SOCIAL CREDIT PRINCIPLES

FOR POLITICAL AND ECONOMIC REALISM: This journal expresses and supports the policy of the Social Credit Secretariat which was founded in 1933 by Clifford Hugh Douglas.

The Social Credit Secretariat is a non-party, non-class organisation neither connected with nor supporting any political party, Social Credit or otherwise.

SOCIAL CREDIT PRINCIPLES

An address delivered at Swanwick, November, 1924 .

By Major C. H. DOUGLAS

(Revised,* January, 1954)

The financial system, in its control over production, stands to the works or factory system of the world, considered as an economic unit, in the same relation as the planning department of a modern factory does to that factory.
The distribution side of the financial system exercises a function not dissimilar to that of the progress department of a factory.

No discussion of the financial system can serve any useful purpose which does not recognise:–
(a) That a works system must have a definite objective.
(b) That when that objective has been decided upon it is a technical matter to fit methods of human psychology and physical facts, so that the objective will be most easily obtained.

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 it is 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 a 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 they are clear you are not in a position to offer an opinion on any economic 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 thing 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 administrative 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 actually expended in consumption is wages and salaries.

It will therefore be seen that there are two standpoints from which to examine its mechanism. The first considered as a method of achieving its political end of universal work, and the second as a means of achieving some other political end–for instance, the third alternative already mentioned.

Considered as a means of making people work (an aim which is common both to the Capitalist and Socialist Party Politics) the existing financial system, as a system, is probably nearly perfect.

Its banking system, methods of taxation and accountancy counter every development of applied science, organisation, and machinery, so that the individual, instead of obtaining the benefit of these advances in the form of a higher civilisation and greater leisure, is merely enabled to do more work. Every other factor in the situation is ultimately sacrificed to this end of providing him with work, and at this moment the world in general, and Europe in particular, is undoubtedly settling down to a policy of intensive production for export, which must quite inevitably result in a world cataclysm, urged thereto by what is known as the Unemployment Problem.

To blame the present financial system for failing to provide employment is most unfair; if left alone it will continue to provide employment in the face of all scientific progress, even at the cost of a universal world war, in which not only all possible production would be destroyed, but such remnants of the world’s population as are left will probably be reduced to the meagre production of the Middle Ages.

Considered as a mechanism for distributing goods, however, the existing financial system is radically defective. In the first place, it does not provide enough purchasing-power to buy the goods which are produced.

I do not wish to enter at any great length into the analysis of why this is so, because it is always a matter of some heated controversy. I have, however, no hesitation whatever in asserting not only that it is so, but that the fact that it is so is the central fact of the existing economic system, and that unless it is dealt with no other reforms are of any use whatever.

And the second feature of equal importance is that considerably less than the available number of individuals, working with modern tools and processes, can produce everything that the total population of the world, as individuals, can use and consume, and that this situation is progressive, that is to say, that year by year a smaller number of individuals can usefully be employed in economic production.

To summarise the matter, the principles which must govern any reform of the financial system, which will at one and the same time avoid catastrophe, and re-orientate world economic policy along the lines of the third alternative, are three in number:–
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.
2. That the credits required to finance production shall be supplied, not from savings, but be new credits relating to new production.
3. That the distribution of cash credits to individuals shall be progressively less dependent upon employment. That is to say, that the dividend shall progressively displace the wage and salary.

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 the banks, which is so hard to explain, and which is grasped by so few people, is that their true assets are not represented by anything actual at all, but are 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 vague generalisation into a more concrete form, the true assets of the 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 exist, but which might exist, and which is kept out of existence by the fiat of the banking executive.

END

*THE SOCIAL CREDITER, Saturday, January 2, 1954.

Social Credit Principles

The Editor, The Social Crediter,

Sir,

The important brief statement of the principles of Social Credit, which takes its origin from the address delivered by Douglas at Swanwick in November, 1924, was printed in The New Age in its issue for November 20 of that year, has since been several times reprinted and appears in Warning Democracy by C. H. Douglas as Chapter IV of that work (pages 37 to 43 of the third Edition).

A correspondent abroad has on several occasions questioned the accuracy of the newspaper’s report of the first paragraph only and has suggested the withdrawal of the printed texts in existence, so far as practicable, and the substitution of an accurate text.

His suggestion was reported in detail to Major Douglas in 1935 and again, to my knowledge, in September, 1945. A written statement was elicited from Major Douglas on the first occasion which is conclusive concerning the authoritative text, but neither then nor later was it ascertained whether the author considered public correction necessary or desirable. Nevertheless, there can be no question but that the authentic text is superior to the published text in completeness of expression. Distortion of meaning is not involved, excepting in regard to an omitted paragraph, the wording of which Major Douglas (1935) reported from memory. Here too, a competent Social Crediter will recognise the emendation proposed by Major Douglas as a paraphrase of what he said on other occasions, and thus not of the order of a modification in any sense of his views.

The corrupt passage of which complaint is made is as follows:–

The financial system is the works or factory system of the world, considered as an economic unit, just as the planning department of a modern factory is of that factory.

Having corrected this passage, (vide complete text infra) Major Douglas went on:–

As far as my memory serves me, there is a further complete paragraph left out, somewhat as follows:– "The distribution side of the financial system exercises a function not dissimilar to that of the Progress department of a factory."

It is not for me to speculate concerning Major Douglas’s reasons for not insisting on immediate correction of the text of a brief but important summary of his views, which has been very widely distributed. Even non-technical readers will appreciate that both the statements cited above are in fact similes, and, as such, have only such force as a figure of speech may possess. However this may be, I have authorised the reprinting of the leaflet, "Social Credit Principles," with the wording as corrected by Douglas, with an intimation that the text is a revised text, the date of the revision (January, 1954) being stated with a following reference to this letter of explanation of the circumstances. I have taken this course because I think it would be unwise to distract the attention of any new reader from uncomplicated study of the text as Douglas originally intended it to appear.

I append the revised text.

Yours faithfully,

Tudor Jones,

December 23, 1953 Chairman, Social Credit Secretariat.