand, cer- tain producer goods are underpriced today. They buy these underpriced resources, produce consumer goods, and sell them to the highest-bidding consumers. This is the basis of economic progress: the quest for firofit forces Producen to cut costs and jind better ways of striving consumers. Remove the profit motive, and you reduce the innovation motive. Also, you remove the “hammer” that the consumer holds over producers: the right to buy from someone else, thereby producing losses for the inefficient producer Social Credit removes this hammer from the consumer and places it in the hands of the State’s credit masters. Social Credit also removes savers’ and investors’ control over business 38. Economic Democracy. p. 112. 39. Ibid., p. 103. Sociul Credit k Blueprint 77 by monopolizing the supply of’ credit into the hands of the government. It removes capitalism’s system of rewards and punishments. This is the heart, mind, and soul of Social Credit not monetary reform, not government credit, and not price controls. At its core is a philosophy which denies the legitimacy of economic sanctions: rewards and punishments, carrots and sticks.40 Social Credit forbids men to buy and sell homes. It forbids them to change their occupations without permission, at least during the transition to Social Credit. It forbids them to borrow and lend except at interest rates at least 25 times higher than the rate which people voluntarily decide is reasonable. It cen- tralizes banking and credit into the hands of a monopolistic State credit bureaucracy the credit masters. It establishes price and wage controls on businesses, as well as profit limits on business. It allows the State to issue unbacked fiat money on the basis of a statistic: a monetary estimate of total national capital, including human capital. It issues these checks or paper money to everyone except the rich on a “one share, one check” basis. It forbids the buying and selling of these shares. It forbids parents to leave these shares to their heirs (clause 3: p. 208). And this is all justified in the name of private property: “It will be obvious that such a set of relationships does not impinge on what is commonly called the rights of property . . .“4 ] This system does not reward the good investor, nor does it penalize the bad investor. No one is allowed to accumulate shares. Fiat money that is not sent to consumers as part of the National Dividend is invested in government-favored business firms by the government’s monopoly credit masters as part of the Just Price system. That is, the investors are bureaucrats who are salaried-by the government and therefore cannot personally profit from successful projects which their decisions have made 40. See Chapter 11, below. 41. Social Credit, p. 186. 78 SALVATION THROUGH INFLATION possible. There is no reward for profitable investing, for there are only average profits. The enterprises of the nation are turned into one gigantic public utility: fixed rates, fixed prices, and average profits for all. Finally, he wanted the part played by human labor, with its system of rewards and punishments, to fade away. He called for a system of State distribution of wealth in which “the distribution of cash credits to individuals shall be progressively less dependent on employment, that is to say that the dividend shall progressively displace wages and salaries as production keeps increasing per man hour.”4 2 The whoik natwn goes on& dole! If this cannot legitimately be called a welfare State, what can? Why is Social Credit regarded as conservative? Conclusion What is the Social Credit economic system really all about? As we shall see in Chapter 11, it is about man’s attempt to escape from God’s negative sanctions in both history and eterni- ty. Major Douglas, as a follower of Charles Darwin, rejected the biblical idea of heaven and hell, and he then constructed an economic system that reflected his theology. Socialism comes in many forms, but they all boil down to the same thing: no special rewards to those producers who serve consumers as consumers pay to be served, and no special penal- ties for those producers who ignore consumers’ demonstrated preferences in the market. Socialism denies what Jesus taught about the final judgment, namely, that from them to whom much is given, much is expected: “And that servant, which knew his lord’s will, and prepared not himself, neither did according to his will, shall be beaten with many stripes. But he that knew not, and did commit things worthy of stripes, shall be beaten with few stripes. For unto whomsoever much is given, of him shall be much required: and to whom men have commit- 42. Warning Democraq, pp. 34-35. Social Crediti Blueprint ’79 ted much, of him they will ask the more” (Luke 12:47-48). In this crucial sense, as in many others, Social Credit is socialistic to the core. I ask: Why would anyone who calls himself either a conservative or a Christian become an advocate of Social Credit? My answer: probably because he does not know what Major Doug- las actually wrote. I believe this is one reason why leaders in the Social Credit movement have done so little to see to it that the complete writings of Major Douglas are easily available to the average Social Credit believer. Today’s Social Credit leaders, because they aim their appeal at conservatives and Christians, have been unwilling to use Major Douglas’ proposed reform for Scotland as their model. Neither did William Aberhart in the 1930’s in Alberta. There is little that is either conservative or Christian about that proposal. Summary 1. A reformer should have a blu eprint. 2. The founders of Communism did not have one. 3. When the Social Credit League won the 1935 election in Alberta, its leader had no blueprint. 4. When he contacted Major Douglas, the latter offered only piecemeal suggestions. 5. The government of Alberta never launched a Social Credh reform. 6. Social Credit rests on the idea of community capital. 7. This community capital is a statistical concepti the total value of all goods, private and public. 8. This statistic is then used to authorize the printing of money. 9. Social Credit proposes the creation of governmental, monopolistic credit masters. 10. These monopolistic credit masters issue credit to highly regulated private businesses oust Price). 11. The government also sends monthly checks to every citizen except rich ones (National Dividend). [...]... by the issue of money The Target of His Criticism The failure of capitalism, Douglas said, is the failure of financial credit to match the output of Real Credit The banks create financial credit The banks supposedly extend credit only to producers, he said - conveniently overlooking the existence of modern consumer credit The “result of these creations of credit granted to producers only, instead of. .. becomes the central motif of the book .“~l This was also the central motif of everything Major Douglas wrote It was the theme of the Technocracy movement of the 1930’s The reader should be alert to the problem facing those defenders of Social Credit who claim that the system is essentially conservative: the most notorious American socialist author of the 1900-1929 period, Thorstein Veblen, advocated the. .. as it often is, absolutely detrimental to society in general, and the worker in particular.”4s In 1920, there was a major recession in the United States and England The vast expansion of fiat money by the Federal 43 Social Credit, pp 87-88 44 Credit- Power and Democracy, p 11 45 Ibid., p 11 102 SALVATION THROUGH INFLATION Reserve System (America’s newly created central bank: 1913) and the Bank of England... sense the State, as the custodian of the Real Credit of the community, may be said to represent the interests of Producer and Consumer equally, since both are equally necessary to the creation of Real Credit Since, however, Producers and Consumers between them make up the whole community, we may conclude that Real Credit is social or communal in origin; that it belongs neither to the producer nor to the. .. insisted, “is to produce a rise of prices which nullifies the addi- 100 SALVATION THROUGH INFLATION tional purchasing-power thus created. 4] Therefore, he concluded, The business of a modern and eflective financial system h to issw credit to the consumer up to the limit of the fn-oductive capacity of the produce~ so that either the consumers’ real dmnd is satiated, or the producers’ capacity is exhausted,... the value of the collateral from the monetary effects of the credit on the collateral In this respect, Social Credit is the representative example of all other fiat money credit reforms that attempt to issue sufficient currency to match the increase in output The onl y way to estimate the increase in output in a money-based modern economy is by way of a system of statistical estimations of money prices... 26 These shares cannot be sold or left to one’s heirs 27 Social Credit makes the assumption of all socialist systems: “community” equals “State.” 28 Social Credit assumes that all natural resources are common property 29 By limiting profits, Social Credit limits the consumers’ control over producers 30 By monopolizing credit, Social Credit removes savers’ and investors’ control over the use of credit. .. money the issue of money by the State will raise the monetary value of Real Credit This will make mandatory another issue of Just Price money and National Dividend money, to keep pace with rising Real Credit value, which will raise the monetary value of Real Credit This is the fate of every monetary reform that relies on the issuing of money by the State No fiat money reform proposal can separate the. .. practical standpoint, this failure of Douglas to specifj exactly how Real Credit can be calculated scientifically is the Achilles heel of Social Credit If the State’s credit masters cannot identify exactly how much Real Credit there is in society, and then match exactly the issue of investment money and the national dividend so that the total money supply equals Real Credit, the proposed monetary reform... of the Green Shirts, John Gordon Hargrave, had adopted Social Credit as early as 19 24, and had made it the official ideology for an earlier organization of his, the “Kibbo Kift, the Woodcraft Kindred,” a breakaway group from the Boy Scouts Hargrave was anti-democratic and anti-Parliament He created the Green Shirts by taking over another populist group that had adopted Social Credit, the Legion of the . the nutwnalization of all Scotthh banking. The government would overnight have become the sole legal lender. This, of course, is the whole point of Social Credit: the nationalization of credit. . tenants-for- life.”~ Social Credit would put all but the rich on the dole. Why is Social Credit regarded as conservative? The Premises of Socialism Social Credit is socialistic in its basic. Nott, 19 34) , p. 11. 84 SALVATION THROUGH INFLATION the name of some god. This god, through the reforme~ an- nounces some system of ethical cause and effect. Show me the source of a societyh

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