BY C.H. DOUGLAS
THIRD EDITION. STANLEY NOTT 69 Grafton Street Fitzroy Square LONDON
PREFACE: IN reprinting a series of addresses and articles which have been delivered or have appeared between the years 1920-31, it is hoped that two objectives may be, to some extent, attained. The first of these is to put in colloquial form much of the matter of other books which it has seemed necessary to inflict upon a long-suffering public. The second is to suggest that as the test of science is prophecy, the correspondence between the course of events as they have developed, and are developing, and the arguments embodied in these addresses, affords solid ground for optimism. Difficult as the present times may be, and worse as they may become, we know that the monetary system is the main cause of our discontents, and we are for that reason so much the nearer to a cure.
C. H. DOUGLAS, 8 Fig Tree Court, Temple, E.C.4.
 Notes for an address delivered to the Anthroposophical Society.
IT might appear at first sight that there is little or nothing in common between what is in one sense a branch of economics and a society such as yours. But such an opinion would, I think, be mistaken. Money and the money system now occupy the place of religion.
It is not my intention to inflict upon you to any considerable extent any views upon the existing financial system, or the modifications which, in my opinion, are urgently required in it, as, apart from other reasons, there is a fairly extensive literature on the subject, and it is one which lends itself better, in the first place, to assimilation through the printed word than through the medium of an address. My object, rather, is to indicate the reaction which the presentation of those ideas has evoked in various cases, and to consider, and to ask you to consider, the apparent reasons which have hindered the more rapid translation of those ideas into the stage of practical action.
In order, however, to do this it is necessary, I think, to give you some short epitome of the subject in order that you may judge for yourselves what may be the motives and psychology behind the reactions to which I have referred. Very briefly, then, it is our contention that the industrial, international, and, to a large extent, the social difficulties with which the world is plagued at the present time do not arise either, on the one hand, from anything in the nature of physical scarcity, that is to say, lack of either raw or finished materials, goods, or services, nor, on the other hand, are they the result of the administrative relations between employers and employed, or any lack of what is commonly called goodwill in any of the parties concerned in the actual processes of industry.
Similarly, in a wider field, we say that the danger of international conflict, which is insistent and growing, also does not arise from any desire on the part of the populations of the world to fight each other. And the constant and somewhat wearisome demand for goodwill and understanding between nations belongs to the same order of sentimentality as those somewhat similar exhortations addressed to those threatened with industrial strife. We point, on the one hand, to the half-employed factories, whose one constant preoccupation is to obtain" orders"; to the farms going out of cultivation because they do not "pay"; to the shops and stores full of goods which in many cases they cannot sell, tothe millions of unemployed and half-employed working people, asking to be allowed to make more goods, and, on the other hand, to the millions of people, frequently the same, whose one idea of the better life is that they should be able to obtain more goods, food, clothes, housing and services, which as producers they are not allowed to create. We say that it should not require intelligence above the ordinary to appreciate that there must be something which stands between the mechanism of production, with its farms, factories, tools, materials and men, on the one hand, and these millions of people whose only desire is to obtain the products which the productive organisation could give them if it were allowed. Examining the organisation by which goods pass from the producer to the consumer, we find that it is the money system, and we naturally suspect the money system as being at fault. In other words, it is not goods which are scarce, it is money, or, more accurately, purchasing power, which is scarce.
Now, if it were in the nature of things that in some way the quantity of money in the world was fixed by the laws of nature, our case would be desperate, but we find by technical investigation that it is not so fixed, that the amount of money in the world is almost entirely dependent upon the action of those institutions which we call banks, that, in fact, the banking system can, and does, control the prosperity of every country in the world, and that the banking system is a man-made system controlled by men and can be altered by men. The method by which this position can be rectified, and with it, at any rate in our opinion, a very large number of the troubles from which humanity at the present time suffers, is technical and as I previously said, I do not propose to inflict it upon you. I am going to ask you tonight to accept the statement that I have just made as correct, and as being proved both mathematically and by the inductive method of comparative statistics. Taking this for granted, then, you would naturally assume that the great majority of people would regard such a matter as being not only of the greatest possible interest, but as the nature of a very happy discovery. It is quite possible that my own method of communicating information may be to some extent at fault, although I do not think this is the whole explanation, because it is a common experience. But, speaking generally, the information to which I have referred is not received with the enthusiasm which at first sight you would expect.
Now, one of the first conceptions which is driven home to a consistent critic of the money system is the curious and widely spread desire which seems to exist to attribute our troubles to anything but the money system. From one quarter you will be told that it is the incorrigible laziness of what is called "labour" which is at fault. On the other hand, the rapacious employer is the difficulty, or lack of education, or too much education, or obsolete tools, or too many tools, or the climate, or spots on the sun. On the whole, however, there is a strong tendency to suggest that it is the depravity of human nature that is at fault, and to epitomise the matter ... "If we all went to church our incomes would be larger." In a smaller number of cases, but still quite numerous, one's criticism of the existing money system, and the suggestion that it could be improved, provokes the most furious resentment, akin to the resentment roused by religious heresy in the Middle Ages.
I have never been able to explain to my own satisfaction this resentment, although no doubt it has some connection with the prevalent idea that the money system is so simple, obvious, and natural, that it is an insult to one's intelligence to assume that anything very serious could be the matter with it, which would not be patent to the man in the street. While the broad functions of the money system are simple enough, the mechanism of it is, of course, very far from simple, and so far from being " natural," it is highly artificial. Since the institution of a modified financial system of a suitable nature would rapidly increase the (what is called) material wealth of everyone without detracting from the wealth of anyone, it would be imagined that when once agreement had been obtained as to the feasibility of such a readjustment opposition would cease. But this is far from being the case. The more important the individual with whom one is dealing in these matters, and the more able such a person may be to assist in the end desired, the more likely one is to find a very definite dissent, not as to the competency of the mechanism, but as to the desirability of the end. It is a curious feature of the average human being that he deems himself singular in the ability to make a right and proper use of wealth. "It is a good and desirable thing for me to have ten thousand pounds a year. I am a sober and right-minded person, but it would be absolutely disastrous for my neighbour over the way to have a comfortable income. He would not know what to do with it, and it would only hasten his career of drunkenness and depravity."
Shortly after the war I had several conversations with the late Lord Leverhulme on these matters, and he was quite clear that only the fear of poverty kept the vast majority of people at work, and he took it for granted that they ought to be kept at work. Two or three sentences after disposing of the question in the foregoing manner, he explained that he worked much harder than any of his employees. That, of course, was because he was different.
Analogous to this, and no doubt closely connected with it, is the rooted objection existing in the minds of most people that anyone but themselves should get something for nothing. I have heard innumerable cases of furious resentment against the grant of what is so improperly called "the dole" (which is, of course a form of contributory unemployment insurance to which the workman himself contributes) and these denunciations, proceeding from normally kind-hearted, persons of both sexes, are usualIy accompanied by remarks on the demoralising effect of money received without working. If you enquire, as mildly as possible, of such people, if by chance they receive any didends which enable them to exist without working, you will, of course, be very unpopular, and you will be told that that is different, and if you suggest that a generalisation of the dividend system if it could be obtained (and it can) would be desirable, you will be called "Socialistic," a Parliamentary epithet for dangerous. An extreme variant of the same idea is that there is some virtue in poverty.
Speaking to Labour and Socialist audiences I have been struck with the hypnotism exercised by such phrases as " Public Ownership." It never seems to penetrate the minds of the large numbers of people who clamour for Public Ownership of this, that, or the other, that they already have public ownership of such things as the Army, Navy, Post Office and many other services. I should like to see one of the public owners step upon a battleship of the Royal Navy with a view to removing his bit of property or making some use of it. The real fact is that the word "ownership" is quite meaningless when it is applied to the relations between any undertaking and a large number of what the law calls "tenants-in-common." It is quite impossible for a hundred people to own a piece of land, although there is a legal fiction to the effect that they can. Either they have to let it and divide the rents, or each one of them can walk about on it, in which case there is no rent and nothing to divide. Even a Public Park is subject to regulations which the individuals using it are generally powerless to alter as individuals.
It is a fact inherent in the nature of the case that ownership must vest in an individual, and :my attempt to get away from this law of nature results as a practical consequence in the appointment of an administrator whose power increases as the number of his appointers increases. This is, of course, the idea which is contained in the continuous extension of the voting franchise, and, a very Machiavellian policy it is, resulting as it does in the intelligent voter being completely disfranchised.
Another very curious and almost universal form of resistance which is met with by the credit reformers is the general determination to believe that any proposal which offers a radical amelioration in the economic situation must be a fairy tale. Inspired by the bankers and orthodox economists, political spokesmen have been at one in asserting that there is no short cut out of our difficulties. That is what they are paid to say, and it is perhaps not surprising. But what is surprising is the unanimity with which most people accept the statement. We all know Mark Twain's story of the man who was imprisoned for twenty years and then walked out having just discovered that the door had never been locked, and some of us think it is funny. Personally I do not think it funny. I consider it a somewhat boring statement of fact. The world at large is in prison, and shows many symptoms of dying in prison, and there is nothing whatever to prevent it from walking out.
No doubt some of you may remember a book by Mr. Tawney, a well-known Socialist, and Fellow of an Oxford College, called The Sickness of an Acquisitive Society. I must confess that I never read the book itself, although I read several reviews of it, but I never saw the title without wanting to write another book under some title such as "The sickness of people who write about the sickness of an Acquisitive Society." It has always been quite incomprehensible to me why people should be expected, when they don't want to, to work unless they get something for working. Please do not misunderstand me. There is a very great satisfaction to be derived from creative work, quite irrespective of the result. But that is not the primary objective of work, used in the ordinary sense of the word. That primary objective is to obtain something which had not existed before the work was done, and the fundamental defect of the existing financial system is that it does not give people enough return for the work that they do, or conversely, they do not get in confident security a standard of life such as they have a right to expect without devoting far too much time and energy to its acquisition. It is my own personal opinion that the undue acquisitiveness of a small section of society very largely arises out of fear, and that by far the best way to reduce it to its normal proportion would be to remove the fear and insecurity in the existing state of affairs by making plain what is undoubtedly the truth that the modern production system can meet every possible need of society without any stress or strain, if only it is freed from the fetters imposed upon it by the existing financial system.
I do not claim in the foregoing remarks to have more than sketched the outlines of the curious perversity which seems to exist in regard to our social troubles, but ,I hope that I have given you sufficient indicitation that the nature of that "change of heart," of which we hear so much, is not so simple as many people would have us believe. Those very persons who are loudest in their demand for a human spirit in industry are very often the most determined that the results which they pretend to desire shall not be attained by methods which would remove the necessity for the philanthropist. There is a great deal of truth in the saying that "People will do anything for the poor, except make them rich." It is my own opinion that until it is clearly recognised that the only sane objective of an industrial and productive system is to deliver goods as, when, and where desired with the minimum of trouble to anyone, and that the moment you begin to mix this clear-cut objective up with moral considerations, so called, including a strong dash of Mosaic law, you produce, maintain, and increase friction, inefficiency, and mental and physical distress, and that if you persist, as we are persisting, in this confusion of objective, you will eventually arrive at a situation involving the serious elements of breakdown.
 Extracts from a paper read at the Institution of Mechanical Engineers on April 22nd, 1927.
THE subject cannot be covered in the space of the time available this evening with any approach to thoroughness, and I should like therefore, to begin by an apology and a warning. The apology refers to the necessarily wide, and therefore somewhat thin, treatment of the subject, and the warning is in regard to the danger of detaching any one aspect of the subject from the others. I propose to deal briefly with three points, each of which may serve as points of departure for further discussion.
1. The application of the word "engineering" to this subject.
2. The general nature of money.
3. An outline of the nature of prices.
In regard to the first, the charter of the Institute of Civil Engineers defines engineering as "the application of the forces of nature to the uses of man." It is quite probable that what are commonly known as physical forces were in the mind of Telford when he framed this admirable definition, but I suppose that, on consideration, there is no one here tonight who would not recognise that such a restriction is unwarranted. It is not sensible to detach an engineering project from the purpose to be attained by it. The force of gravity is not half such a serious obstacle to the development of, let us say, the Severn Barrage scheme, as a lack of finance, and a strike on the railway system of England is much more effective in paralysing transportation than an inferior valve gear. We arc constantly being told of the necessity of goodwill and tact in industry. While these are obviously desirable, it seems to me that arrangements which require so much tact and goodwill are suspect, just as would be a machine which required too much oil, and that it is our business to look into those arrangements, even if it were only to enable us to conform to them intelligently.
A curious point in connection with this matter is that the truth of what I have just been saying is fully recognised within the limitations imposed by the factory walls. No one would contend that it is outside the province of the Works Manager to make such arrangements as would tend to keep his men at work, but it is well enough understood both by the Works Manager and by the Trades Union agitator that the one difficulty which never remains composed for any length of time is the wages difficulty. On the other hand, during the past few years, we have witnessed the reconstruction of many of the largest engineering concerns in this country - a reconstruction the necessity for which has almost uniformly been attributed to bad management, but which can in fact simply be attributed to the inability to sell at prices which the market can afford to pay. The situation was the direct result of the policy of the Bank of England acting within the existing financial system, and management had very little to do with it.
These reasons alone would be sufficient to justify the inclusion of the financial system as an integral part of the production and distribution system. There are, however, many more reasons. The influence of finance upon design is predominant. The horse-power tax on motor cars has a great deal to do with the position, or lack of position,of the British car in the world's markets. Those familiar with design during the war, which is realistic, will remember how questions of performance, ease of production and so forth, outweighed questions of money. Peace is not realistic at the present time, and financial questions are apt to outweigh all others. It is often said that we British allow other nations to develop everything that we invent. The reason is simple, and is financial.
II. The General Nature of Money
The best definition of money with which I am acquainted is that of Professor Walker, which is that "money is any medium which has reached such a degree of acceptablility that, no matter what it is made of, and no matter why people want it, no one will refuse it in exchange for his product." You will see that this definition rules out any physical properties in respect of money. The properties that are left, therefore, are not physical. They can be summed up in the word "credit," which is, of course, derived from "credere," to believe. The essential quality of money, therefore, is that a man shall beleive that he can get what he wants by the aid of it. This is absolutely the only quality that it is required to possess, although, of course, certain minor attributes, such as convenience, have a bearing on the decision as to what particular description of money, if it fulfils the major requirements, is likely to come into the most general use. The cheque, no doubt, owes its popularity to this latter attribute.
Looked at from this point of view, money is simply a ticket. A railway ticket is, in the truest sense, a limited form of money and differs only from any other sort of money in that the owner of it only beleives, and is only justified in believing, that he will receieve in return fir it a particular service, i.e., transportation.
Now, if the whole of the population of Great Britain were to besiege the gates of the great London termini, under the urge of some necessity, such as, let us say, the invasion of London, to remove themselves to Scotland, and were to be told that there were plenty of trains, plenty of tractive power, and that, in fact, the whole of the railway system was physically capable of meeting their necessity, but that unfortunately only 15 per cent. of the tickets necessary to entitle them to seats were available and that the Traffic Department, as a matter of policy, did not propose to print any more, it would probably be agreed that the Traffic Department would hear something to its disadvantage.
The extraordinary feature of the present day is that, when people arc told that the workshops of this country are clamouring for orders, that the shops and department stores are full of goods, that a large proportion of the population is, at one and the same time, asking to be allowed to make more goods and services, while complaining that it cannot get more than a bare minimum of those goods and services that are available, because it has not got the tickets to hand over in exchange for them, the situation is regarded as being in the nature of an act of God, and impressive gentlemen deliver homilies to us on the inexorable nature of economic law. In other words, the statement that a thing cannot be done because there is no money with which to do it is accepted as a good and final reply to a demand for action.
Some examination into the mechanism, therefore, by which these tickets that we refer to as money are issued, and the conditions governing the control of their issue, is an important part of this subject. In the first place, we have anumber of tickets described as "legal tender," which are comprised under the description of Bank of England notes, Treasury notes, gold silver and copper coin. In round numbers, in this country these amount to about 380 millions, and bear about the same relation to the total volume of thickets as do teetotallers in America to prohibition. In figures, it is about 10 per cent. The other 90 per cent of the ticket system iwht which we are dealing is represented by bankers' credit, that is to say, by payment by cheque. Now, every effort is made to convey the impression that a cheque upon a bank is an order to the bank to pay out money hwich was paid in, either by the drawer or by some else. This idea is, of course, foseterd by the fact that, so far as personal banking accounts are concerned (as distinct from commercial banking accounts) it is roughly a true statement, but it must be remembered that very few personal banking accounts bear any considerable ratio to the so-called wealth of the persons to whom they refer. Very few people keep large personal bank balances. Nevertheless, no transaction as between a buyer and a seller can take place without the use of money in some form or another. To see where this money comes from, it is necessary to examine the technique of Bank Loans.
The railway ticket, described above as a limited form of money, has, however, in addition to being only a demand for transportation, a rigid relation to a certainkind of transportation: that is to say, one first-class ticket will obtain one first-class seat, other things being equal, but £1 sterling in 1914 would obtain probably more than twice as much of the average articles that you use as the same £1 sterling in 1927. To begin with, you buy in 1927 to the extent of at least 20 per cent of your income something that you do not want, that is to say, taxes. It has, therefore, to be recognised as fundamental that the amount of money available at any one time only derives importance in relation to the price of goods. In other words, a money system derives its features not either from money alone or prices alone, but from the ratio between the two of them. If this ratio of money to goods is such that there is more money than goods, goods will be more important and money will be unimportant. if the ratio is such that there are always more goods than money, money will be important and goods will be unimportant. The plain issue before the world at the present time is which is more important, money or goods? The facts of the situation are that there are clearly more goods than there is money with which to buy. The reason for this situation is complex, but one of the fundamentals, without attention to which the situation cannot be rectified, is as follows. When a manufacturing concern pays out wages and salaries, its costing department enters this payment in the costs of production. Let us imagine that these wages and salaries are always paid in Treasury Notes. These Treasury Notes go back to their source after a very short time, through the agnecy of prices paid to retails distributors, and are paid out again. Each time they are paid out, they pass through the cost accounts and, consequently, each time appear as a component of prices. There is nothing in this circulation of the Treasury Notes which increases the amount of money in the world, but each cycle represents the creation of a batch of prices . To put the matter shortly, when you make goods you make prices but you do not make money. As a result of this divergence, total prices produced over a given time are greatly in excess of total money distributed over the same period of time. In concequence, the ratio of money to prices is considerably less than unity, and there is a constant struggle on the part of the industrial system to obtain purchasing power, either from export markets (which struggle is the prime incentive to war) or by the manufacture of so-called capital goods, the money distributed in respect of which temporarily assists in the payment fro consumable goods.
The problem set for, I believe, the engineer
to solve, therefore, may be stated thus. He has to obtain a clear
statement as to what the production
Having attained an objective, he ought to be
in a position to state the conditions under which he can achieve
it. These conditions, on the one
 Address to the London Socialist Forum at Caxton Hall, October 22nd, 1930.
"SOCIALISM" is a word which is commonly used in these days, and, like many other things, is more freely talked about than it is understood, even by those who call themselves Socialists. Before proceeding to a slight sketch sketch of my own views on the general situation and such suggestions as I can make for its improvement, I think it would be well worth your attention to consider the various meanings that can be attached to the word "Socialism."
I suppose that its literal meamng is "that which appertains to society." it is quite obvious that this meaning is so wide that it embraces every human activity. But the professed Socialist would probably not accept so wide a definition and would, at any rate until a few years ago, probably have defined "Socialism" as a system of society in which the State was supreme and all individuals were equal but subject to a common will expressed by the State. Without in any way presummg to criticise the many high-minded leaders which the Socialist movement has evolved, I think it will be admitted first of all that in using the word "society" they had a strong tendency to regard the human indiyidual as being for all ordinary purposes that fiction of imagination callede the "economic man," and, secondly, that in the nature of things, being unfamiliar ,with the technique with which the economic world is, as a matter of fact, carried on, they made the grave and even fatal error of confusing econpomic policy with economic administration, and they assumed, therefore, that some process of democratisation of administration would result in removing the many inequalities and injustices, which they very properly resented.
Now, curiously enough, the mechanism which was logically enough evolved from these incorrect premises was exactly the mechanism most calculated to produce an accentuation of the discontents it was intended to remove, and was, in fact, closely allied to the form of mechanism which. the alleged arch-enemy of Socialism, Capitalism, is evolvmg, or has, in fact, evolved, for the express purpose of still further fettering the individual in the toils of the economic system. With the exception of the fact that a higher standard of technical ability has been applied to their organisation, the large Government Departments, such as the Post Office, the grouped railway companies, or the huge industrial organisations such as, for instance, Imperial Chemical Industries, are indistinguishable from the ideals of State Socialism, at any rate, in its more finished stage, and it is significant that Fascism in Italy, which was the capitalists' reply to Communism, is practically indistinguishable to the unprejudiced observer from the so-called Bolshevism of Russia, which is at present our only avowedly socialistic commonwealth.
It is, therefore, I think, important to endeavour to isolate the nature of the genuine urge at the root of the Socialist movement, in order to find, if possible, a mechanism which is compatible with its attainment.
This is not by any means so easy a matter as it might seem, partly because men and women have an unfortunate habit of clamouring for things by names that they do not understand. We have, of course, the simplest possible instance of this at the present time when millions of unfortunate people are asking for employment. Anyone who will devote a minute's serious reflection to the matter will realise that the greater proportion of these unemployed millions could employ their own time to their own satisfaction if they were supplied with the means, or to put it shortly, the money with which to buy food, clothes, housing, and the available luxuries of civilisation. People clamour for equality, although not so much as they used to do, whereas the very last thing the average individual really desires is equality. He is convinced, and in my opinion, properly convinced, that he is quite different to everyone else, and the modern demand to realise one's real personality is far nearer the truth than the clamour for equality of the beginning of the last century.
Many people complain bitterly of the injustice of the world. I am afraid that the last dispensation which we should any of us ask for, if we really understood what it meant, would be justice, and for my own part I am inclined to think that a large proportion of the misery of the world is due to the arrogant claim of society to dispense something which it calls "justice." One of the most illuminating lines ever penned, by that extraordinary genius, the poet Blake, was that "one law for the lion and the lamb is oppression."
Now if you have followed me so far you will, I think, on consideration, agree with me that the last thing that anyone really desires is the imposition upon us either by the State, big business, religion, or any other of the agencies which have been active in the matter, of a rigid, uniform ideal. The only thing that we agree in wanting is that we want what we want, when we want it, and not because our nextdoor neighbour wants it at the same or some other time. So that, so far from the realisation of some machine-made Utopia which would embrace us all, I think what we all as individuals desire is a state of affairs which would enable us to use the benefits conferred upon us by science and education for the furtherance of our own individual ideals and desires, which must be just as different, in the nature of things, as our personalities are different, and must become increasmgly different as our personalities become further individualised.
The Social Credit proposals at any rate start from this point of view, and in one sense they may be considered as a complete inversion of either State Socialism, Fascism, or Sovietism. So far from desiring to impose some abstract ideal called the "common will" upon the individual, their proposals have for their objective the employment of the common heritage (a phrase which I will define shortly) for the furtherance of the individual objective, whatever that may be, and without defining it.
In order to make this a little clearer I shall be obliged to devote a few moments to a consideration first of the nature of property and secondly of the nature of what is called "Credit."
In what sense can a man own a factory? It is quite obvious that he cannot himself either operate it, eat it, live in it, or dress in it in any comprehensive sense. Under existing circu:nstances he can administer it, but administration is clearly not the monopoly of ownership, since probably more than 99 per cent. of the factories, farms, and other property in the world are administered by persons who do not own them. Not to take up too much of your time, the ownership of a factory may be said to consist in taking the profits, if any, of it, in the power of appointment of its administration, and in the power of divesting oneself of the ownership by sale or otherwise .. Now a little consideration will, I am sure, convince you that the majority of people only desire ownership of any such thing as a factory for one reason, and that is the profits which may be obtained from it. These profits take the form of money, and money is the financial embodiment of something which we call "Credit." What is this "Credit" about which we hear so much?
In the first place it is necessary carefully to distinguish between real credit and financial credit. Real credit is a well-founded, that is to say, correct belief or estimate of the capacity of a person or community to materialise its desires. It is, as one might say, a blue-print of a state of affairs which the community can achieve, but has not yet achieved. It is the same thing as that sort of faith which was defined as "the substance of things hoped for, the evidence of things not seen," and fundamentally it takes its rise out of that marvellous faculty of human nature which consists of first imagining a state of affairs and then successfully reproducing the thing imagined in the everyday world. That is real credit. Note that it is not belief only, it is well-founded belief.
Financial credit is a sort of reflection of this real credit in figures, and might be defined as a correct estimate of a person's or a community's ability to deliver money. Money is an effective demand for goods and services, and most of us believe, and probably correctly believe, that we cannot further our desires without command over a certain amount of money. The Social Credit proposals therefore may be stated somewhat in this manner. They are not concerned with either the nature or the result of an individual's ideals; their objective is to help man to achieve them. As a matter of observation it is clear that on the material plane the possession of money is, as the world is constituted, an essential to the realisation of almost any objective. The problem therefore is to provide the greatest number of people with the greatest amount of money that they can use effectively, bearing in mind the limitations inherent in the nature of ownership and at the same time to make sure that in doing so we do not destroy the properties which at present seem to inhere in money.
Before passing on to a short outline of the mechanism of these proposals I should like to touch upon some of the objections which are raised against them. One of the first and most widespread objections met with is fundamental, and probably the most powerful obstacle to their realisation, and might be perhaps called the "Puritan Ideal." That "it is not good for people to have what they want, that human nature is essentially bad, and that life should consist to a very large extent in running to see what Johnnie is doing and telling him he mustn't." It is quite evident that if this position be taken up no progress along these lines is' possible, and it is obviously not a matter for argument but is purely one of belief. I would however, repeat that in a more or less veiled form, it is very prevalent and will have to be faced in the open sooner or later. A second objection, perhaps worthy of a little more respect, is that human nature will not be permanently satisfied by what is called "material progress." This is quite probably true, but as an objection to Social Credit it is, I think, irrelevant. If, as is quite probable, the result of an initial extravagance is a reversion to a very much simpler life than we have at the present time, so much the better. Such a state of afairs would be far more stable if it came as a result of experience than as a the result of an imposed ideal. A third objection, perhaps almost universal, is that Social Credit, by reieving everyone of the fear of poverty, would remove the chief stimulas to what is called "work," iwht the result that civilisation would fall to pieces.
Now superficially this is an important objection, and not lightly to be disregarded. If the existing state of affairs provided evidence that the fear of poverty was a successful stimulus, was a successful motive power for society, it might perhaps - I do not say that it would - be justified on pragmatic grounds; but it must be quite obvious to anyone who is familiar with the facts of industry that the fear of poverty is the worst possible incentive to successful industry. I have no hesitation whatever in saying that the most important work, the hardest work, and. the most work per man in the world is done by men who have no fear whatever of poverty and no human likelihood of ever being poor. Conversely, these sections of society which are constantly faced with the fear of poverty tend automatically to become incapable of anything but the lowest grade of work, and ultimately do even this work less efficiently than better-paid and socially better-placed individuals. Whatever function it may have fulfilled in the past, it is my personal opinion that fear of any kind is the most destructIve and generally undesirable motive which can be imported into any human action, and, that no greater service can be made to mankind than its elimination. There is, however, an addItional factor to be considered in regard to the objection that the work of the world would not be done except under the stimulus of poverty and that is that we are rapidly passing from the human labour stage of progress into the machinery stage of progress, and that if the enormous amount of unnecessary work which is stimulated by the existing financial system were eliminated, notably, of course, the completely non-productive labour of what is called "business" as opposed to production and distnbution, the work of the world could be done with a surprisingly smaIl percentage of the labour available, a state of affairs which might be visualised perhaps by imagining the human being to pass four years in a school, three years in a university, and three or four years in an industrial organisation, passing, perhaps, at the age of twenty-four or twenty-five into what we might call the "reserve."
Having the preceding considerations in mind, we are in a better position to examine the reasons why the economic and financial system does not at present fulfil them and what changes would be necessary in order that it should do so.
Let us first be clear that the defect does not lie in any failure of the production system. The rate of production of a given article per human unit of labour has enormously increased and is continually increasing over that which was competent to give a reasonable standard of living four or five hundred years ago. For instance, in 1928 the rate of production of pig iron was three times as great per man employed as it was in 1914. A workman using automatic machines can make 4,000 glass bottles as quickly as he could have made 100 by hand twenty-five years ago. Taking 1914 as 100, in 1919 the index of factory output was 147 and the index of factory employment was 129. By 1927 output had risen to 170 and employment had sunk to 115. In 1928 American farmers were using 45,000 harvesting machines and with them had displaced 130,000 farm hands. Motor car output per man had increased during the same period by 210 per cent.
Similarly it would be absurd to contend that human necessities, much less human desires, are fully met. The existence of a poverty problem face to face with an unemployment problem and side by side with a marvellously effective production system ought to direct our attention unfailingly to the fact that it something that stands in between consumption and production which is the cause of our difficulties. There is only one thing which stands between production and the desire to consume and that is the ability to pay, in other words, money, and thus it is to the money system we must look for the source of our troubles
Now the simplest method of obtaining a physical conception of the situation is to regard the money system and the price system as a double-entry system of book-keeping. Every article which is produced has a price attached to it, and somewhere on the opposite side of the account there should be a sum of money capable of moving each and every article out of the production system into the consuming system. Since money is the mechamsm by which the consumer gives orders; no money, no order; no order, no delivery; and ultimately, no delivery, no production. Having this conception firmly fixed in your minds, you will see at once that if the total amount of money available on one side of the account is less than the total amount of prices on the other side of the account there must be something remaining unsold always. Now the reasons why the amount of money on the consumers' side of the ledger is always less than the collective amount of prices of the goods which that money ought to buy, are complex, but the two more important ones, which in themselves are quite sufficient to account for the difficulty are (1) the double circuit of money, which has been dealt with by me under what is called the "A plus B theorem," and (2) the reinvestment for production, of money which is obtained by the production of goods for consumption.
These two, while not identical, are to some
extent interlocked, and are not very suitable for explanation verbally,
so I have arranged to
Space will not permit me, nor in my opinion is it tactically desirable, to go into great detail in regard to the mechanism by which the situation can be put right, but the main principles arise directly out of consideration of the disease and are quite simple. There are three: (1) That the cash credits of the population of any country shall at any one moment be equal to the collective cash prices for consumable goods for sale in that country (irrespective of the cost price of such goods), and such cash credits shall be cancelled or depreciated only on the purchase or depreciation of goods for consumption. (2) That the credits required to finance production shall be supplied not from savings but from new credits relative to production, and shall be recalled only in the ration of general depreciation to general appreciation. (3) That the distribution of cash credits to individuals shall be progessively less dependent on employment, that is to say that the dividend shall progressively displace wages and salaries as production keeps increasing per man hour.
The relation of the first two of these considerations will be clear to you upon a careful consideration of what I have previously said. I should like, however, to add a few words in regard to the third of these, and I might premise my remarks by pointing out how completely it inverts the normal Socialist idea that there is somethmg wicked about a dividend and something laudable about a wage or salary.
From one point of view a perfect financial system
would simply be a mirrored reflection of every change in physical
facts of the economic
 Address at Swanwick in 1924. Reprinted from The New Age, November 20th, 1924.
The financial system is to the works or factory system of the world, considered as one economic unit, just as the planning department of amodern factory is of that factory. No discussion of the financial system which does not recognise:
(a) That a works system must have a definite
In regard to (a) the policy of the world economic system amounts to a philosophy of life. There are really only three alternative policies in respect to a world economic organisation: The first is that the end in itself for which man exists. The second is that while not an end in itself, it is the most powerful means of constraining the individual to do things he does not want to do; e.g., it is system of government. This implies a fixed ideal of what the world ought to be. And the third is that the economic activity is simply a functional activity of men and women in the world; that the end of man, while unknown, is something towards which most rapid progress is made by the free expansion of individuality, and that, therefore, economic organisation is most efficient when it most easily and rapidly supplies economic wants without encroaching on other functional activities.
You cannot spend too much time in making these issues clear to your minds, because until htye are clear you are not in a position to offer an opinion on anyeconomic proposal whatever. In regard to (b) certain factors require to be taken into consideration.
1. That money has no reality in itself. That in itself it is either gold, silver, copper, paper, cowrie shells, or broken tea-cups. The thing which makes it money, no matter of what it is made, is purely psychological, and consequently there is no limit to the amount of money except a psychological limit.
2. That economic production is simply a conversion
of one form of energy into another, and is primarily a matter of
energy. It seems highly probable that both energy and production
are only limited by our knowledge of how to apply them.
3. That in the present world unrest two entirely separate factors are confused. The cry for the democratisation of industry obtains at least 90 per cent of its force from the desire for the democratisation of the proceeds of industry, which is, of course, a totally different thing. This confusion is assisted by the objective fact that the chief controllers of industry get rich out of their control.
I do not, myself, believe in the democratic control of industry any more than I should believe in the democratic control of a cricket team, while actually playing, and I believe that the idea that the average individual demands a share in the administative control of industry is a pure myth.
The present world financial system is a government
based on the theory that men should be made to work, and this theory
is considerably intermixed with the even stronger contention that
the end of man is work. I want you to realise that this is a statement
of fact, not a theory. More than 95 per cent of the purchasing power
expended in consumption is wages and salaries. It will therefore
be seen that there are two standpoints
Considered as a means of making people work (an
aim which is common both to the Capitalist and Socialist Party politics)
the existing financial
Considered as a mechanism for distributing
goods, however, the existing financial system is radically
defective. In the first place, it does
1. That the cash credits of the population of
any country shall at any moment be collectively equal to the collective
cash prices for consumable goods for sale in that country, and such
cash credits shall be cancelled on the purchase of goods for consumption.
I may conclude by a few remarks on the position of the banks, in respect of this situation. It is becoming fairly well understood that the banks have the control of the issue of purchasing power to a very large extent in their hands. The complaint which is levelled at the banks is generally, that they pay too large a dividend. Now, curiously enough, in my opinion, almost the only thing which is not open to destructive criticism about the banks is their dividend. Their dividend goes to shareholders and is purchasing power, but their enormous concealed profits, a small portion of which goes in immensely redundant bank premises, etc., do not provide purchasing power for anyone, and merely aggrandise banks as banks. But the essential point in the position of banks, which is so hard to explain, and which is grasped by so very few people, is that their true assets are not represented by the difference between a society functioning under centralised and restricted credit and a free society unfettered by financial restrictions. To bring that perhaps somewhat vague generalisation into a more concrete form, the true assets of banks collectively consist of the difference between the total amount of legal tender, or Government money, which exists, and the total amount of bank credit money, not only which does not exist, but which might exist, and which is kept out of existence by the fiat of the banking executive.
It must be within the experience of most people who have endeavoured to popularise the idea of finance with which this review is associated, to find that the question of international exchange forms a stumbling block. In the case of those persons of whom, perhaps, it is most important to make converts, such as business men and others who deal practically with the everyday transactions of commerce, it is frequently possible to obtain an admission that some new conception of finance, besides being desirable, does not appear to present insuperable difficulties in regard to internal business, but is ruled out of the sphere of practical politics because of (what seems to them) the insurmountable difficulty of international trade on a basis other than that of the gold standard.
It is relevant to observe in the first place that this is exactly the idea which the upholders of the gold standard would wish to disseminate. It is fairly obvious that if you can imbue an effective majority with the idea that nothing can be done for the financial system except as the result of world-wide and international agreement, you are going to put off any considerable action for a long tune. It is convenient, though not necessarily accurate, to say that the length of time required to obtain action in regard to any fresh idea, varies directly as the square of the number of people required to be convinced, and inversely as the simplicity of the proposal, and is unaffected by its essential soundness.
But while, I think, there is reason to suspect conscious assistance to the idea that finance can only be treated as a world-wide problem, and that reform on any other basis is impracticable, there are doubtless genuine difficulties in the apprehension of the fallacy involved in this idea; difficulties which in the main arise from the conception of money, and more particularly gold, as having some fixed value in itself.
Now the theory, if theory it may be called, of a gold exchange standard is that if two articles, A and B, have prices attached to them in different currencies, those prices will vary inversely as the amount of gold which tbe currencies in question will buy, varies. That is to say, if the price of gold in English currency is £4 per ounce, the price of gold in American currency is $20 per ounce, and the price of two articles, A and B, in the respective countries is £1 and $5, a rise in the price of gold in Great Britain to £5 per ounce would mean a fall in the price of article A, if bought by United States currency, by 25 per cent, and a rise in the price of article B, if bought in British currency, by a similar amount. That is the theory, although it is very far from being what actually happens.
The first point to observe is that we are considering the interplay of two kinds of credit systems. The national currency depends for its validiity on the fact that, if tendered inside the country of origin, goods will be delivered in exchange for it: Gold, in the post war world, has been artificially elevated into a super-credit sysytem of a peculiar kind. For the individual, gold is an effective demand for currency of any country at the gold exchange rate. For the banking institution, however, gold is not merely an effective demand for currency at the gold rate, it is an effective demand for international credit to the amount of several times the face value of the gold. These considerations may enable us to get a firm idea of the tremendous power given to banking institutions by persistence in the use of gold, and on the other hand, to realise that its use is essentially unnecessary. In regard to the first, we have the astonishing situation that an ounce of gold in the hands of John Smith is worth only £5, but in the hands of the Bank of England it is worth probably £50 - a situation which obviously cannot fail to keep John Smith where he belongs from the point of view of the Bank of England. In regard to the second point, we can see from the proposal enunciated above, to the effect that a national currency derives its validity from its effectiveness as a demand for goods and services, that the problem of maintaining, the exchange value of a national currency, while eliminating the use of gold, depends on the validity in a foreign country of the given currency as a demand for the currency of the second country in question. It is easy to prove that this is ultimately dependent on the ration of unit prices to unit purchasing power in the same country. If we exclude the trade in money as a commodity in itself, the only object in buying a currency of a foreign country is in order that one may, with a currecny so bought, buty goods or settle an acoount. If this be borne in mind (and an astonishing number of people seem to lose sight of it) the value of that currency depends solely on what it will buy. In other words, if we untie a currency from the gold standard, its exchange value is inversely proportional to the relative price level of commodities in the countries concerned. The lower the price level, the higher the exchange value of the currency. This is fundamentally incontestable, and I have never, in fatc, heard it seriously contested.
If, as is suggested in the ideas that I have put forward, a considerable proportion of the credits which are created in the country are applied to the reduction of prices, then it is quite obvious that a given unit of, let us say, English currency will buy more than it would before: the ratio
is raised. Consequently a given unit of currency will find a purchaser in foreign currency at a higher price than it would before, assuming that the ordinary influences of the market were allowed free play. I do not think that if such a scheme were put into operation these influences would be allowed free play, and the first result would possibly be a wholly artificial depreciation of, say, the British unit of currency in the world exchange market--a matter which the exchange brokers could quite easily arrange. But the result of this would be that the British unit of currency, bought at less than its true exchange value in some foreign currency, would, in terms of that foreign currency, buy still more goods than even it ought to under the proposed change. The result of this is easy to foresee. In the first place, it would result in an enormous yet temporary export trade, against which competitors would have no effective weapon other than to apply the same modifications to their financial system. Secondly, in the language of the stock market, the money "bears" would be caught short of British currency, and caught short without the least possible chance of ever buying to cover, except at a ruinous loss. I am inclined to grant them sufficient intelligence to see this very quickly, and I .have no doubt at all that the almost immediate result of the application of credits to the reduction of prices in, for instance. Great Britain, would be to send the British exchange above par.
 Address delivered at Westminster, February, 1926.
In addressing you upon the subject of "Finance and British Politics," I think it would be worth while devoting a few minutes to examining the meaning of the words of the title. I find on consulting an etymological dictionary that the word "finance" has two alternative derivations, one meaning" to pay a tax," and the other " to come to a settlement with." I think these meanings both have their interest, but they do not furnish the definition for which we are looking. Finance as it concerns questions such as national politics is often referred to as High Finance, and I would suggest to you as a definition of High Finance that it is the business, art, or science, of manipulating the money system to obtain political or economic results. Please note that it is not the money system in itself. The money system can accurately be described as a ticket system, and the relations between, for instance, the quantity of tickets issued and those which are automatically recovered through the price system, while of immense and even preponderating importance, since they afford High Finance its opportunities, are not those relations which correctly come under the description of High Finance. They are more or less automatic relations, and High Finance concerns itse1f with using this price-and-money system as it stands, to obtain varying ends. I myself, and others, have devoted a great deal of time to the money system, both in books and in speeches, which have been reprinted, and those of you who are not familiar with that, the primary aspect of the question, might perhaps consult those publications. I think it is of practical importance to keep the conception of money systems, and the use which is made of the present money system, separate, for reasons which will become apparent as we examine the subject.
The essence, however, of the existing money system is that it creates an artificial scarcity of purchasing power on the one hand, and places the power to relieve this scarcity in the hands of an international organisation on the other hand.
Let us turn now to the second half of the title "British politics." Taking the second half of the title, "politics," it is again of interest to find that there are three words, which are allied, which bear upon it; one of these is "policy" in the sense of a plan or scheme, the second is "police," which originates from a word meaning "civil government," but has come to mean the use of physical force to enforce law, and the third is again "policy," which means a warrant for money. We are familiar with the latter chielfy in connection with what we call an insurance policy. I mention these etymological derivations for the purpose of suggesting how closely connected are the words meaning Government, and those meaning money transactions.
It is common to assume, at any rate as a convention, that British Policy is the greatest-common-measure of what would be the policy of individual Britons. On the firts points I wish to make to you is that this is not true, that it probably never was true, that it is probably less true now than it ever was. The same argument can be applied to the politcs of other countries, but we are not tonight concerned with these.
Now, before proceeding further in examining divergence between so-called Britilsh Policy amd the policy of the individuals who live in Great Britain, it is worth while considering certain facts. To avoid a charge of plagiarism I may say that the whole of this address was drafted some weeks before the delivery by Mr. McKenna, the chairman of the Midland Bank, of the speech which so lucidly emphasises these facts.
It is notorious that, wiht numerically few exceptions, at the present time the individual Frenchman is richer than he ever was and more prosperous than he ever was. it is notorious that in the years 1919, 1920, and 1921 the individual German was more prosperous perhaps then he had ever been, and that since the Dawes plan was applied, Gremany is "on her feet," but the Germasn are starving. It is said at the present time that France is financially bankrupt, just as it was said in 1922 that Germany was financially bankrupt. I mention this, not necessarily to commend either the condition of affirs in France at the present time, or those which existed in germany before the so-called stabilisation of the Mark, but to point out that, even in the language of the Press, it is possible for there to be a complete contradiction between what is called the prosperity of the individual (and I mean by that, the prosperity of the great majority of individuals), and something which is referred to as National Prosperity. You will see that there is in fact a suggestion tjhat the two stand on opposite sides of an account, that the State becomes rich at the expense of the individual, or the individual becomes prosperous in proportion as he escapes from the powre of the State. And it is most significant that France, which has the weakest central Government in Europe, is making the most successful stand against financial domination. There is in fact strion reason to suggest that a prosperous and powerful Government, where theGovernment is closely connected with finance, does not be any means mean a prosperous and powerful citizenry.
At this juncture I should like to meet a probable criticism in advance. I can imagme someone saying "This is another Hidden Hand theory." Do not allow such an idea to affect your judgment of facts one way or another. Every theory of events which has any soundness must at the present time be a "Hidden Hand" theory, because events are not controlled by Voting or Parliamentary Debate, but by Finance. A theory is neither more nor less likely to be true because it appears to be romantic, nor does it necessarily involve conscious turpitude on the part of, e.g., Statesmen. If you train a man from youth, you can make him honestly believe anything, and I can assure you that there are very few "accidents" in the rise to power of public men. If you consider the influcnce of such men as the late Sir Ernest Cassel on the London School of Economics and the care taken to see that high permanent oflicials have an orthodox training, you will see how subtle this influence may be. No doubt many of you have read a short story by Mr. Rudyard Kipling, "As easy as A.B.C.," and considered it to be a brilliant flight of imagination. If there is anyone here who is familiar with the world-wide intrigue to obtain control of the Air Services of the world, and to attach them to some organisation such as the League of Nations, it will require very little emphasis to convince them that that brilliant short story was very far from being a mere flight of fancy. At the present time a much better name for the Hidden Government would be "Dollar Diplomacy," although that is by no means comprehensive.
Since the time of Cromwell, excluding the short Restoration, the financial policy of the British Government has been based on a theory of scarcity.It has been the custom in this country to suggest that, figuratively speaking, the individual only clings on to economic life by his eyelids. As time passes, I am beginning to be more and more doubtful whether this was ever necessarily true, while I am quite certain that it is not necessarily true at the present time. But if you will cast your mind back over the known periods of economic distress in this country, you will find that they are definitely traceable to financial policy in some sense or other. For instance, a serious depression stretched from the time of the Crusades to the beginning of the Renaissance and is explainable, I think, far better by the fact that the English nobles were all mortgaged to the Jews as a result of the Crusades, than in any other way. The Renaissance itself was specifically due to the opening up of the wealth of the West Indies, and the influx of gold and other treasure, as a result of the forays of Drake, Hawkins, and their confréres, combined with the isolation of British Finance from that of the Continent. The Hungry Forties were no more due to the Napoleanic Wars than the present industrial distress in this country is due to the European War. They were due to the hold which financiers, such as the Rothschilds, obtained upon this country, and the consequent passing of the Bank Act Charter and other financial restrictive legislation; and coincided with the rise of the Joint Stock Banks and the absorption of the English private banks, and they were relieved by the discovery of gold in California in 1848. A similar period of prosperity followed the discovery of gold in. South Africa. We have just been favoured with speeches from the Chancellor of the Exchequer and the Prime Minister demanding economy. Those speeches merely justify a policy which is continuous, but which has received temporary setbacks for reasons which are easily understandable, but need not detain us tonight.
This theory of scarcity is closely allied to a financial policy of money saving or its more elaborate successor, Insurance. No one can make any pretence to an intelligent understanding of the present situation who does not recognise firstly how deeply ingrained this policy has become in the methods of the British Government, and at the same time how completely divorced this practice is from any relation to physical fact, just as those two speeches to which I have referred have no justification for their demand for sacrifice.
If I have an income of £500 per annum and I save, as the phrase goes, £100 per annum of this sum, either by the simple process of putting it in a bank, or by the investment of it in an insurance policy, I decrease my expenditure by 20 per cent., and I certainly provide myself with money for use at some future time. But there is no physical saving corresponding to this money saving. In fact, owing to the interconnection of the financial system with the producing system, there is probably an actual destruction of wealth due to the fact that I do not spend the whole of my income. More goods would have been drawn from the shops, more orders would have been given to the manufacturers to replace those goods, and consequently a real ability to produce more goods per unit of time would have been created, probably by an extension of manufacturing facilities, had I spent my income. But if I save my money, only one of two things can possibly happen in the world of actualities either goods which have been produced will not be bought and will therefore be wasted, or in anticipation of the fact that I should not buy them they will never have been produced. That, I think, is an accurate description of the result of financial saving and insurance, so far as it affects the production system. I do not, of course, overlook the immense forces which impose this policy of saving upon the individual, due to the much greater importance to him of the possession of money than the production of goods.
That is merely to say that Finance has the power
to impose a policy on the public, even if that policy is demonstrably
anti-public in character. Notice that the effect of this is still
further to reduce an amount of purchasing power which would be insufficient
to buy the product, even if it were all spent.
Consider also the Land question, which has again
come to the fore as the result of the efforts of a statesman well
known in connection with pheasants and mangel-wurzels. There has
been a persistent attack upon the private ownership of land by the
Liberal Party for the last hundred years. The Liberal Party (for
many of whose ideas I have the greatest respect) has been consistently
financed by the banking interests in this attack upon property, and
especially in that particular aspect of it which has to do with site
values. What has been the result of this attack? The answer is easy.
Ninety-seven per cent. of the finest sites in this country are owned
by banks and insurance offices, and the only reason that they have
not got the other three per cent. is that for the moment they do
not want them.
You will quite properly feel inclined to ask
at this stage of the argument: " Are you stating that the condition
of affairs in Great Britain is
Taking all these matters into consideration, and having made it my business to observe the course of events in the United States of America, together with what information it is possible to glean in regard to Italy and Russia, I have come to the conclusion that we are witnessing a gigantic attempt, directed from sources which have no geographical nationality, to dispossess a defective democracy, and to substitute a dictatorship of Finance for it. I do not think public men necessarily agree with this, but I do not think they struggle very hard against it. They would not become public men if they did. The tactics which are being employed to further this policy must necessarily involve an attack upon all forms of purchasing power which are not gained by what is called work. It is a matter of no consequence to such a policy that an individual should receive high wages or a large salary. These can be taken from him at any time should he develop an inconvenient faculty of criticism. It is not even a matter of serious importance that he should acquire securities which are a basis of dividends, if by means of heavy inheritance taxes it can be ensured that he only acquires them by work of a specified kind. Given a sufficiently passive acquiescence in the policy which is imposed upon him, there is no reason why he should not be well fed and materially prosperous But it is necessary that he should not have(power until he has been through such a training as will ensure his docility to the hierarchy of Finance, and I may, perhaps, say that I think that the elimination of an independent upper middle class is an intermediate objective of that policy.
In my subsequent address I hope to show you legible indications of the working of this policy in international relationships, and the only line in my opinion, along which it is possible to take effective action to counter it.
It will have been plain to those who have followed
the examination of the relations between Finance and Internal British
Politics that the validity of the ideas involved in that action rests
largely upon the acceptance of somewhat unorthodox or at any rate
unfamiliar theory of world politics. I think perhaps i would be convenient
at this point to state that theory.
In the first place it is suggested that the
aim of national Governments are by no means the same things as the
aims of the majority of individuals in the countries they are supposed
to represent. Further, that these Governments are far more responsive
to influence from financial sources than they are to popular influence.
We might almost go so far as to say that the modern Government is
quite insensible to popular influence, and that no serious change
of policy is effected by a change from one party to another. This
is certainly true where the subject in which such influence might
desire to be exercised conflicts with the interests of Finance. A
consideration of the relative progress, during a period of acute
housing shortage, in the building of small houses on the one hand,
and the building of branch banks on the other, will perhaps afford
an example of what I mean.
There is very little
doubt that the effective headquarters of world Finance at the end
of the eighteenth and the beginning of the nineteenth centuries were
in London. It is a matter of common history also, that the end of
the eighteenth century and the earlier part of the nineteenth century
witnessed a condition of general culture in England which was lower
and more brutal than that existing in any other portion of the civilised
world. It is not necessary to elaborate this side of the question.
I do not suppose anybody would seriously contest it, but in any event
a consideration of the penalties prescribed by the criminal law,
or even a slight excursion into the literature and particularly the
biographies covered by the period referred to, are sufficient to
prove the point.
In the past fifteen or twenty years, however, the event of the most outstanding importance in world politics has been the rise to power of the United States of America. It is the common convention to ascribe this rise to the possession, by the United States Government, of unique economic resources. While economic resources are a factor in the question, I do not myself think that they are anything like so important a factor as is commonly believed, and they are certainly not the only or even the dominating factor. Under present conditions, any country is as prosperous as Finance allows it to be.
Side by side with this rise to world power of the United States, there has arisen a culture which is markedly similar to that of the eighteenth-century England, or nineteenth century Prussia. In saying this, I do not overlook the existence in the United States of a very large number, perhaps even a majority, of people who are kindly, tolerant, and charming. But I am personally familiar with the United States over a period of more than twenty-five years, and I do say most emphatically, that these people do not represent the effective culture of the United States, and further than that, that their influence is considerably less effective now than it was twenty-five years ago. Lynching, murder, and other crime is a reflex of a police system which is both corrupt and brutal. While American law is milder than ours, its enforcement is more barbarous.
It is more than a coincidence that at the periods to which I have referred, Finance and a particular type of culture, which you can call Prussianism if you wish to give it a name, have been dominant at one and the same time, and I think you will see that it is not a very long step from recognising and admitting this to recognising that the interests of Finance might be expected at the present time to coincide with the domination in international politics of the United States of America.
Perhaps the question of international War Debts
affords the clearest indication of the policy of High Finance. You
are all familiar with the general outlines of the Debt settlements
which have been arranged. The financial representatives of the British
Government pledged the credit of the British people to the United
States Government. The United States Government issued loans to the
population of the United States in exactly the same way that the
British Government issued loans to the British people. The banks
and issuing houses created new money, lent it to the people to invest
in the loans, and held the loans as security for the " Debt."
In both countries the ultimate owners of this debt were the bankers
and not the Governments. Now I do not believe that a few people, many
of whom are no doubt here tonight, are the sole possessors of sufficient
intelligence to understand the true meaning of this process. That does
not seem to me to be a reasonable hypothesis. But in spite of the fact
that there must have been numbers of people in important positions,
both in Governmental and financial circles, who understood quite well
that we never received any money from America either for ourselves
or on behalf of our Allies, a financial commission headed by Mr. Stanley
Baldwin concluded a post-war arrangement with financiers in the United
States which committed us to repay, not the goods which we had received,
but the money which we had not received, on terms more onerous even
than those financiers acting on behalf of the United States themselves
had hoped to procure. The population of this country of forty-five
millions, which sustained no small part of the actual fighting between
1914 and 1918, is at the present time committed to pay a large portion
of the taxes of a country of 110 millions, whose effective participation
in the actual war covered a period of about six months. Subsequent
to the completion of this undertaking, the United States arranged its
loan transactions with other debtors who were at the same time much
larger debtors of this country. In place of an interest rate of 3½
per cent on a sum of about one thousand millions, which is being exacted
from Great Britain, an interest rate of one-eighth of 1 per cent on
a debt of about half that sum has been arranged as between the United
States and Italy. Our own financiers (if there can be said to be any
ownership in financiers) gave Italy terms equivalent to cancelling
five-sixths of the debt. You will not fail to notice that these extremely
favourable terms to Italy coincide with the apotheosis of one of the
most fantastic tyrannies (not excepting that of Russia) which history
has ever known. The result of this and other similar arrangements has
been to make it impossible to obtain from our own debtors a sum which
is more than a portion of the sum which we have to pay to America,
although our collective loans to the Allies in the war considerably
exceed our borrowings from America. This
situation has been accompanied by a policy which has been termed the
return to the gold standard, a policy which even some of our most influential
bankers, to their great credit, have denounced as inevitably reducing
this country to a state of financial bondage to Wall Street.
Now, with a full sense of the gravity of what I am saying, I suggest to you that the persons who were really responsible for those Debt settlements (I do not say the figureheads, although I see no reason why they should escape criticism) were financiers before they were Englishmen. They saw, and truly saw, that the power of Finance was shaken to its very base, and that a sacrifice was necessary. The millions of unemployed, the bankrupts, the suicides, the new poor, those and many others are that sacrifice. I hope those of them who survive feel that their sufferings were in a good cause. Finance has been re-established, and there is every prospect, I think, that the main object having been achieved, the Anglo-American Debt will eventually be scaled down, and we may be permitted to enjoy a decorous, if undistinguished, old age-if nothing happens to disturb the plan.
I believe that there is (save the mark) a
"gentleman's" agreement between the Bank of England, the
permanent Treasury officials, and the Federal Reserve Board-Messrs.
Warburg, Mr. Otto Kahn and others intervening- to that effect.
I do not suggest that this sequence of events has passed unnoticed or uncommented upon. That well-known classic, Gibbon's Decline and Fall of the Roman Empire set a fashion which has had many imitators. In almost every case, and most notably in the case of the immediate pre-war German comment on these matters, the suggestion was that the type of culture to which I am referring, which involves the elevation of such qualities as kindness, mutual consideration, toleration of new ideas, dislike of aggression, in fact all that group of virtues which we call civilised, or, if you prefer it, Christian, constituted a disease of society and led to the downfall of a nation which succumbed to them. It was, in fact, assessed as pure weakness.
The first negative comment which we can make upon this theory is that the fall of Germany was certainly as violent and catastrophic as any in history, and was certainly not due to the undue cultivation of a civilisation of this description. For half a century, at least, Germany had inculcated brutality as a specific principle of her system. Her fall was not due to anything that you might call softness. I believe that in the lying propaganda as to the causes and the reasons of the war, there was a real truth. It was that the world would not have German" Kultur "at any price. Prussian culture set in motion forces stronger than itself, which brought about its downfall. In war time, therefore, civilisation does not fail. It is in peace time that it fails.
Now I want to put before you a totally different
theory (which so far as I know is novel, although its novelty is
of no importance) as to the reason for the decline of nations which
become pre-eminent by force and financial policy and subsequently
become civilised. I think that they are brought up to a certain point
in evolution by the system that we are living under, and that at
that point they are in a very favourable position to develop what
I believe to be a really higher level of culture.
The danger of a decline, once this level of
a new culture is reached, is not, in my opinion, due to that culture
in itself. It is due to the failure on the part of that culture
to develop a system of Finance, and a use of force, which is sympathetic
to the general spirit of the new culture.
While the details of such a system of Finance
are better left for discussion until such time as they might come
into the region of practical politics, I do not think there is much
doubt of the principles they would be obliged to follow. In the first
place they must provide a financial reflection of the physical facts
of the producing, distributing, and consuming systems which the existing
financial system signally fails to do.
Practically all the evils from which we suffer
at the present time can be traced to the ability resident in existing
organisations to subordinate true individuality to them. It must
be a common experience of many people here to-night to have been
obliged to acquiesce passively in transactions either of a business
concern or a Government Department which transgress every canon of
common decency, and which if done for the advantage of an individual
would be generally condemned; The fact that they are done under the
orders or for the advantage of some organisation is commonly held
to excuse their character. There is, however, another aspect of the
greatest importance. Measured by civilised standards, groups are
always of lower value than individuals. Conversely, individuals have
qualities which are non-existent in groups. I suppose a life-long
plot on the part of one man against the well-being of another man
is very rare, but a business or national vendetta is the rule, and
I should say there were few exceptions to that rule. Acts of generosity
without ulterior motive between individuals are common-between nations
or businesses as such, are unknown.
In conclusion, however, I should like to emphasise
one very important aspect of the whole problem. The desired solution
has no basis in sentimentality or abstract Pacifism. To be successful,
it has to be a solution which can fight. As I have just said, and
as must be only too obvious, modern scientific civilisation is irresistible
in war. I believe it is possible to provide a financial system which
will so abolish the artificial differences of interest between individuals,
that any community, nation, or continent which will successfully
put these principles into operation will either compel imitation
from the rest of the world, or will reduce any attack upon its principles
to the relative position of a mob of bushmen armed with bows and
arrows who might be so rash as to attack a modern army equipped with
all the terrible weapons of modern warfare.
 Address given at the Cannon Street Hotel on June 3rd, 1925.
It is necessary in dealing with the question
of money to be quite sure that the assumptions on which the money
system is to be founded are both understood and accepted. Some glimmering
of this appears to have occurred to Sir Josiah Stamp, in an address
which he gave some short time ago, in which he pointed out that the
public mind in these matters swung from political interests to industrial
interests, which apparently to him were incompatible.
I would particularly draw your attention to the absence of any consideration affecting what is commonly called morality or ethics in these definitions. Even in these days I suppose that if the booking clerk at the railway station were to address, to the prospective purchaser of a ticket for transportation from London to Edinburgh, an enquiry into his domestic habits and the regularity with which he paid his Income Tax, it would be felt that he was in advance of his time. Similarly, in times of stress, it is noticeable that we do not enquire very strictly into the antecedents of those who are enlisted in our armies. To put the matter another way, as circumstances force us more closely in contact with the underlying realities of life we jettison a good many artificial considerations which seem to grow up around our conduct in peace time.
One of the most important realities of the condition
under which we live on this planet is that we live by work; and energy
or power is the rate of doing work. Lest some adherent of that much
misused phrase " he that will not work neither shall he eat" should
read in what I am saying a justification for his belief, I would
hasten to point out that it does not matter in the very least how
the work is done nor from whence comes the energy by which it is
In a somewhat narrow sense, the truth of this
statement is becoming recognised by the importance which is being
given to the question of the electrical distribution of energy in
this and every other country, and, of course, this is all to the
good. It would be too much to say that this recognition carries with
it any general appreciation. of the greater issues that are. involved.
If you will carry your minds back to what is called the Golden Age
in Great Britain, the age of the great Elizabethans, you will find
that, although the amount of extra-human energy which was
employed for productive purposes was trivial, arising from such sources
as small and inefficient water-wheels and windmills, a very tolerable
standard of living was common, and it was common in spite of much
greater general leisure and a good deal of waste energy in the shape
of war. I feel sure that amongst my audience someone is yearning
to point out that the population of these islands was much less than
it is now-a consideration which, I am afraid, leaves me quite cold
for reasons into which I propose to go a little later.
But a much more important consideration even
than this is that this kind of doctrine is powerless to account for,
does not, in fact, touch at all, upon the fact that we are constantly
witnesses of acts of economic sabotage. When, as the result of the
stimulation to agriculture provided by the German submarine campaign,
the Argentine and the West of Canada enormously increased their production
of foodstuffs, a state of affairs rapidly supervened in which grain
was burnt under the boilers of steam engines, and calves were shot
and left to rot 4 the plains of the Argentine, in order that the
surplus of foodstuffs should not reach markets of the world. The
late lamented war ceased with such suddenness that it was almost
impossible to slow down production for some months after the date
of the Armistice, with the result (which involved the financial inflation
of the post-war period) that seven years afterwards we can still
buy Government surplus production at advantageous prices, in spite
of the determined efforts of the orthodox manufacturer and producer
to get this material off the market as quickly as possible. During
the latter years of the war, when the rate of destruction of material
and the waste in the use of it reached a point of which the average
individual has no conception, and which certainly exceeds anything
the mind of man had previously conceived, it is probably true to
say that the standard of living, not only in this but in every other
country, reached a higher level than ever previously, and that, with
the vast majority of the best producers absent from the country and
replaced by persons labelled C3. If you will look at these generalisations,
which it is possible to support by any required amount of exact data,
you must have the conviction forced upon you that the modern production
system, if unhampered, is capable of producing everything that is
required of it, and further, that this production involves or can
involve the use of a continuously decreasing amount of human energy
or labour. That is the first vital point to grasp. The second point
is that the best brains of this and every other country in the industrial
and scientific field are working as though they recognised their
objective to be the replacement of human labour by that of machines,
although it is quite possible that very few of them do. To put the
matter still more baldly, these best brains are endeavouring to put
the world out of work, to create what is miscalled an unemployment
problem, but what should properly be called a condition of leisure.
At this point we begin to touch this conflict between a classical
morality and modern scientific effort. Oblivious to the fact that
practically all advance in the world's history can be traced to a
condition of leisure, however that leisure was obtained, we find
a large number of people prepared to argue that the object of modern
scientific progress is to increase employment, and that only the"employed," in
the economic sense, have a "right" to exist.
Now the curious point is that about two years ago a semi-private publication, circulated only amongst banking officials, came into my hands, containing a review of one of my books. The reviewer was the same person just referred to as employed by the Socialist weekly. It was a much less crude review, but was not less ingeniously designed to mislead. I think the only reasonable deduction is that there is no diversity of interest between the two publications. I mention the matter to make the point which I think requires making, that Finance is at least as dangerous an enemy of the upper and upper-middle classes as it is of the poor. It should be realised that it is not the war which makes us pay an income tax of 45. 6d. in the pound, a death duty of 20 per cent., and a general tax of 70 per cent. on everything we buy, in the form of increased prices. The war was paid for as we fought it. It is the Banking and Financial system which taxes us.
Finance has got the poor where it wants them,
and can and does keep them there; they are comparatively harmless
; they are not merely harmless, they are useful; their revolt against
the present state of affairs can be made, and is made, an excuse
for such measures as penal death duties and steeply graduated taxation,
the only effect of which must be to reduce the whole population to
the necessity of wage and salary earning. Under these conditions,
any expression of opinion likely to be harmful to the financial system
or its administrators can be dealt with by deprivation of employment
and consequent starvation. If you will think these matters over,
you will see that the theory held in some quite well-informed quarters,
that Russian Bolshevism and certain aspects of high finance are closely
connected, is not so wild as it appears at first sight.
I hope I have made the dilemma clear. The scientific
organisation of industry and the introduction of increased quantities
of solar energy into the productive system means, and can only mean,
the displacement of human labour from the economic process. Even
now there is very little doubt that the present standard of living
can be maintained by the working efforts of io per cent. of the population
if the productive system were not so largely directed towards money-making
rather than goods-making, and the immensely inefficient business
system of the country were modified so as to cut down what was termed
by Lord Milner "interception."
On the other hand, penal taxation, rising prices, and the building
up of invisible and visible financial reserves, operate to diminish
and even extinguish what are called unearned incomes, thus forcing
more persons to compete for employment which science is diminishing
in quantity. In order to avoid too much repetition of the matter with
which I dealt a fortnight ago, I should like to summarise certain facts
in regard to the money system, which those who are interested will
find elaborated in the report of that lecture, which has since been
published. The first point to recognise is that distribution takes
place, in civilised countries, solely by the aid of some sort of money.
You do not make money by making goods or by working. It is a fact not
disputed, and, indeed, emphasised, by Mr. McKenna, the chairman of
the Midland Bank, that "The amount of money in existence varies
only with the action of the banks in increasing or diminishing deposits.
We know how this is effected. Every bank loan creates a deposit, and
every repayment of a bank loan destroys a deposit."
It is impossible to exaggerate the importance of a world-wide antagonism between a system in which every interest is directed to making the machinery of consumption continuously more difficult of access, on the one hand, and a scientific and productive system, which, in spite of handicaps, is continuously increasing its capacity for production; and that is exactly the position of the financial system in its relation with the consumer and the producer. All over the world the signs of a final and deadly conflict, directly traceable to this fundamental antagonism, can be seen. The conflict may not break out for a year or two, or it may break out to-morrow. No one who realises the gravity of the riots at the moment proceeding in Shanghai, in which Americans and Japanese are both involved, would venture to say that serious trouble, from that cause alone, is impossible. But, in spite of the unrelieved gloom of the superficial position, I venture to believe that, even if after some tribulation, we shall break free from the domination of Finance.
 An Address given at the Central Hall, Westminster, on May 21st, 1925.
Any speaker on the subject to which I am anxious to attract your attention to-night finds himself confronted with at least two major difficulties. The first, and perhaps the more important, resides in the fact that the implications of it ramify into practically all human activities. As a result it is possible to approach the subject from an unusually large number of angles, and some restraint is necessary to prevent an effect of confusion, while presenting a sufficiently comprehensive picture. The second difficulty arises from the fact that the subject is highly technical, but yet is not recognised as such. A speaker on a technical subject, if speaking to a technical audience, has a common ground of agreed knowledge. Or, alternatively, in speaking to a general audience, is generally conceded the advantage of expert knowledge. But, curiously enough, neither of these situations is generally found to be the case in regard to a discussion of the money system. There is practically no agreed body of expert opinion; and the average business man, engaged in "making" or perhaps losing money is, perhaps naturally, apt to regard himself as being equipped to discuss the matter at length with anyone. The result of this, however, too frequently, is the creation of mental confusion and verbal argument, arising from the clash of two capable logicians arguing from different premises; and, therefore, naturally unable to come to any agreement or understanding. In order to avoid, so far as is possible, this position to-night I propose to ask you to memorise, or, better still, to write down, certain definitions.
These definitions are not necessarily orthodox, and you are, of course, at liberty to question them at your leisure. But they are the definitions and conceptions from which I am arguing in speaking to you. The first definition to which I would draw your attention is that of Wealth, and is, "The rate at which a nation or any other corporate body or individual can deliver goods and services esteemed conducive to well-being." I would ask you particularly to notice that the word "deliver" is used in this definition, and not the word "produce," and also to notice the inclusion of the word "rate." The second definition is that, "The objective of an industrial system is to deliver goods and services to the whole of the individuals included in the Nation, or other corporate body, to which the system is attached, with the minimum amount of trouble to those "individuals." A deduction from this definition is that on its economic side, a nation or other corporate body exists to further the interests of individuals; or, to put it in a more technical form, there is an increment of association derived from the co-operation of individuals, which should be distributed amongst the individuals, if the object of their co-operation is to be achieved successfully.
The third conception which I wish to impress
upon you, is that of the artificiality of money. The best definition
of money with which I am acquainted, which is an orthodox definition,
is that of Professor Walker in his book Money, Trade, and Industry,
which reads that money may be defined as "any medium which has
reached such a degree of acceptability that no matter what it is
made of, and no matter why people want it, no one will refuse it
in exchange for his product." I have no doubt that you will
accept this definition, and you will see that it eliminates any specific
physical characteristic from the nature of money. It may be gold,
silver, copper, cowrie shells, leather discs, paper, cattle, or slaves;
and every one of these has in turn been used for money. The one characteristic
that they had in common was a psychological characteristic, that
of belief, faith, or credit, and if you will bear this conception
clearly in your minds you will recognise the absurdity of such statements
as are frequently heard to the effect that there is no money in the
country, or that certain desirable works cannot be carried out because
there is no money with which to do them. Such statements, of course,
receive credence because they are normally true in respect of the
individual, who has a very limited power to impose his own personally
created money upon the community, but they are not true of nations
(as was amply demonstrated between August 4th and August 7th, 1914,
when an absolutely novel currency system was imposed upon Great Britain
without the slightest shock), and we shall see almost at once they
are not true of large corporations, and particularly are not true
of financial institutions.
Any system or institution which is so all-pervasive in its effects, is a government, whether conscious or unconscious, and one would imagine it to be a matter of the first consequence to understand the principles upon which it is based. So far from this being the case, however, a very large number of people regard it as almost a matter for pride that they know nothing about finance, and if my own experience can be taken as a guide, any exact knowledge of the general system is confined to a number of persons in every country who might be numbered on the fingers of both hands, a lack of knowledge only paralleled, unfortunately, by the confidence with which the existing system is regarded by those who do not understand it. It is, in fact, one of the most astonishing experiences which comes to anyone who seriously interests himself in these matters to find the perversity with which intelligent people will put forward any explanation, on earth or off the earth, from sun spots to the viciousness of human nature, for the economic misfortunes which attack nations and individuals, rather than question or allow to be questioned the practical perfection of the money system.
Clearly, if money is of such importance, the
first point to which to direct an inquiry in regard to it must concern
its point of origin, and it is one step towards this end to recognise
the fact that you do not make money by making goods or by working.
Some years ago I made this statement at a luncheon of quite important
manufacturers in the North, and only their politeness to a guest
obviously restrained them from considerable hilarity. I then asked
them to imagine themselves doing business with each other round the
table at which we sat, and to explain to me how it was possible that
at the end of a given period of such business there could be more
money round the table than there was when they started. Naturally,
nobody could tell me. Similarly, you do not make money by agriculture.
If I grow a ton of potatoes and sell them for money, I merely get
the money that somebody had before in return for my potatoes, and
the coming into existence or the disappearance by consumption of
those potatoes does not itself make the slightest difference to the
amount of money in existence; it merely affects its distribution.
If anyone wishes to argue that it cheapens potatoes, I would merely
point out that such cheapening makes every grower or holder of potatoes
poorer, and discourages the growth of potatoes.
Imagine a self-contained community, say, upon an island, of ten men, each of whom has £10, we will say, in Treasury Notes. The community carries on all the operations of a modern business community, and settles its debts by handing over Treasury Notes. After a time an eleventh man lands upon the island and makes the suggestion that he should safeguard the money of the community by keeping it in a burglar-proof safe with pigeon-holes for each of the depositors. This is thought to be a good idea, and for a time the original members of the community settle their debts to each other by going to the eleventh man, whom we may call the banker, drawing out Treasury notes every morning and handing them over to each other. It naturally dawns on the business community very soon that this is a cumbersome and time-wasting performance, and an efficient substitute for it is found by writing little notes to the banker instructing him to readjust the contents of the pigeon-holes to correspond with the business transactions of the previous day. In a very short time the banker finds that very few of his Treasury notes have left his possession, and that his business has become a bookkeeping one, of which the original documents are the trader's note or cheque. When this condition has become established, Trader No. 10 finds that he could accept a larger order for goods, to be paid for on delivery, if he could see his way to pay for labour and material between the time that the order is accepted and the time that the goods are delivered and paid for. He has no exact knowledge of the amount of money on the island, but he knows that it is practically all with the bank, so he goes to the banker and suggests that the banker should lend him £10, in addition to the £10 that he has himself. The banker agrees, on terms which are immaterial to the argument, and Trader No. 10 is in a position to draw £20, where previously he could only draw £10. The crucial point to recognise is that the banker does not inform the other nine depositors with him, that owing to the fact that No. 10 has drawn £20, they must draw less in consequence. In other words, his liabilities to the other nine remain as before, but his liability to No. 10 is increased by £10, therefore, the banker's liability to the community instead of being £100, which was the total amount that they deposited, is £110; and £10 of absolutely new and effective money has been created by this process, and can be drawn, so long as it is not all drawn in Notes. But it must be remembered that this £10 of new money, which is an effective demand for goods and services, and has been created by the banker, has only been loaned, and therefore it may be said that the banker has created an effective demand of £10 on the goods of the community. Just as effective as if he had forged or printed £10 in Treasury Notes. The repayment by Trader No. 10 of the £10 has the curious effect of cancelling both the debt registered in the books of the banker (and which the banker treats as an asset), and the £10 with which it is repaid, and the net result of the transaction (assuming the £10 to have been used for productive purposes) is to leave £10 of price values in existence in excess of the possible effective demand of the community. There is only one possible way in which the community can buy these goods, and that is by the creation of a fresh credit, or the printing of more money.
Now it must be obvious that this process gives those in control of it absolute control of the economic situation, and what is perhaps of even greater importance, this control is fundamentally dependent on a scarcity of money, and consequently of purchasing power. Individuals must use economic products, and they can only obtain those economic products by the means of money. If they are short of money, terms on which they obtain money can be imposed upon them; if they are not short of money those terms cannot be imposed. And it therefore follows that the existence of a money control necessitates a condition of economic scarcity, quite irrespective of the advances of scientific progress or productive capacity, and restricts economic production within the limits imposed by restricted money demand. For the moment I would merely emphasise that you cannot reward or punish individuals by the granting or withholding of something of which they already have a sufficient supply, and that the excessive production of what are called capital goods, i.e. goods which are not used by individuals for personal consumption (which is a marked feature of present-day industrialism) is caused by the desire to keep the population at work without allowing them to obtain such control of their economic existence as would free them from the dominance of money.
The scarcity of money and the consequent restriction of effective demand is unquestionably the most important, and in fact, the vital point on which the future of the present financial system turns, and such questions as that of the Gold Standard, for instance, are only important to the extent that they buttress this restricted effective demand. I have endeavoured to show you, so far as the limit of time imposed upon me allows, that a scarcity of money as distinct from a physical scarcity of goods, either actual or potential, is an essential feature of the hidden Government by Money. But it is also necessary to understand exactly how this disparity between the amount of goods available and the amount of money with which to buy them is produced. The general principle may be fairly briefly stated. Let us imagine a shipbuilder receiving an order for a ship to cost £1,000,000, and let us suppose, as would most probably be the case, that on the basis of this order the shipbuilder borrows £500,000 from his banker. I would emphasise that this borrowing from the banker as compared with the provision of the sum out of the resources of the shipbuilding undertaking, does not materially alter the general principle, but it makes the explanation somewhat easier. We will suppose that £100,000 is paid away in wages during the building of the ship, and that the remainder represents payment for material and for various charges which are known in technical language as overhead charges. Eventually the ship is completed and is handed over to the purchaser, who we will imagine to be the public, for £1,000,000 in the form of a cheque. £500,000 of this money is handed over to the banker in repayment of the loan which was created, and which was new money. The banker applies the £500,000 to cancel the loan, i.e. both the £500,000 and the debt against the shipbuilder disappear simultaneously as if they had never existed. You will see quite clearly, I think, that a ship priced at £1,000,000 exists, but the equivalent purchasing power in respect of this ship has not merely changed hands, half a million of it has absolutely disappeared. It will be found, upon examination, that even this remarkable result is not a full statement of the position, but the general principle involved is made clear by it.
The technique by which this general principle
operates in daily life is naturally much more complicated. One outstanding
example of it is in the redemption of the National Debt. I find from
reference to the monthly Review issued by Barclays Bank for the current
month (May) that during the past five years nearly £750,000,000
(collected by taxation) has been applied to the reduction of the
National Debt. Every penny of this represents a deficiency between
the collective prices of articles available for sale and the available
purchasing power for those articles, although it is quite true that
many of the articles, in respect of which the debt was created, no
longer exist. Exactly the same comment is applicable to the enormous
sum placed to reserve, depreciation, etc., by practically all large
industrial companies. These sums are earned, as the phrase goes,
by the sales of goods to the public, and, consequently, must appear
in the price of those goods. If they were not applied to reserves
and so forth in accordance with what is called "sound finance,"
they would be distributed in dividends, and would be available as purchasing
power. They are not so distributed, and therefore are not available
as purchasing power, and do, in fact, ultimately go to the redemption
of loans, in one form or another, which loans have inevitably appeared
in the price of the articles produced. I would particularly ask you
to notice that the difficulty is an arithmetical difficulty. If you
are going to ask the consumer to pay for depreciation, etc., you must
give him the money with which to pay, which you do not do at present.
You will, no doubt, wish to inquire what proposals
can be made to remedy this state of affairs. Let me say at once that,
at any rate, by itself, the nationalisation of banks is no remedy.
It is, in fact, very questionable whether the nationalisation of
anything is a remedy. Nationalisation is an administrative change,
and in most cases is an administrative change for the worse, because,
at any rate, in the forms in which we know it at present, it involves
a highly centralised form of administration, and separates authority
very largely from the facts of the situation with which authority
ought properly to deal. But whatever views one may have about systems
of administration, the essential point to recognise in regard to
finance is the question of the beneficial ownership of public
credit, whether public credit be administered under a de-centralised
or private system of administration or by a public authority. To
put this matter in a more concrete form, the question at issue, fundamentally,
is whether, when a banker creates and issues a loan he should be
repaid (which assumes that the loan belongs to him), or whether he
should not be repaid (which assumes that credit is a public asset).
That is the simple and fundamental issue of this controversy, and
upon the answer which is given to it, in my opinion, the present
civilisation stands or falls. But although the fundamental issue
can be thus simply stated, the practical methods of carrying out
changes based upon it are not so simple and obvious. A clue to them
may be obtained by considering the analysis to which I have devoted
some of your time to-night. The fundamental defect, as we have seen,
in the present financial system is that it produces a disparity between
available purchasing power and collective prices for goods for sale,
and the disparity may be eventually traced to the existence in prices
of sums of money which were created by bank loans and which have
subsequently been cancelled without being cancelled in the prices
of the goods. The remedy which is obviously suggested by a consideration
of this situation involves the cancellation of these credits in Prices.
One perfectly practical method by which this can be done is as follows:
The justification for the issue of the Treasury Draft is found in the increased real credit of the community, which accrues from the increased trade which is assured by the lowering of prices. I have, of course, used the figure of 25 per cent for purposes of illustration, but I may say that in 1919 I conducted a somewhat elaborate investigation into this matter, and I arrived at the conclusion that the true discount to the consumer was very much nearer 90 per cent than 25 per cent, to obtain the result which I have just been outlining. It was agreed, at that time, that the result was too startling to be let loose on a somewhat sceptical public. As a result of the immense trade depression, the enormous number of bankruptcies, and the general depreciation in the real credit of this country, which has taken place between the year 1919 and the present, as a result of the financial policy imposed on this country by bankers, it is quite possible that the true discount to the consumer would now be fairly represented by about 35 per cent to 45 per cent. I have no doubt whatever that, should some arrangement of this nature be put into operation, the real credit of the country would rise so rapidly that it would be possible to reduce the price to consumers of articles to a very small fraction of that existing at present, while at the same time enhancing the prosperity of all producers.
In a recent issue
of The New Age, the editor brought to the attention of his
readers, perhaps semi-seriously, the predictions of "Old Moore" in
regard to the coming year. The predictions are based on astrological
Having said this, I must confess, however, that I am impressed, as no doubt many other people have been impressed, by the fact that such apparently unorthodox prophecies seem to point to the occurrence of a world crisis at very much the same time as that which some ordinary statistical and political knowledge would suggest. For instance, Sir George Paish some time ago prophesied a financial crisis in the spring of 1929. I have myself always suggested that the financial system would encounter difficulties about the end of the decade. The complications which seem likely to attend the election of a new President in the United States of America, and the almost synchronous election of a new government in this country, the resurrection of problems arising out of the Treaty of Versailles and the Dawes scheme, together with the well-nigh unbelievable political situation in Italy and Russia, all point towards a world situation not less problematic than that which is obvious in the internal policy of nearly every country, not excluding Great Britain.
It will probably be agreed that some idea of
the lines of demarcation in this situation would be helpful to those
who take it as seriously as I, at any rate, think it should be taken.
In the first place it is obvious enough that mere national labels
will not help us much. The problems which confront the world are
not primarily geographical. So far as any one adjective will describe
them, they are fundamentally cultural. That is to say, they relate
to objectives, to ideals of life and its uses, and the conditions
under which individuals will co-operate to reach these objectives.
(1) The control of the Bank of England by a
public corporation containing representatives of such essential factors
in the community as the Treasury, Board of Trade, Industry, Labour,
and the Co-operative Movement (!).
It is not my object to examine at any length
the supplement in question, but it will repay study as indicating
the point I wish to make, which is the determination exhibited, not
less by the Labour Party than any other, to use any and every means
to subordinate the individual to the group. A far-seeing writer,
a long time ago, said that "the eyes of a fool are upon the
ends of the earth." It is this species of folly which animates
men who, while unable to solve the problem of giving the individual
worker a decent existence, are only willing to try their hand with
the financial problem if it is considered as a world problem and
not as a domestic problem, just as, while unable to resolve the differences
in any one industry such as the coal industry, save by recommending
their continuous enlargement, problems of the magnitude of world-wide
peace, disarmament, and foreign relations have not appeared to present
any difficulties to them.
To explain what I mean, let us return for a
moment to the recommendations of the Labour Party's Supplement. Consider
as an example the remark that "the extension of banking facilities
for workers would facilitate small savings." We have here a
typical instance of idolatry. Saving is put forward as a virtue in
itself, and we can only conclude that those responsible are either
without any understanding
Now, it must be observed that this subservience
of ballot-box Democracy to some kind of a dictatorship is inherent,
and it is indissolubly connected with the idea that the relationships
of different individuals to the same situation are similar. It is
consequently a system of government depending for any workability
it may possess upon an electorate possessing a low degree of individualisation.
If it be applied to the animal world one can imagine a successful
election on the subject of the most satisfactory dog biscuit. An
election amongst Frenchmen upon the question of, let us say, an omelette
or a beefsteak as the only article of diet, would, however, probably
show signs of dissolving in disorder.
It may be suggested that it is as arguable that the relation of one individual to a given situation is similar to that of any other, as is the converse. But apart from any theory on the matter, I think we are in possession of important evidence to prove that the trend of evolution is towards Individuality, and that Individuality demands its own unique relationship to circumstances. There probably never was a time at which such conscious eff6rt was being made to endeavour to make people think alike. We have a syndicated Press, selecting and adapting the news of the world to suit a unified policy. As a result there never was a time since the invention of printing when people paid less attention to the opinion of newspapers. On the whole, so far from the modern newspaper impressing its views upon its readers, its influence wanes almost directly in proportion to its absence of evident bias, which is another way of saying that it varies as it represents the opinion of some individual, rather than the machine-made policy of some large interest. Similarly, there never was a time in which the mechanism of Education was so centrally controlled as at present, and there probably never was a time in which the revolt against orthodox, uniform, or machine-made teaching was so active and widespread.
It is impossible to consider these matters with
any seriousness, however, without realizing that there is a force,
which may be conscious or unconscious, which definitely resists the
evolution of the individual. Ranged with this force at present are
all those influences which may be described by collective terms such
as "Industry," " Labour," "Capital,"
terms, in short, designating functions of the body politic. At the
risk of straining an analogy, I think it is helpful in obtaining a
just view of this situation to consider that, in the case of the human
body, one function after another, after having engaged the sole attention
of the individual, has been relegated from the main object of existence
Nevertheless, this resistance to the emergence of the individual from the group is real and strenuous, and the conflict is daily widening in extent. Returning again to what is one of the main battle-grounds of this conflict-the United States of America-it is becoming evident that "Big Business," Finance, and the "Machinery of Government" are enlisting forces which a few years ago would have been regarded as extinct in the Middle Ages. "Fundamentalisms" of a crude form, which would have provoked a smile in the theologian of the fifteenth century; "Moral" laws, which would have been resented in the time of the Tudors, and an organised system of Commercial Espionage and Blackmail reminiscent of the worst days of the Inquisition or the Star Chamber exist to-day side by side with an exaggerated individualism, far removed from genuine individuality. On the other hand, there is a not inconsiderable minority, possessing great and increasing influence, which is thoroughly alive to the issue. But it does not, I think, control United States foreign policy.
It is necessary to remind ourselves of the nature
of the circumstances which provide the raw material of conflict.
The world, at the present time, operates under a financial system
which is in essence a bookkeeping system controlling the necessaries
of life. This book-keeping system produces an illusory necessity
for an excess of exports over imports in the case of every industrial
nation, the penalty of failure to increase this balance of exports
over imports being an increasing unemployment problem.
It seems to me that only self-deception can
blind us to the fact that given these circumstances there can be
only two alternatives. One is the subjection of the rest of the world
to the United States, a subjugation which must be not only commercial,
political, and financial, but cultural. The alternative is conflict
between the United States (no doubt allied with those forces sympathetic
to her policy) and the remainder of the world which is unwilling
to accept her suzerainty.
This roughly might be expected to be the alignment in any conflagration which may be precipitated during the existence of the present state of affairs in the principal countries of the alignment and Western hemispheres. It is, however, to be remembered that the real divisions in the world at the present time, while still to e extent vertical and national, are also horizontal and international. There is, moreover, little doubt that ultimately this horizontal division (which, it should be plainly understood, is not what is commonly called a class , but a cultural war in which the contending forces on either side will be recruited from every class) will become preponderatingly important.
 An Address delivered in Tokyo, Japan, on November 5th,1929.
IN the sacred book of the Christian religion
occur the words, "The love of money is the root of all evil."
These words, like those of the sacred books of other religions, have
been twisted out of their proper meaning, but, properly understood,
I think they are a key to one of the greatest problems which confront
The poor are poor not because the rich are rich,
but because there is not enough money, or, more correctly,
purchasing power, to make the poor rich, or even comfortably well
off, even if the whole of the money possessed by the rich were taken
from them and equally divided amongst the poor. The result of attempting
to enforce the latter policy, and such an attempt is being made in
many countries to-day under the stress of public pressure and democratic
politics, is merely to accentuate the difficulty and still further
to increase the grip of the financiers since the distribution of
purchasing power, largely through the agency of wages, depends to
a considerable extent on the buying of articles which would not be
produced at all if the existing amount of money were equally divided,
since no one would have enough to buy articles which may be said
to be above the most mediocre standard of living.
In an address of this description statistics
are only apt to be confusing, but I might mention that it has been
calculated that the average income per family in Great Britain, if
all incomes large and small were pooled, would be under £200
per annum, or Y2,000.
Having got it firmly fixed in your minds that
while to the ordinary man there is no wealth without money, and yet
that there exist either actually or still more potentially enormous
quantities of wealth, for which there is no equivalent amount of
money, I should like to bring to your attention another simple, apparently
obvious, but very frequently overlooked fact, and that is that you
do not make money by making goods. In other words, the industrial
system, which makes goods, is not to blame for poverty - it is the
A little while ago I said that you did not make
money by making goods. It is astonishing, when we consider the importance
to every one of us of money in our daily life, that most people have
no conception of where money comes from beyond a hazy idea that a
certain amount of it is dug out of the ground in the form of gold,
silver, and copper, and the rest of it is printed and issued through
a Government department. But as a matter of fact money in this form
only bears a very trivial relation to the amount of available purchasing
power, insufficient as the latter has been stated to be. The total
amount of money in circulation, in the form of gold, silver, copper,
and paper coinage is, in Great Britain, only about one per cent of
the total amount of bank clearings, or less than 10 per cent of bank
deposits, available to be drawn on for purchasing purposes. What
is the remainder ? It is what is called bank credit, and for the
purposes of this address it may be defined as the willingness of
a bank to cash cheques drawn upon it.
"Every bank loan creates a deposit and the repayment of every bank loan destroys a deposit."
Now several very curious, not to say serious, and far-reaching consequences arise out of the situation which I have been endeavouring to explain. To the ordinary man money is essential; it is the key to all the things he would like to have. For the most part the population obtains money through the agency of wages; and the first feature of the situation to which it is necessary to direct our attention, is that while there may be, and in fact is as a rule, a surplus of unsold goods, the wage-earning man cannot obtain these goods without making more goods, because he obtains his wages through the process of making goods. On the other hand the manufacturer of goods cannot see his way to make more goods until he has disposed of his existing stock, and his constant preoccupation is for what are called markets. When we recognise that this situation is common to all industrial nations we are at once upon the track of the true, and probably in modern times the only true, cause of war. Consider the position of a statesman under these conditions. There is not enough money in his home market to buy the goods which he can produce. On the other hand, if he stops producing he stops distributing wages and can sell no goods at all, since his home population has no money, so that he is obliged to look for foreign markets. No industrial nation will willingly afford him a market since its own problem is exactly similar to his. Consequently he must compete against other industrialised nations for those markets which are either not sufficiently industrialised or are politically too weak to resist economic exploitation. Sooner or later some one of the industrialised countries becomes more successful than the rest; the others are faced with an unemployment problem, and sooner or later the outcome of this situation seems inevitably to be war.
A second feature arising out of this situation,
and mixed up with the common confusion between money and goods, is
that statesmen and others threatened with this problem are almost
inevitably driven to the advocacy of either wage and salary reduction
or some other form of what is called deflation in order that the
price of articles produced in the country may be a little lower than
those of the competing countries, thus enabling, at any rate for
a time, lower prices to be quoted for export purposes. Entirely apart
from the humanitarian aspect of such a policy it overlooks the fact
that such wage and salary reductions are a reduction of purchasing
power and consequently a still further reduction in the available
home market. It is not too much to say that 95 per cent of the political
and social evils existing at the present day arise directly or indirectly
out of this shortage of purchasing power and not out of a shortage,
either actually or potentially, of the wealth which money could buy.
It consists in a simple adjustment by the use
of the technique of credit of the relation between the average price
level and the available purchasing power; and, under existing conditions,
the responsibility for making this adjustment most undoubtedly rests
with the banking system. I do not for one moment think or suggest
that bankers as a class are other than men of the highest integrity.
But I do recognise quite clearly, and I think it is increasingly
recognised, that the existing situation places the banker in a position
of such commanding advantage that he would be more than human if
he endeavoured to inaugurate any alteration until considerable pressure
had been placed upon him. The alterations which are necessary would
not detract in the slightest degree from the available wealth of
anyone, while adding to the available wealth of all, but it is futile
to pretend that they would not detract from the power of the banking
and financial system over the industrial system and society in general
- they would, and for this reason it will be necessary to exercise
very considerable pressure on those who are in control of the banking
and financial system before such modifications are made. For my own
part, I think that if these persons could be brought to see the matter
in the right light, they are from their experience probably best
equipped to inaugurate the necessary changes smoothly; but if they
are not, then these changes will have to be inaugurated by someone
else, and in that process we shall all undergo considerable discomfort
which might be avoided by the general use of a little intelligence.
 Speech at The New Age Dinner on March 23rd, 1929.
Looking round upon the world, and the grave difficulties in which its various peoples are still involved, it might occur to a superficial observer that proposals which make such large claims as a solvent for material difficulties cannot have made very much progress, or their results would be evident. But I think that such a comment would be misplaced. In the first place it has to be remembered that the proposals involve changes in mechanism, and that the results of them cannot become evident until these changes are actually made and in operation. We cannot, therefore, judge the condition of our interests in this matter in the same way that we might, for instance, comment on the progress of a building and say, "This, that, or the other storey of it is now approaching completion."
Nothing of this kind has so far been accomplished. It might even be said that the difficulties of the eventual builders of the structure on which our hopes are fixed have been materially increased during the last few years by the activities of those who do not desire that the existing building should either be replaced or altered. At the moment representative bankers of the world are meeting in Paris with the primary objective of riveting yet more firmly the chains of an obsolete financial system on the peoples of the world. It has to be remembered that antecedent to the actual construction work on any great project a great deal of hard work, and perhaps the hardest of all work, has to be done. The minds of the public have to be prepared, they have to be educated to see the desirability of the proposed work, plans have to be drawn, and a staff of workmen has to be marshalled in readiness for the concrete effort.
If we look at this aspect of our labour I do
not think that it is necessary for us either unduly to blame ourselves
or to be depressed at the progress which has been made.
When, therefore, The New Age and those
associated with it announced with a firmness which their candid critics
labelled as "cock-sure" that the salvation of the world
was not to be found in committees, soviets, or nationalisation, but
that its difficulties arose from a defective financial system, and
that these can easily be remedied without affecting the administrative
relationships which experience has proved to be both satisfactory
and effective, the announcement in the first place was received with
about the same enthusiasm that would be accorded to it by the Elgin
Marbles. But it is a testimony to the vital nature of the message
that we have to convey, that this period of calm was of astonishingly
short duration. Within twelve months, and for a period of two or
three years, the proposals that we put forward received widespread
discussion, not always conducted in an atmosphere of calm detachment,
and even in that short period of time reduced the propaganda both
of nationalisation in its old sense, and still more the committee
system of industrial management, to the position of mere doctrinaire
Perhaps as a result of this inquiry, the boycott of the subject became almost complete, and if such methods could have been effective there is no doubt that the agitation which we had initiated would have died away. But it has always been my personal opinion that the force on which we had to rely was not principally propaganda, but rather the awakening of public opinion, once it had been given the lead, to the explanation of the facts of the everyday world; and that awakening has taken place and is to-day taking place with tremendous rapidity. The process through which our idea went during the period 1918-23 might be likened to the sowing of the seed. It was thinly, but very widely, sown. During the last five years the seed has been driven underground.
Though you will see very little about The
New Age or the Douglas Theory in the popular you will see pages
of criticism of the Bank of England, the Federal Reserve Board,
the International Debt Policy, and if you are sufficiently interested
you will recognize phrases, and even whole sentences, extracted
without acknowledgment from the "Notes of Week," so ably
maintained by Mr. Brenton.
In the United States, however, the policy of
deflation was reversed within six months. Industrialists were encouraged
to borrow money on easy terms, and the public, instead of being deafened
with the insane cry of "consume less and produce more," was
not only encouraged to buy, up to the extent of its resources, but
was assisted to increase its resources by every device possible within
the orbit of the existing financial system.
Out of this situation one clear and indisputable
fact emerges. The American public has tasted material prosperity
far in excess of that enjoyed by any other people at any time, and
is absolutely united in the determination that prosperity shall continue.
 This was written before the slump of 1929. Whether or no this slump was ultimately inevitable, it was most certainly brought about by Financial Interests acting through the Federal Reserve Bank, and the result was to discredit Mr. Hoover.
Now, for reasons which will be familiar to most of you here, it is inevitable that this continuous industrial expansion demands an increasing export market. It is also certain that the financial position of the United States under the existing conventions places its nationals in a position to impose foreign loans over an increasingly wide areas and that the inevitable effect of these foreign loans is to make it possible to impose American productions upon the borrowing country. Any slackness in this process would mean unemployment in the United States, and unemployment on a large scale would not be contemplated by either the political or industrial leaders. The unemployment, therefore, which is inevitable from the progress of the industrial arts will be imposed upon the commercial rivals of America, and in particular the British Empire. That is the situation with which the world is faced today. Its symptoms may be various and obscure, but, in my opinion, it is a disease of which the world may easily die. Its only cure is a radical reform of the financial system of such a nature as would remove the alternative of increased exports or penal unemployment.
Within the last month the new President of the United States has taken office. Mr. Hoover is an engineer of great capacity and with wide knowledge of the world. I think he is perfectly familiar with the problem as I have just stated it, and I think it is very probable that if he were a free agent we should witness a spectacular adjustment of the problem. But he is not a free agent. His Cabinet contains such men as Andrew Mellon, the ideal of banking interests, Mr. Robert Lamont, also closely connected with banking, and Mr. C.F. Adams, Secretary of the Navy, closely identified with a big Navy policy. Their financial interests make it quite certain that the continued supremacy of the financial system will be their first care. In these circumstances we are faced, I think, with the situation provided by a country having both the financial power and the financial knowledge to carry out whatever policy will conduce to the continued prosperity of the existing financial system. That policy inevitably must be a pan-American policy and a policy of continual and accelerated commercial expansion. What the result of this upon the rest of the world will be, and in particular upon the British Empire, which appears to be directed by statesmen and financiers who have apparently learnt nothing and forgotten nothing in the past hundred years, only time will show. We are operating under a system which has certain inherent and vital defects. These defects tend to produce and to aggravate both internal and international difficulties. Unfortunately, the means of enlightening the general public as to the real cause of these difficulties, by which I refer to the public Press, organised speechmaking, and broadcasting organisation and mass publicity in general, are all dependent for their existence on financial support. Consequently, to put it quite bluntly, they dare not indicate the cause of the trouble.
I do not myself believe that we can take to
ourselves credit, either in this room, or even as a generation, for
being the first discoverers of the true cause of the trouble, although
I think probably we have added something to the stock of knowledge
of it. I believe it has been discovered several times before, notably
about a hundred years ago, and in every case general knowledge of
it has been suppressed and the troubles caused by it have been used
as an argument for some form of centralisation of power, of which
the latest form comes under the name of "Rationalisation."
As I remarked in an address two days ago the
first point to realise clearly in assessing the practical situation
is that the problems connected with the financial system do not arise
out of the difficulties of financiers. There is only one uniformly
prosperous business in the world today, and that is "banking"
with its twin sister "insurance." You cannot realise too
clearly that the financier's only anxiety is that
If you see these matters in the way that I see and I have no doubt that many of you do, you will realise the immense area and importance of the interests involved, you will also realise that taking the wide and the long view the approach of a very troublesome period which is as clearly indicated as any signs could possibly indicate anything, ought to be, and for my part is, an indication to be welcomed that the forces of mankind are upon the march, that the seed which we have sown to the best of our ability and which may have appeared during the last few years to be lying fallow, is now beginning to sprout, and that although the forces of reaction undoubtedly will not retreat and be finally defeated without striking many a shrewd blow, in the words of the inspired prophet "The time of our redemption draweth nigh."
When President Lincoln enunciated his famous
complaint that "You can fool some of the people all of the time,
and all of the people some of the time; but you can't fool all of
the people all of the time," he indicated a defect in the scheme
of things which, it is obvious, is troublesome to politicians generally.
Now, it is obvious that there are many things which might be said about this situation, but for the moment perhaps the most interesting of these is the clear light which is thrown upon the essential antagonism between executive statesmanship and public interest. Or, to put it another way, statesmanship might be defined as effectively fooling the People without being found out. I do not think that this matter is quite so clearly realised as it might be, and it is probably worth while giving a little space to its examination.
Let us first state the problem. Is there some
essential reason which makes it impossible to conduct the affairs
of any country honestly? By honestly, I mean with a continuous endeavour
to take such action as will realise a plainly set-forth objective,
such objective being one which the public would itself accept as
desirable, if it thoroughly understood it. And if the answer is in
the affirmative, as I think it is, is there any process operative
to produce a particular type of statesman willing to conduct the
affairs of the nation dishonestly?
It is highly probable that he attaches considerable importance to this sum of £2,400,000 per annum, both because in his Budgetary difficulties every item will be of importance, because of the immense political capital to made out of the feeling that it is quite time someone else, other than Great Britain, "paid" for the war . . . a feeling which I think is common to 99 per cent, of the population of these islands, including myself. But I find it difficult to believe that Mr. Snowden, who is possessed of considerably more intelligence than our late unlamented Prime Minister, regards the mere allocation of the sums obtained from Germany as being the most important aspect of the Young Plan, or is unaware of the fact that it is quite unnecessary for anyone to pay for the war - that was done by those who fought it either in the trench or the factory. Even Mr. Bernard Shaw, whose brilliant wit is so delightful a contrast to his "Socialism," understands that.
Assuming this to be the case, and crediting Mr. Snowden with the ability which I believe he possesses, only one conclusion is possible. He has decided to wreck the Plan, but wishes to wreck it on a comparatively minor point rather than on the question of the Super-Bank which is involved in it. In other words, he would rather antagonise France, Italy, Japan, and possibly Germany, than antagonise the financiers, probably in the main of American domicile, who propose to place Europe under the control of an International Bank. To this end, the Press is engaged in the mobilisation of British opinion against the countries and statesmen who, while involved, are no more or no less responsible than are soldiers in a war they do not understand.
In this situation we have an exact parallel to the condition of affairs which exists in our home politics. Finding it impossible to deny that the condition of industry, of social life, and of national morale is thoroughly unsatisfactory, the role of the statesman appears to be to find a scapegoat who can be blamed with comparative impunity. Mr. Snowden must know, as any individual of ordinary intelligence who devotes a little time to the question must know, that the condition of affairs in the mining industry, textile industry, and the railways, to take only three examples, is fundamentally attributable, and almost solely attributable, to the dead weight of an obsolete financial system. But in the mining industry he allows financial interests to capitalise the discontent of the miner, so that the mineral owner may be deprived of his coal although within the frame of the existing financial system, coal is a form of property indistinguishable from other forms of property except that it is most unfairly taxed. There is no factor in the coal problem so unimportant as the ownership of the raw material, which represents an item in the selling cost of coal of about 3d. per ton. But the mineral owner is a fairly defenceless scapegoat. In the textile industry every effort is made to suggest that management and machinery are at fault, thus strengthening the hand of those interests which desire to trustify the textile industries while obtaining the assets at break-up prices from their existing owners. To the extent to which the textile industry of Lancashire is operating on obsolete machinery, the responsibility is obviously financial, and financial only, since the finest textile machinery is made in, and exported from, Lancashire. If the present owners had the money - or rather, if it would "pay" - they would naturally use the equipment which the makers would be so glad to sell to them. The railways, which were trustified at the behest of the Bank of England and the powers operating through it, are, almost alone amongst the railways of the world, in a state of financial, technical, and administrative stagnation, the services rendered to the public being little, if at all, superior to those available over thirty years ago, the prices charged for these services being probably more than double, and the return to the shareholders less. There is hardly a practical railwayman in the country who does not regard the grouping system as having accentuated every problem with which he has to deal.
So long as this condition of affairs remains so long indeed as the financial system remains unmodified statesmanship would thus appear to consist in attacking one section of the public after another, and steadily reducing the power of resistance of each while consolidating the position of the financial hierarchy. There can be no remedy for this state of affairs, so fatal to morale, until a statesman is in power who is prepared to face squarely the issue that either finance will rule the world and the statesmen will become a species of bank clerk; or, on the other hand, a halt will be called to the aggression of the financier, sanctioned and assisted by the law, upon each section of society in turn, and he will be reminded of the warning given many hundreds of years ago "Ye take too much upon yourselves, ye sons of Levi." Time alone will show whether Mr. Snowden is content to be a bank clerk. He has had, within the last few weeks, an exhibition of the temper of the British people, which, as Lord Castlerosse remarked in the Sunday Express, "has done more to shake the Conservative Party into a sense of reality in one week than did Mr. Baldwin in five years." If he can manage to grasp the fact that the enemies of this and every country are not Frenchmen or Italians or Americans, not dukes, nor employers, or even rich men per se, but those people, wherever they may be domiciled and whether Jew or Gentile, who are determined to maintain a system which would destroy all initiative not sanctioned by themselves, then he has an opportunity to go down to history as the founder of a new Magna Charta. But I cannot help feeling that if we are witnessing the opening of a new drama of Runnymede, the Chief Baron is getting a suspiciously good Press.
Now, to understand this situation, the first point to be realised is that the Government of the United States (i.e. the President, the Senate, and the House of Representatives) is on the whole hundreds of years nearer to being a realistic organisation than are the Cabinet, the House of Lords, and the House of Commons, in Great Britain. That is to say, while only in the last two or three years, there is growing up a small, but increasing, body of members of the House of Commons, who are competent to hold and express an opinion on finance without first consulting their local bank manager, for at least forty years, and probably more, genuine finance, by which I do not mean mere discussions on taxes and tariffs, but rather questions as to the basis and function of credit, have been continuously matters of practical politics in Washington. They first came under review at the very birth of the Republic in the days of Alexander Hamilton. They were of the very essence of the situation created by the Civil War in the late sixties and early seventies. The Bryan Free-Silver Campaign, little understood perhaps by Bryan himself, nevertheless injected fresh ideas into the perennial controversy. And since the War, a continuous agitation, to which such persons as Mr. Henry Ford have contributed, has been proceeding on the same subject.
Now, the result of all this, interlocking with
the control of finance over patronage in politics as elsewhere, has
been to produce a peculiar situation, which, so far as my knowledge
goes, is not precisely paralleled elsewhere. Considered as an institution,
the Government of the United States has never relinquished its sovereignty
over finance. Finance has, as usual, and by the simple method of
supplying the campaign funds of all the political parties impartially,
managed to make its own views prevail, but while being a Government
"de facto," it has not succeeded in becoming, as in Great
Britain, a Government "de jure." You do not hear in the United
States timid and apologetic assurances that on no account would the
Government think of criticising, much less of interfering, with the
banks or the great credit institutions, although for the reasons which
we have just noticed, such interference does not usually materialise,
and criticism remains largely ineffective.
It will not come as a new idea to students of the credit problem, that the financial system, as such, provides an effective sieve for the purpose of assuring that no individual comes into a position of considerable power, without having given, for a considerable portion of his lifetime, satisfactory evidence that he will behave in accordance with the principles which are paramount in the world to-day. Through the agency of these principles, it has on the whole been possible to see that either only safe men were elected to the Presidency, or at any rate were only allowed to be effective in harmless directions.
The Presidential election of 1928, however,
presented a curious problem for the financial interests to solve.
For reasons which are, no doubt, deeply involved in high politics,
finance did not want a Roman Catholic President of the United States,
and Mr. Al Smith was a Roman Catholic. It was considered that there
was only one candidate strong enough to defeat Mr. Smith, and that
was Mr. Hoover, who greatly enhanced a reputation already considerable
in industrial circles, by the organising ability he displayed during
and immediately subsequent to the War.
So far as can be seen by the unprivileged observer, Mr. Hoover has not so far given to Wall Street any serious grounds for anxiety, although his endorsement of higher tariffs is no doubt offensive to international finance, which is quite clear in its own mind that the only desirable tariffs are those which are imposed by itself through the medium of the exchange rates. Mr. Hoover has, however, at least two more years of office, and, if we might venture to give him a hint, that is all the time at his disposal to prove whether he or the bankers rule the United States. If the bankers should be proved to have made their claim good, not only will the cause of economic freedom have received a set-back, but Mr. Hoover himself will have lost an opportunity such as is rarely afforded even to Presidents of the United States.
If the situation in America has been correctly appreciated in the preceding paragraphs it contains a lesson for us in this country. The strategy of international finance is, like all great strategies, based on a few simple principles, and these principles are repeated again and again. The Labour Party in this country has been put into office in order to be discredited, the Liberal Party, which is predominantly financial, and notably Jewish-financial, in its interest, being put into a position to turn it out at any moment of crisis, and to put back our own Coolidge, Mr. Baldwin, for a fresh period of "tranquility." Suppose, for instance, that the Snowden Committee on Finance and Industry were really to grapple with the causes of the social and industrial decay in this country. Then the Liberal Party would be instructed to turn out the Labour Party, and the Report of Mr. Snowden's Committee being the report of a discredited Government would be pigeonholed by their successors, who would be subconsciously aware that their only chance to retain the loaves and fishes would be to leave the question of finance severely alone.
The deduction to be made from these considerations is clear enough. Every effort ought to be made to discredit the idea that a mere change of Government is an effective remedy for any of our troubles. As I am always willing to admit to anyone who is interested in so unimportant a matter, my political sympathies, if any, are Tory, possibly because there is no Tory Party in this country. But any small influence which I might have at the present time would be devoted to keep the present Government in power, simply because it is the present Government, and for no other reason. Every change of the ostensible Government is a success for the real Government, Finance, which is the deadly enemy of this country, and it is our business to cultivate the form of neutrality in regard to ostensible Governments which was expressed by the American in the early part of the European War when he said that he was so neutral that he didn't care who licked Germany.
One further observation on this situation. As
Lords Beatty and Jellicoe have just told us, the naval strength of
this country is in course of being reduced to a point which will
ensure disaster if and when this country is attacked at sea. This
reduction is not made because we cannot build the necessary ships.
Our shipyards are idle, our steel furnaces are unlit, our men are
sick for lack of work. It is because - God help our poor turnip heads
- we have no paper-tickets - "money."
 Notes of a lecture by Major C. H. Douglas in 1920 at a meeting of the National Guilds League.
BEFORE dealing with subject of lecture I propose
to comment on method by which conclusions are arrived at: Explanation
likely to cause intense irritation ! It is admitted by most persons
that there is something seriously wrong in the world to-day-wars,
strikes, etc., general disgruntlement; various prescrlptions for
Practically all Socialist schemes, as well as
Trust, Capitalist, militarist, etc., schemes, are of this character,
e.g. the League of Nations, which is essentially ecclesiastical in
origin, is probably the final instance of this.
It does not attempt to suggest what people ought
to want, but rather what they do want, and is arrived at not so much
from any theory of political economy as from a fairly close acquaintance
with what is actually happening in those spheres where production
takes place and prices are fixed.
Now, under the private capitalistic system the price at which the producer is willing to sell is the sum of all the expenses to which he has been put plus all the remuneration he can get called profit. The essential point to notice however, is not the profit, but that he cannot and will not produce unless his expenses on the average are more than covered. These expenses may be of various descriptions, but they can all be resolved ultimately into labour charges of some sort (a fact which incidentally is responsible for the fallacy that labour, by which is meant the labour of the present population of the world, produces all wealth). Consider what this means. All past labour, represented by money charges, goes into cost and so into price. But a greater part of the product of this labour-that part which represents consumption and depreciation has become useless, and disappeared. Its money equivalent has also disappeared from the hand of the general public-a fact which is easily verifiable by comparing the wages paid in Industry with the sums deposited in the Savings Banks and elsewhere-but it still remains in price. So that if everyone had equal remuneration and equal purchasing power, and there were no other elements, the position would be one of absolute stagnation-it would be impossible to buy at any price at which it is possible to produce, and there would be no production. I may say that in spite of enormously modifying circumstances I believe that to be very much the case at present.
But there is a profound modifying factor, the
factor of credit. Basing their operations fundamentally on faith-that
faith which in sober truth moves mountains-the banks manufacture
purchasing power by allowing overdrafts, and by other devices, to
the entrepreneur class in common phrase, the Capitalist. Now, consider
the position of this person. He has large purchasing power, but his
personal consuming power is like that of any other human being: he
requires food, clothes, lodging, etc.
Before turning to the examination of the remedy built upon this diagnosis, it is necessary to emphasise a feature of our economic system which is vital to the condition in which we find ourselves, i.e. that the wages, etc., system distributes goods and services through the same agency by which it produces goods and services - the productive system. In other words, it is quite immaterial how many commodities there are in the world, the general public cannot touch them without doing more work and producing more commodities. It is my own opinion, not lightly arrived at, that that is the condition of affairs in the world to-day - that there is little if any real shortage, but that production is hampered by prices, and the Capitalists cannot drop prices without losing control. However that may be, this feature, in conjunction with those previously examined, has many far-reaching consequences - amongst others the feverish struggle for markets, which, in turn, has an overwhelmingly important bearing on Foreign Policy. To sum the whole matter up, the existing economic arrangements:
(a) Make credit the most important factor in
A careful consideration of these factors will lead to the conclusion that loan-credit is the form of effective demand most suitable for stimulating semi-manufactures, plant, intermediate products, etc., and that " cash "-credit is required for ultimate products for real personal consumption. The control of production, therefore, is a problem of the control of loan-credit, while the distribution of ultimate products is a problem of the adjustment of prices to cash-credits. It is only with this latter that we are at present concerned.
We have already seen that the cash-credits provided
by the whole of the money distributed by the industrial system, so
far as it concerns the wage earner, are only sufficient to provide
a small surplus over the cost of the present standard of living,
and that only by conditions of employment which the workers repudiate,
and rightly repudiate. We cannot create a greater surplus by increasing
wages, because the increase is reflected in a compound rise in prices.
Keeping, for the moment, wages constant, we have to inquire what
prices ought to be to ensure proper distribution.
The total money distributed represents total
production. If prices are arranged as at present, so that this total
will only buy a portion of the supply of ultimate products, then
all intermediate products must be paid for in some other way. They
are; they are paid for by internal and external (export) loan-credit.
UNDER whatever name the parties to political
controversies may pass locally, whether that of Conservative, Tory,
Liberal, Radical, Socialist, Communist, Republican, or Democrat,
it does not require very much acquaintance with the subject to recognise
that they represent, where-ever found, certain broad attitudes of
mind which are conveniently described by the continental terms "
Right Wing," " Centre," and Left Wing."
It is elementary to observe that in such cases
as the political systems of Russia and Italy, we are spectators of
the ultimate incarnation of a system of thought. Since the distribution
of this system of thought is not confined to the countries in question,
we should expect to find evidences of it elsewhere. I think we do
find such evidences, and as they are specially plentiful in the field
of taxation, that field will fully repay a little attention.
It is well understood that taxation in its present form is an unnecessary, inefficient, and vexatious method of attaining the ends for which it is ostensibly designed. But while this is so, there is, of course, a sense in which, while private enterprise and public services exist side by side, taxation is inevitable. Public services require a provision both of goods and human service, and the mechanism by which these are transferred from private enterprise to the public service must in its essence be by a form of taxation.
Now just as there are two methods in theory by which the unearned increment of association, which we call public credit, can be distributed, these two methods being either a grant of "money" or a general reduction of prices, and the choice between these two methods is one of practicability and not of principle, so there are two methods by which this transfer of goods and services from private to public use can be obtained, the direct and the indirect method, and it is curious that we have such a tendency to insist on the direct method, with its crudities, complications, and inequities. It would be both simple and practical to abolish every tax in Great Britain, substituting therefore a simple sales tax on every description of article, and, apart from other considerations, such a policy would result in an economy of administration far in excess of anything conceivable within the limits of the existing financial system. Why do we not do it? I think that in essence the answer is simple.
What we may call, for the purposes of this present
article, " the taxing mind," is obsessed with the idea
that it has a divine mission to reform the minds, morals, and manners
of humanity by the aid of its favourite instrument. It advocates
taxes on tobacco and whisky, primarily possibly because it thinks
the country must have the money, but antecedently because a number
of quite possibly foolish people enjoy smoking tobacco and drinking
whisky. In some cases, notably in the case of entertainment taxes,
it is quite openly postulated that pleasure and, in particular, luxury
of any kind is in its very essence suspect, and ought to be satisfied
to be specially heavily taxed. This idea has such a general and unthinking
acceptance that it is almost axiomatic to assume that anything connected
with industry must take precedence in importance to anything connected
with leisure or enjoyment. The culmination of this idea is the tax
on income. Now, most people know quite well that popular
The practical importance of the foregoing considerations lies in the fact that the admixture of "moral" considerations into the question of finance and taxation is probably the most potent factor in the prevention of rational modification such as that embodied in the Social Credit idea. It is increasingly clear to me, at any rate, that the majority of those who, while eager to assist, are not suited, either by temperament or inclination, to become experts on the technical aspects of these matters, could do no greater service to the cause which they have at heart than by concentrating on this aspect of the question. It has many times been my own experience in dealing with individuals who might have been of signal assistance to an effective check on the financial monopoly, that in the last resort their true objective was not the solution of industrial or political difficulties, but the imposition of their own particular form of morals upon the community by the agency of economic Government. Until the validity or otherwise of this attitude has been definitely settled, there can be no advance. Government by economic restriction is fundamentally incompatible with either maximum output or maximum efficiency.
Nothing has done more to destroy that real,
if somewhat misunderstood, "brotherhood of the trenches "
than this question of taxation, with which, in Great Britain, is closely
associated the wicked misuse of the word " dole in connection
with unemployment insurance, a device which was diabolically calculated
to produce the impression that the tragic results of banking policy
were due to the incubus of a shiftless proletariat.
THE publication of the report of the Mond-Turner
Conference on industrial relations seems an opportune moment to consider
the possibility, or probability, of any such conference arriving
at a solution of the problems with which it professes to deal.
But, however this may be, it is clear enough
that the Conference as a whole does not propose to attack with any
vigour the real problem. Nor is this surprising. Apart from lack
of technical knowledge in the actual delegates to the Conference,
it is evident that the premises to a technical examination of the
problem have not yet been decided, or perhaps apprehended.
It is a tribute to the immense flexibility of
finance, considered simply as a tool, that it can be adapted without
very great difficulty to meet the requirements of any one of the
three foregoing premises. And the adaptation is in essence as simple,
although as radical, as the difference between these premises. Disregarding
for the moment details of mechanism, it is a matter which is dependent
upon the point of origin of money.
With this preamble, it may be useful to consider
the financial conditions under which a company with a capital of,
let us say, £10,000 operates. It buys a certain amount of land,
buildings, plant. It employs men, and pays them wages, and it buys
materials from other concerns. From time to time it finds it necessary
to buy fresh machinery and to put up new buildings. It would like
to charge the cost of this machinery direct to the purchasers of
its own products, but it is somewhat hindered in this simple and
amiable idea by competitors, who to some extent make a market price
for the article that it produces, which price is independent of specific
costs of production, although perhaps, governed by general cost of
production. Consequently the cost of this machinery, etc., though
it must ultimately be paid by the general public, is paid
Supposing for the moment that this process goes
on uninterruptedly, a time must inevitably arrive in which
the concern in question, while its accounts show a profit, yet has
no money, i.e. liquid bank credit. There are only two courses open
to it; it can apply to the public for more money, that is to say,
it can increase its capital, which of course is merely a preliminary
to the repetition of the process and further depletes its available
market, or it can go to the bank and obtain a loan on the
security of its fixed capital. The meaning of this requires the most
careful attention, because it is the core of the industrial situation.
It will at once be seen that this situation
is intrinsically bound up with the fact that effective demand starts
from the banks and is regarded by them as their property. A little
consideration further, however, will make it clear that any possible
justification for this situation must rest on the assumption that
the bank system is a governing system possessed, either by common
consent or inherent virtue, of supreme economic sovereignty.
[In considering the curves shown in a diagram above, it is necessary to bear in mind that the official statistics on which they are based are given in annual form, and therefore between the yearly dates which mark the ordinates the curves are, necessarily, interpolated. This, in all probability, accounts for their slight displacement from the events which seem to have controlled them.]
IT is an unfortunate defect in our attitude
towards human affairs that we place an inordinate value upon human
life, but a trivial value upon human happiness. You may subject an
employee or a member of your family to persistent mental and physical
cruelty in the form of bad working conditions, unjust treatment,
and a myriad other minor and major inhumanities, and within very
wide limits (and in particular if you do not exceed the conditions
which are accepted as normal) it is unlikely that you will receive
much criticism. You may lend a widow £20 and make her life
In consequence of this curious disregard for
long-drawn-out misery, and the disproportionate solicitude in regard
to the final termination of it, there are no statistics of human
unhappiness until that unhappiness becomes so unbearable that the
sufferer feels that it can no longer be endured, and himself places
a period to it by suicide. When such a climax has been reached, however,
society immediately takes an effective interest in his remains. It
employs scientists to ascertain the physical cause of death, and
detaches citizens from their normal pursuits in order that their
observations on the state of mind of the deceased, who for the first
time becomes interesting, may be recorded. Finally, the suicide becomes
an item in a book of statistics, and is available as the raw material
of a curve.
Now a glance at the graph is sufficient to show that one of the curves is a function of the other. In fact, the variation of one curve in accordance with the variation of the other is most remarkable, and is sufficient to show that the intervention of any other cause not allowed for in the plotting of the two curves is surprisingly unimportant. Where two curves vary together one of them is called the '' dependent variable, and the other is called the "independent variable," and we have therefore to decide whether it is suicides which cause bankruptcies or bankruptcies which cause suicides. This dilemma need not detain us long. We have only to examine the recorded reasons for bankruptcies and the reasons for suicides to find that while financial worry is the commonest predisposing cause of suicide, suicide is almost never given as a predisposing cause of bankruptcy.
We can, therefore, deduce from official statistics that the greatest factor in human unhappiness is financial worry, of which bankruptcy may be regarded as the final stage. We can also deduce from the same statistics that this unhappiness is not inherent in the nature of things, but is a definite and traceable result of a policy, human in conception and human in execution. On the basis of the curves shown, human distress, mental and physical, in this country has increased by more than 100 per cent in the last ten years, and that increase coincides with the period of office of the present Governor of the Bank of England. I have no doubt at all that he would be horrified to believe that he had doubled the misery of this country in ten years, and very probably had been instrumental in a similar situation in all those countries where the policy of the Bank of England has become effective. But while I should not suggest for an instant that Mr. Norman has been actuated by anything but what he considers to be the best motives, I think that it is time that our English convention (that no individual is responsible for the policy which he carries out if he does not originate it) should be dropped, and that Mr. Norman should be identified with the results of the Bank of England's policy, so long as he remains Governor of the Bank of England.
I fear it will not happen, but if a few rough, vulgar men could express to Mr. Norman their rough, vulgar opinion of a policy by which English and Scottish men and women are being butchered to make an international financial holiday, it might act as a stimulant to his imagination - if he recovered.
While making it clear that he feels that the
banking fraternity consists of men of honour and skill in routine
(and we confess that, on the whole, we agree with him)' he is concerned
to inquire whether or no they have any conception of what they are
doing, or where their policy, if any, is leading us. Towards the
end of his article, however, he mentions "the growth of a world
system of co-related and co-operative central banks may be, as people
put it, 'a natural development,' but also . . . there may be much
more deliberate intention and lucid understanding in that process
than appears on the surface." You will see from this that Mr.
Wells is beginning to be exercised upon the relative merits of the"
It-just-growed " theory, or the "Plot" theory, and rather
hopes the "Plot" theory is correct.
The first of these may be quoted in full
Before commenting upon these visions separately, let us consider the root idea underlying all three. It is that Mr. Wells in particular, and certain unspecified banking experts in general, either already know, or easily could know, what is good for the rest of the world, and ought therefore to be put in a position to make their will effective. Mr. Wells himself points out that the banking system, for instance, is a more powerful mechanism of control than has ever existed in the world before, and, at any rate by implication, that its results are more unsatisfactory than has ever been the case before. In fact, it might almost be said that Mr. Wells demonstrates that the unsatisfactoriness of the banking system is in direct proportion to the increase in its power. But his general remedy is to give it more power.
Let us consider his first desideratum ("trustworthy wages"). It will be noticed that "wages" are accepted as being axiomatically a sound institution. No glimmer of the tremendous physical revolution involved by the transfer of labour from the backs of men on to the backs of machines, and the consequent inadequacy of any theory of wages whatever to the new conditions, appears to have reached him. Further, the rapturous folly of the idea that a piece of printed and water-marked paper, or other money token, if put away in a cupboard, can, in some mysterious way, ensure that a certain number of loaves of bread can also be put away in a cupboard and deteriorate neither more nor less than the piece of paper, and consequently can be produced at any unspecified moment that the "saved" piece of paper is produced, appears to be present with him in an acute form, in spite of his reference to Professor Soddy. His conception of the word "trustworthy" denies to the wage-earner for whom he is so concerned, any hope that prices will fall, and thus shuts him out from the benefits of progressive efficiency.
In regard to his second requirement, does Mr.
Wells feel so confident that the modern world is enamoured of economically
compulsory industrial employment to such an extent that it wishes
to be secure in it for ever? Has he never heard of people who hope
some day or other to get into a position in which, so far from being
secure in employment, they would be secure from the necessity of
it? Is he quite sure that all of these are striking examples of original
sin, and that only, for instance, the automobile manufacturer, concerned
to secure foreign markets from his rivals at the cost even of war,
is a true exponent of an inward and spiritual grace?
Then this question of making a financial system
act as a "security against war." As I believe I have said
elsewhere, the average man, while not perhaps representing the pure
and undiluted light of wisdom, is not such a natural born fool that,
having been maimed, blinded, killed, or impoverished in the last
war, he requires restraining from war as an amusement. Just as Mr.
Wells fundamentally mistakes the nature of money, so also he mistakes
the causes and the nature of war.
Of course, it is easy to see where the divergence
arises between Mr. Wells, the orthodox banker, and, let us say, Sir
Herbert Samuel, on the one hand, and a large number of people, of
whom I am one, on the other hand. Mr. Wells feels that whatever Johnny
is doing at the moment, someone ought to run and tell him he mustn't.
I am with him to the extent that I think Johnny is very likely to
be up to a certain amount of mischief, but as a purely practical
proposition, he will get over it quicker and grow up sooner by burning
his fingers than by Mr. Wells or anybody else persistently running
and taking away the pretty matches. Of course, if, like the would-be
Napoleons of finance, he plays with high explosive, he will be blown
up, but that may be all for the best. To relinquish the language
of metaphor, it appears to me that there are nearly always two methods
of dealing with any situation. One is to force the community to accept
the situation whether it likes it or not, and the other is to ameliorate
the situation. I am not so impressed by the intrinsic superiority
of those who fill the positions of power that I want to make it simple
for them to adopt the first method.
Therefore I do not think that any of Mr. Wells'
desiderata are worthy of serious consideration. What is required
of the money system, at any rate in my opinion, is not that it shall
be twisted still further into a mechanism for imposing anyone's set
of ideas upon the world, even to please Jehovah, but that it shall
form a faithful reflection of physical facts without, if it pleases
you to put it that way, having any philosophy behind it at all. It
IT is said that humour consists in the juxtaposition
of the unexpected, and it has further been remarked that as God is
the Absolute, and there can be nothing unexpected to Him, He can
have no sense of humour. These meditations are provoked by the perusal
of The Times of December 14th, 1927. One would not be accused
of accepting entirely without reservation The Times as the
absolute, though the frivolous have been known to refer to it as
the absolute limit. Nevertheless, it is not the organ to which our
thoughts immediately turn when in search of humour.
The leader commences in the authentic manner.
It remarks that, "The news that the country is going slowly
but steadily mad will be received with mixed feelings." A little
lower down it proceeds, in words which we cannot help appropriating
in spite of the unsuitability of the description, "Men of finer
mould, whom even victorious bankers cannot command, may yet feel
a certain poetic justice in a state of affairs which must be regarded
as a triumph for the moon." So ruminate the gods. Let us turn
to the company they keep. It is called "The scheme for regulating
the coal mining industry of Yorkshire, Nottinghamshire, and Derbyshire."
The Times correspondent remarks, with a notable absence of enthusiasm, that the object is to establish the prosperity of the coal-fields by stimulating exports, and to free the home market from the competition of the coal which at present cannot find a market abroad. In other words, and to put it quite simply, the object of the scheme is to still further cheapen coal to the foreign buyer, and raise the price of it to the home buyer.
Now I believe that in those institutions devoted to the care of persons afflicted with an infirmity of the mind, it is recognised that it is not pragmatically useful to laugh unduly at the gentleman who informs you that he is a poached egg and that, like St. Paul, though for other reasons, he dies daily. Rather is it useful to accept the situation and converse gently with him on the manners and habits of poached eggs, and the subtle devices by which they may prevent themselves from appearing on the breakfast table. For this reason, and for no other, it may be desirable to refrain from a demand that violent measures should immediately be taken against persons who put forward such a scheme as the foregoing, but to accept the situation suggested by the Times leader, dealing with the afflicted accordingly.
Let us begin at the beginning. Coal is real wealth as distinguished from money, which is a claim on wealth. Further than that, coal is real wealth of a very special kind. While there may be a great deal of it, that quantity, though large, is finite, and for all practical purposes irreplaceable. So far as Great Britain is concerned, it is not only wealth of a special kind, but it is wealth of a unique kind, since it is, to an overwhelming extent, our main source of power, and the fact that our natural resources and water power are small and we have no oil deposits of any consequence renders coal (not, be it noted, the money obtained from selling coal) more important to us, possibly, than to any other country in the world. That is the first point to be borne in mind. The second point which we really think ought to be obvious to any persons not mentally afflicted, is that you cannot grow rich by sending wealth away from a country. The orthodox justification for exports, which is not the true reason for exports at the present time, is that you export wealth in order to import wealth in exchange for it. Even taking this erroneous explanation of the present reason for exports as being the correct explanation, it seems a little hard to understand why anyone should devise a scheme to exchange a ton of coal for less imports than would normally be obtained for it if the scheme were not in operation. But the fact is, of course, that the very last thing that the industrialists of this or any other country want, is to obtain imports in return for their exports. It so happens that on the same day that this remarkable scheme was published in The Times, the National Union of Manufacturers presented a powerfully supported petition from their Liverpool centre to the effect that a tariff should be placed on all imports, with a view to substituting British manufactures for foreign manufactures.
At this point, the gentleman who has persuaded himself that he is a poached egg will be sure to observe that we have to export coal because we do not grow enough wheat to feed our population. There are obvious reasons why our conversation with him at this point is better conducted out of earshot of the rest of the inmates, because a number of them are struggling with what they call the agricultural problem, which consists in the lamentable fact that as a British farmer cannot sell at a profit wheat that he does grow, more than two and a half million acres of arable land have gone out of cultivation since the war, and, superficially at any rate, he would be justified in objecting with some vigour that, according to the foregoing, the more coal we export the more certainly would he go into bankruptcy.
The matter might be pursued into the many ramifications involved by questions of this character. It might be mentioned that the immediate result, for instance, of selling coal to, say, Germany, under the light of the moon, in this manner, would be to force down the wages of the German miner so that German coal would be brought down to a competitive price, with the result that the purchasing power of the German miner would thereby be depressed, his power to take goods off the German market would be decreased, and the German industrial system would be still further under the necessity of increasing its exports in competition with those of our own manufacturers.
But the serious point which, I think, must be
evident to anyone who will consider this scheme for five minutes
with an unprejudiced mind is the point which is becoming so remarkable
in all questions of policy in this country, and which may be expressed
in the form I ventured to use in the preface to "Social Credit,"
that "the Devil is God upside down." The scheme in question
bears a considerable family likeness to the scheme for the mining industry
which, with Mr. Orage, I put forward in 1919, with the trifling reservation
that it produces exactly the opposite results and accentuates every
difficulty which that scheme was intended to meet. It is intended to
raise the price of coal to the home consumer instead of to lower it;
it is intended to lower the price to the export buyer, and so lower
the return which is obtained for our coal, instead of to increase it.
It is expressly, though of course not consciously, designed to assist
in the rapid arrival of the next war rather than to avert it. It does
not expand National Credit for the benefit of British nationals; it
Published by the Australian League of Rights, Box 1052. G.P.O. Melbourne 3001.