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PAMPHLETS ON THE NEW ECONOMICS
A SHORT COURSE IN ECONOMIC HISTORY
STANLEY NOTT L'TD
69 GRAFTON STREET, FITZROY SQUARE, LONDON
PRICE: SIXPENCE NET
The following is a list of pamphlets dealing
with the economics of the time.
PAMPHLETS ON THE NEW ECONOMICS
Each Sixpence Net
1 C. H. DOUGLAS The Use of Money
Printed in Great Britain
A SHORT COURSE IN ECONOMIC HISTORY FROM THE 17TH CENTURY TO THE PRESENT DAY (1935)
by HELEN CORKE
SYNOPSIS OF THE COURSE
WE shall define economics as the study of processes concerned in the production and distribution of goods and services required by man. Taught with due appeal to the imagination it is not "the dismal science" but a fascinating study intimately associated with the experience of every pupil, and bearing directly upon the needs of his daily life.
History and geography lessons frequently approach the subject, but more generally that side of it which deals with production. When such lessons enter into the business of distribution, they confine themselves to the consideration of transport, and rarely touch upon the working of the financial machinery on which distribution, no less than production, depends. Thus follows the nearly universal public ignorance of the relationship existing between the circulation systems of money and of goods.
We attempt here to outline a brief course which might be incorporated with a syllabus of modern history, and presented either intensively during the last school year, or spread more advisably over the two concluding years.
PRODUCER, DISTRIBUTOR, CONSUMER
Three agents are equally concerned in the business of economic circulation. Each agent can carry out his function fully and satisfactorily only with the full co-operation of the other two.
(We may note here that the consumers desire
for goods and services is the original dynamic force which starts the
running of the economic system. Jones wants a bicycle. His desire impels
him to the cycle shop.
Each section of our study of economics may be profitably shown from the producers, the distributors, and the consumers pointof view.
Our concern is with present-day economic conditionsthose
of our own age of mechanical power. But these conditions have evolved
from the past age of muscular power. This age extended from the beginning
of human history to within two centuries of the present. The nineteenth
century saw the processes of mechanical power production extend from
Britain over the whole earth.
In terms of economics it is convenient to divide the people of any given community into the following classes:
CONSUMERSpersons who use or consume any kind of goods, from a penny loaf to a Rolls-Royce car, or any kind of service, fromthat of the postman to that of the liners captain. The consumers are clearly the largest class, embracing all other classes.
PRODUCERSthose who bring into being the goods desired by the consumers, using for the purpose either their own labour and capital (see definition below) or the organised labour and capital of others.
MERCHANTS buy goods from producers and sell them to consumers. Middlemen or Factors are agents who arrange to transfer goods from producers to merchants.
EMPLOYEESpersons who sell their time, labour, and skill to the other classes of the community in return for a wage or salary.
BANKERS are manipulators of money. They (a) receive money in trust ( deposits) from their customers, (b) invest money in industrial and Government concerns, (c) create credits (which serve the same purpose as money) by selling customers the temporary right to overdraw their accounts (d) buy and sell bills of exchange, etc. (See later section on banking.)
INVESTORS are persons who purchase shares in
industrial trading and mining companies, Government concerns, etc.)
with a view to
By capital we mean everything used by the producer in the production of goods or services. A sweeps capital consists of his brushes, sacks, handcart, etc., together with the money he may keep in hand for buying new tools. A steamship cornpanys capital includes its ships, warehouses, offices, and general equipment, also the funds at its disposal for carrying on thebusiness. The capital value of the G.P.O., a national enterprise, includes the value of all post-offices, material and equipment, postal transport vehicles, telephone and telegraph apparatus, etc., together with the monetary capital available for maintaining the service.
[Note that the means of production in the seventeenth
century were relatively the same as those of all previously recorded
THE ENGLISH PRODUCER
(a) AGRICULTURAL. Majority owned or leased medium-sized
or small farms, capital included stock, wagons and farmingimplements,
savings. Chief products, corn and wool. Farmer worked with all his family;
hired labourers, dairymaids, etc., at annual hiring-fair.
Open fields, strip holdings, wasteful broadcast sowing, animal manure
only. Sold corn in local market, or to merchants factor. Employees
local villagers. Act of Settlement, 1662, made it impossible for poor
people to move from one parishto another, therefore the villager was
practically obliged to accept the local farmers terms for labour.
Wages often paid partly ingoods. Farmers money kept at home in
THE ENGLISH MERCHANT
Bought in market-place, through factor, or by order placed with master-weaver, etc. If engaged in foreign trade usually belonged to a Regulated Company or a Joint Stock Company. Members of Regulated Companies traded each with his own capital, but submitted to regulate trade according to rules laid down for the common convenience, and contributed to the maintenance of the companys agents abroad. A member of a Joint Stock Company took shares in a common venture, with its risk of loss and hope of gain. (See history of British East India Co.) Other joint stock companies were the Hudson Bay Co. and the less successful Africantrading companies of 1618 and 1672. Merchant transport risks very great. Bad roads, highway robbers, sea voyages of uncertainduration. Chief export, woollen cloth; imports were mostly luxury goodswines, furs, Indian silks and muslins, spices, coffee.
Payments between merchants at home and abroad
were made by means of bills of exchange, as to-day. Merchant A sending
a consignment of wool from London to Merchant B in Antwerp would despatch
also a bill, worded, approx.:
At six months date pay to our order the
sum of One Hundred Pounds. Value received.
THE ENGLISH BANKER
Dutch bankers were paramount during first half of seventeenth century. Banking system in England may be said to date from same time. Charles I seized bullion in Mint; civil war spread general feeling of insecurity through land; people formed habit of depositing their money with London goldsmiths, to be locked in safe. Goldsmiths became wealthy; made loans both to Cromwell and Charles II at high rate of interest. One loan to latter ruler was never repaid, and formed nucleus of our National Debt. Money, in the seventeenth century, meant coin and bullion; but goldsmiths issued a promise to pay, in note form, and such notes, because they bore the name of a highly trusted goldsmith, began to be accepted by merchants, almost as readily as money.
USURY, the lending of money at interest, had been discountenanced by the Church of the Middle Ages. Jews, who grew rich bythe practice, and money-lenders generally, were then scorned and despised by the public. But later it became a common businesswith wealthy merchants, who gave it the guise of respectability it has worn ever since. The goldsmith found it reasonably safe to lend his customers money as well as his own, since between any two dates a proportion of the clients only would be likely to ask for their money back.*
* Many people, ignorant of present-day banking
practice, think that the modern banker still lends out his customers
deposits in the manner of the seventeenth-century goldsmithbut
this is not the case. The modern banker, in terms of current financial
jargon makes loans and advances, but in reality never lends
money in existence.Making a loan means authorising a customer,
who provides security and pays interest for the accommodation, to write
cheques to a stated amount, Since these cheques serve the purpose·
of money, the proceeding constitutes a creation of temporary money,
which goes out of existence when the customer repays his loan.
The Bank of England was founded in 1694 by certain merchants who combined to lend £1,200,000 at 8 per cent. interest £100,000 per annumto the English Government, and from it gained a charter giving them the monopoly of Government lending.Using the Government interest (paid out of taxes) as capital, they began to carryon also the ordinary goldsmiths banking business, but lent to customers not coin, but bank-notes, which were promises to pay gold on demand. The main purpose of banking, said a pamphlet on the Bank, printed in 1697, is to furnish the kingdom with an imaginary coin to serve the purpose of that which is really so. The bank-notes were accepted by merchants, and passed from hand to hand as money, each holder saying, I canchange this for gold at any time over the counter of the Bank, which gets money out of the taxes every year from theGovernment.
THE SEVENTEENTH-CENTURY CONSUMER
Many of the necessaries of life reached the consumer directly, without being exchanged for money. Often employees, domestic, agricultural, and industrial, received part wage in the form of produce, goods, or house-room. A farmers household was practically self-supporting, living on the farms produce and weaving its own cloth. Village people bartered goods and services,using money infrequently. Money was only used generally by the country landowners who rented their land to farmers, the merchants, professional classes, and the townspeople in London and the ports. No crowded industrial towns existed in the seventeenth century. Food, being all home-grown, lacked the present-day variety; clothing was durable in kind and worn for long periods, serving several persons before being finally discarded. Scarcity of production and difficulty of distribution made thrift on the part of consumers desirable, and this was preached as a great virtue.
Domestic State Papers, 1667.
1. GOLD AS OF SUPREME VALUE.
2. THE BALANCE OF TRADE.
3. WORK FOR ALL ESSENTIAL.
THE second half of the eighteenth century saw a new force, superior to that of human and animal muscular energy, introduced into the field of Production. We note now the changes worked in the economic world by the application of Steam Power to industry.
THE EFFECT UPON THE PRODUCER
The capitalist (capital-owning producer employing
workers at a wage) had existed as early as the fifteenth century. But
then his organisation did not increase the amount of producta
hand-loom per worker in a factory produced relatively the
same length of cloth per day as a hand-loom per worker in a cottage.
Nor were costs of production much diminished byfactory conditions;
the cottage weaver employing his familys labour and inheriting
his loom and local trade could still compete in the market and make
profit enough to live upon. But the application of steam power to spindle,
loom, hammer, and many another tool gave to the capitalist producer
a great opportunity and advantage. The steam-driven loom, etc., brought
(d) The grouping of factories in the neighbourhood of coal and iron mines, and abundant water supply. The greatly increased demand for coal and iron, and the possibility of sinking deeper pits (due to Watts invention of an effective steam pump) benefited landowners whose acres yielded these minerals. Mineowners became more wealthy than those holders of rich agricultural land, the old aristocracy.
EFFECT ON MERCHANT
Increase of trade, especially foreign trade; new imports of iron and raw cotton, new exports of textiles. Larger ships built.
EFFECT ON BANKER AND INVESTOR
Increase of trade meant greater demand for money and bigger sums deposited at banks. Producers and merchants wanting to build or extend factories, etc., needed loans from bankers and private investors. Old-established country merchants with a Bank of England account started banking for their friends and customers; by 1793 there were 400 such country banks; some issued their own bank-notes, which passed as money locally. In London all merchants freely used Bank of England notes, accepting them in payment for goods, assuming that upon demand at the Bank any number of notes would be exchangeable for gold. At outbreak of war with France in 1793, a run on Bank, which could not meet demand for gold, having lent it to Government to pay subsidies, etc., abroad. Situation met by Pitts creation of Exchequer Bills, which were accepted as having the backing of the Treasury, and therefore assured their holders of payment out of eventual taxes. 1797 Government passed Bank Restriction Act as an emergency measure, legalising Bank of England notes and suspending cash payments.
This action of Pitts, it should be noted, gave to the Bank of England the solidarity of a national institution. Any other banking firm might be dishonoured and discredited if in time of panic it could not pay in gold the demands of its depositors. But the nations credit was pledged to the Bank of England.
Bank-notes, used as money, had come to stay.
And cheques introduced a supplementary form of paper money.
EFFECT ON EMPLOYEE
The coming of steam power, by cutting out the independent hand-producer, greatly increased the number of persons workingunder direction and for a wage. The grouping of factories in areas adjacent to coal, iron, and water tended to bring thousands of workers to those areas. In the rows of cottages built by producers, to house factory hands, and in the bigger dwellings of the producers and managers, we see the beginning of the huge industrial cities of to-day. Nothing hindered the capitalist manufacturers from working their employees the longest possible hours at the lowest possible wage, nor from employing childlabour. Nothing prevented the herding of employees in badly built, ill-ventilated hovels, nor were any precautions taken to safeguard their health. The results were: (a) A lowered standard of living, health, and morals. (b) An increase of population.
EFFECT AS TO CONSUMER
For those consumers who possessed purchasing power the steam-driven machine provided a greater variety of goods than were formerly obtainable. But while, in England, between 1750 and 1800 the population rose from 5 ½ to 9 millions, the number of persons whose incomes were sufficient to ensure them the necessaries of life increased but slowly.
ECONOMIC IDEAS OF THE EIGHTEENTH CENTURY
The widespread popular feeling against old loyalties and institutions which culminated in the events of the French Revolution wasexpressed by writers of the time in terms of admiration for the natural and the individual in action. The economist, Adam Smith, (1723-90) wrote The Wealth of Nations, a book in which he maintained that the community would be best served if the individual initiative of the producer were left unhampered by state interference or control. Open competition between individuals and free trade between nations, said Smith, would result in general progress to prosperity. His views exactly suited the new class of capitalist producers and financiers, who built up trade and increased profits by a system of free competition which kept their employees in a state of economic slavery.
WAR interferes with the normal processes of production and distribution. The individual having money can no longer purchase what he pleases; his demand is effective in a smaller degree; he is subordinated to the will of the State. The State has a single desireto win the war and production and distribution have to be readjusted to meet the desire of the State, as it is expressed bythe individuals who govern it. Production slows down because producers and employees are withdrawn from work for purposes ofwarfare, and because supplies of raw material can no longer be freely imported. On the other hand, the consumption of goods, owing to the destruction of war, goes on more rapidly: every week of war further depletes the nations real wealth.
Britain was at war almost continuously from 1793 to 1815.
We may note the following developments.
3. Conditions at the end of the war, in 1815,
PURCHASING POWER AND SURPLUS MONEY
During the nineteenth century Production steadily
increased, Profits increased, Money (both paper and coin) increased
in quantity. A number of consumers acquired incomes in excess of their
spending power. This money they lent or invested. They refrained frombuying
goods they might have used, in order to bank or invest their money,
seeking thereby to gain in the future by interest or dividend.
THE SEARCH FOR FOREIGN MARKETS
Early nineteenth-century manufacturers realised
that the population of this country could not buy nearly enough goods
to keep their machines running. But there was effective demand in other
European countries and in Asia and America, where steam power was relatively
Lastly it should be remembered that the bankers
agent went forth with the commercial traveller; branches of British
banks were established abroad; the Egyptian prince who wanted uniforms
for his army, the Indian Raj who desired a telegraph installation, could
borrow from British investors the money to pay for them if he would
offer good security and a high rate of interest. The British consumers
whose incomes were in
Britain, during the second third of the nineteenth century, was the workshop of the world. But after 1850 many other competing workshops opened. Steam power, and later, electric power, were installed throughout Europe, also in the United States. Banking companies on the British model financed the new industries. Huge industrial towns with increasing populations grew both in Europe and America, and in time thecondition we have marked in the case of English industry appeared similarly in that of all these other industrialised nations. Owing to their lackof purchasing power the larger proportion of consumers could not buy the goods they required, and producers turned to find a foreign market.
By the end of the nineteenth century foreign
markets were difficult both to find and to keep. The British commercial
traveller and bankers agent, arriving early for an audience with
the Raj, might find American, French, German, and Italian travellers
and agents already in the waiting-room. This position was reflected
in the speeches of the statesmen of the several nations, whose governments
chiefly represented the producers and bankers. Trade jealousy increased
as competition grew keener. The struggle for foreign markets was the
basic cause of the
ECONOMIC IDEAS OF THE NINETEENTH CENTURY
David Ricardo (1772-1823), in his book Principles of Political Economy and Taxation, supported the laissez-faire recommendations of Adam Smith. He also insisted that the normal value of any commodity is determined by the amount of human labour employed in its production; and thought that wageswould always tend to fall to the minimum sum on which the workman could live.
So often were the theories of Smith and Ricardo repeated, so much were their works read and admired, that people began to accept their conclusions as fixed economic laws, operative through all time, whereas the theories were actually only true in reference to the economic conditions known, and but partially understood, by the economists in their own limited period.
People of the nineteenth century did not regard
consumption as the object of production, but profits. They imagined
wealth to be, not
THE World War ended in 1918 because the material
resources of Austria and Germany were exhausted for the time being,
and neither supplies nor credit could be obtained from abroad. The real
wealth of France, Britain, and their allies (with the exception of the
U.S.A.) was also seriously depleted. In Britain prices were high, goods
scarce, and the National Debt stood at £7,481,000,000. It had
risen to that figure from the 1914 level of £707,000,000. This
means that goods and services consumed by the fighting forces during
the war had been paid for by the Government to the value of £6,775,000,000,
all borrowed money, on which interest was
due yearly as long as the loans remained unpaid.
We should clearly understand that only a small proportion of this £6,775,000,000 was gold. Some of it was paper money, but more what is called bank credit, which is nothing tangible at all. At the wars beginning, the Government anticipated that there might be a run on the banks, as in 1793, and took measures to prevent it. A moratorium was declared, postponing for three months the payment of debts.
The Bank Charter Act of 1844, which had limited
the issue of Bank of England notes, was suspended, and the Currency
and Bank Notes Act (1914) legalising the Government to issue its own
notes was passed. Al lsubjects were invited, and later required, to
exchange the gold coins in their possession for notes; the gold was
kept in reserve at the Bank of England for the payment of foreign creditors.
THE PROVISION OF MONEY FOR THE WAR
War operations consumed goods and services to the value first of £1,000,000, later of £3,000,000 per day, totalling, as we have seen, £6,775,000,000 of borrowed money. The borrowing was done in two ways:
1. By BANK OF ENGLAND ADVANCES.
2. By FLOATING PUBLIC LOANS.
THE MARCH OF INVENTION AND ITS SEQUEL
Since Michael Faraday invented the dynamo the application of electric power to industry has steadily progressed. We must now trace thewide-spreading effect of this on post-war economic conditions.
Year by year ever more powerful and effective machines have superseded earlier ones in all branches of production. Year by yearscientific discoveries have increased and made more easily obtainable the raw materials of the earth, both vegetable and mineral. The real wealth of manhis goods and opportunitiesare enormously greater now than at any previous time in history. The rate of production has tremendously accelerated, and is progressively accelerating. The age of muscular power is past; we are now within an age of mechanical power and electric energy.
HOW THIS AFFECTS THE PRODUCER
We have noted the competition for foreign markets among the producers and merchants of the great industrial nations which ledup to the World War. In 1914 it ceased for the period of the war, the consumption and destruction of goods being at that time in excess of their production. There followed several years of reconstruction and replenishing of stocks. Under the provisions of the Treaty of Versailles, German producers were required to replace the Allied shipping destroyed during the war, to deliver coal toFrance, livestock to Belgium, etc. But soon French, British, and even American producers objected to the German goods enteringtheir countries; more goods on the home market means falling prices unless balanced by an increase of purchasing power, and purchasing power had decreased since 1918, because:
(a) the creation of bank credit for Government
advances had stopped,
From 1922 onward producers have sought to reduce
the costs of manufacture and agriculture
by use of labour-saving electric machinery. But the installation of
the machines is a heavyexpense, covered generally by bankers advance
or the issue of new shares. In either case the machines are bought with
borrowed money, and until this is repaid the interest on the loan must
be added to the cost of the goods and charged in the prices to the public.
The producer therefore reduces his bill for wages and increases the
amount of interest he must pay to the banker or investor. He is enabled
to speed up production, improve the quality and increase the quantity
of his goods. But in order to keep his
In 1903 the General Electric Co., U.S.A., built for the Insull interests in Chicago a Curtis turbine. In September, 1909, this turbine, in perfect working order, was withdrawn, and to-day is once more in the possession of the General Electric Co., and exhibited as a relic of a bygone age. That obsolete turbine is still being paid for in interest on the bonds sold to buy it.*
The producer of the early nineteenth century was an individual capitalist who managed or personally supervised his own works. Few such producers exist to-day; the large capital required for a modern enterprise is generally subscribed for by a group of financiers who employ a specialist manager or entrepreneur as organiser. Another form of business organisation is the joint stock company, with its board of management and shareholders, the latter being investors who have nothing to do with the working of the concern, but draw, half-yearly, a dividend of the profits made, in proportion to the number of shares held. The share certificates or bonds of all the producing and trading companies, like Government bonds, are bought and sold in the money market (British, Stock Exchange; American, Wall Street, etc.), their prices rising and falling in accordance with the good or bad prospects of the companies concerned.
The natural and mechanical resources of the producer of to-day are enormous. Science has placed in his hands the means of providing amply for the needs of the whole population of the world. But he is hampered by two considerations: the merchant can only buy a decreasing proportion of his goods, because the effective demand of the worlds markets tends always to lessen; and his own indebtedness to the bankers increases. So farmers limit their acreage, seeking to produce less, and industrialists run their factories at short time, and reduce to a minimum the number of their employees.
* The A,B,C, of Technocracy, Arkwright (Hamilton).
THE MODERN MERCHANT must speed up his business so that his sales keep pace with production. He seeks to buy in the cheapest market and sell in the dearest. The producer's extremity is often the merchant's opportunity. Yet, though he offers his goods at the lowest possible price (and obviously the price must cover the costs of his business and afford a minimum profit), he frequentlyfinds that the effective demand of customers is not large enough to maintain his trade. In Britain during 1933 thenumber of business firms that became bankrupt was 4,606, while in U.S.A. the total reached 20,307. But in trade, as in production, the individual has been replaced by the financiers' group and the joint stock company, with agents at home and abroad, who watch the course of production for bargains; who bid for the harvest before it is sown, and contract for the wool of sheep yet unborn. A third development is that of the Co-operative Societies, associations of consumers who buy goods at shops organised by controllingcommittees, the profits on sales being divided annually among the members in proportion to the amount of their purchases. The Co-operative Wholesale Society is a company whose shareholders are the retail co-operative societies, and these elect its directors. The C.W.S. is producer as well as merchant, owning factories both at home and abroad, and also carrying on banking business.
THE MODERN BANKER AND INVESTOR.
Of the country banks, a large number failed during the nineteenth century; of the rest the majority amalgamated to form what are now known as the Big Five; they work to a single system, co-ordinated with the Bank of England. A large part of their business is exchange bankingthe adjustment of payments among producers, merchants, and investors in terms of the various foreign currency values.
THE GOLD STANDARD.
THE MODERN EMPLOYEE.
A Marion electric shovel will remove as much earth in twenty-four hours as 15,000 labourers could in a ten-hour day.
The Aston process for wrought iron produces an 8,000 lb. iron ball every five minutes, whereas two men formerly took an hour and a half to make a 600 lb. ball. Such instances could be quoted by the score. The result has been the expulsion of employees from industry throughout the industrial world. The International Labour Office estimated, in 1933, that 30,000,000 persons, formerly wage-earners belonging to statistic-keeping industrial nations, were then unemployed. The machines are superseding all classes of workersmanual labourers, factory hands, domestic servants, artisans, clerks, and organisers of all grades of skill.
Assuming for each of these persons two dependent or partly dependent relatives (a low estimate) this signifies a world population of 90,000,000 on or below the poverty-line, not merely short of money but practically without it and with no means of obtainingit. Herein lies the chief reason for the farmers unsaleable wheat, meat and cotton, and the glut of food and useful commodities inthe markets. Since the publication of this International Labour Office report the official total of the unemployed has been partially and temporarily reduced by two expedients: (a) public works schemes inaugurated by the American, German and British governmentsall financed by further government borrowing, (b) the renewal of the competition in armaments. There has also been a British revival of the luxury trades, motor-cars, etc., consequent upon some recovery of public confidence from the effects of the financial panic of 1931-2.
In previous centuries muscular and mechanical
human labour was essential to the life of the community. It is no longer
essential.In the early nineteenth century the increase of production
depended upon the utilisation of the whole strength of millions of workers.
It now depends almost wholly upon electric energy applied to complex
machinery. The supervision of the machinesrequires the work of relatively
few persons. It has been estimated that such labour, divided out among
the employees available, need occupy no more than three to four hours
per day of the workers time. Leisure would seem to be within the
possibility of all.
THE MODERN CONSUMER.
Shops and warehouses to-day are stacked with goods for sale. The elevators of Canada and the U.S.A. were full to overflowing of surplus wheat, and further stocks were being burned, until by international agreement wheat cultivation was limited. Producers deliberately destroy huge supplies of useful food and raw material which cannot be sold at a profit. Food, clothing, tools, toys, etc., grown or made in New Zealand or Japan reach by rapid transport the remotest villages in Britain, and there are offered at a cheap price. In spite of this abundance, millions of consumers are still lacking the necessaries of life, and the majority are unable to buy according to their desire. They are short of money. There remain the minority of consumers whose money supply exceeds their purchasing power, and who must needs invest their surplus; invested money helps to produce more goods which cannot be sold.
REVIEW OF THE POSITION TO-DAY
THE PRODUCER, in order to pay his debts and interest
and make a profit, introduces labour-saving machinery and discharges
THE CONSUMER (in great majority) wants goods and services he cannot obtain. The worlds real wealth is being wasted instead of being used. Effective demand is shrinking, and will continue to shrink as long as the economic ideas current in the seventeenth and eighteenth centuries are applied to twentieth century conditions.
Here, then, is an economic position impossible to maintain, and impossible to change or adjust by the rules of the Age of Scarcityeconomists. It becomes now our urgent task to study the new conditions, and to face the facts of the present time unhampered byideas only relevant to the past stress of poverty from which we have emerged.
Many of the axioms of the Age of Scarcity are now not merely obsolete, but dangerous, standing as formidable obstacles in the way of public progress. We should not allow a seventeenth-century milestone to remain in the middle of a new by-pass motor road; with this thought in our minds let us review the points of economic philosophy we noted previously.
GOLD AS OF SUPREME VALUE.
The tremendous increase in quantity and exchange value of world products; the demand for theirrapid distribution; the relatively small quantity of gold availablethese considerations make it highly inconvenient that gold shallbe retained as the basic medium of exchange. Its use as coin was discontinued at the beginning of the world war. The Gold Standard Act (1925) rescinded the former legal obligation of the Bank of England Company to exchange its notes for gold, and in1931 it was found necessary to repeal the clause of that Act which required the Bank to sell bullion bars on demand. Gold is nowkept in bulk in the vaults of the Bank to serve as the (theoretical) backing of the bank-note issuetheoretical because a large part of the notes in circulation are issued against securities and not against gold. Lord Melchett, in his book Modern Money says: Gold is the only commodity that matters of which there is a shortage. It is, from the practical point of view, the most useless of allcommodities. Yet we are such lunatics that we allow this one shortage to deprive us of the benefits of plenty in all the remaining prime commodities.
THE BALANCE OF TRADE.
The old idea, dating from the seventeenth century, expressed the balance of trade as favourable when the nation was exporting (in exchange for gold) more goods than were being imported. The net result of a favourable balance was that real wealth (goods and services) really needed at home went abroad, in return for gold which could not be consumed, butonly saved up for future purchases. This indicated a form of national thrift justifiable when real wealth was limited and its future supply precarious. At present it is not only unjustifiable but foolish. Our problem is not how to save, but how to use to the bestadvantage the vast abundance of real wealth ensured to us by science and the world-wide use of electric energy. The command of the twentieth century economic genius is Distribute or destroy!
WORK FOR ALL NO LONGER ESSENTIAL.
Human labour bears every year less relation to this abundance of goods. Work for all inthe fields of agricultural and industrial production is not merely unnecessary; it cannot be guaranteed. Machines of tremendous power and marvellous capacity, displacing employees by scoreseven by hundredsrequire only a few men to tend them. They place the possibility of economic freedom and leisure within the reach of millions of wage-slaves.
THE ECONOMIC IDEAS OF THE TWENTIETH CENTURY
Of present-day writers on economics the work
of C. H. DOUGLAS stands paramount for a clear analysis of the position.
The proposals are:
1. That the creation and issue of Money should
cease to be a Bankers Monopoly, and that the sole right in both
functions shouldrevert to the Crown. That all administrative powers
in relation to these functions should be vested in a National Credit
Douglas maintains that the total value of Production
should bear the same ratio to that of Consumption as total Costs do
to totalPrices. In other words, Purchasing Power in the hands of the
community should equal the price value of the goods for sale, so thatthe
latter shall be always distributed. If it may be assumed, for example,
that the total value of the nations Production and Imports for
a given period is £600,000,000, and its total Sales for Consumption
are £400,000,000, then ,it isapparent that one-third of
the goods available for use can not be distributed, presumably be cause
the public lacks Money to the amount of £200,000,000.
By means such as these, poverty and privation should now be banished as bubonic plague has been eliminated from this country. The same policy would reduce the chances of war between nations to a minimumfor the prime cause of modern warfare is thefear and irritation engendered by economic necessity, by shortage and want. When effective demand is operative in each home land, its producers will no longer need to maintain a fiercely competitive struggle for foreign markets. The competition of the future will be for excellence of quality, the factor which will determine individual demand, and therefore the volume of producers sales.
THIS EDITION FIRST PUBLISHED IN 1935
THE DOUGLAS MANUAL
A RECENSION OF VERBATIM PASSAGES FROM THE WORKS OF MAJOR C. H. DOUGLAS OUTLINING SOCIAL CREDIT
Compiled by Philip Mairet
The works of Major Douglas throw out a challenge which every thinking man must appreciatc.The Spectator.
Mr. Mairet has performed a difficult task to admiration. Only those who have gone from book to pamphlet in search of an elusive quotation will fully realise the usefulness of this compendium.New English Weekly.
His manual may be commended to all who wish to understand this economic theory . . . The Morning Post.
Mr. Mairets efficient work of compilation has made it possible for interested laymen to master the brief of the economist whose work has provoked the most bitter fury and the intensest enthusiasm of any published since the European War.Time and Tide.
. . . for those hearing of the Douglas theory for the first time, here it is, presented in authoritative and readily accessible form.Review of Reviews.
. . . even among active supporters and critics of the scheme a thorough knowledge of its details is often lacking . . . the Manual can be accepted as thoroughly authoritative, and it offers a convenient opportunity to anyone wishing to study a theory which can no longer be ignored . . . unusually well printed and has a good Index.The Yorkshire Post.
The book will be very disturbing to all disciples of orthodox economics. With simplicity and with unanswerable logic it calmly overturns the most cherished of doctrines and so-called axioms.Vancouver Daily Province.
. . . the book should be read by all conservatives who are not yet familiar, at first hand, with Major Douglass theories. Here, in the briefest and clearest form, is the complete outline of these theories. . . . Major Douglas is, at the lowest estimate, a strong original thinker in the field of economics. Knowledge of his thought cannot fail to benefit anyone who is seeking the way out of our present waste land.The English Review.
by E. SAGE HOLTER
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AN ALPHABET OF THE NEW ECONOMICS
A glossary for the plain man
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CREDIT-POWER & DEMOCRACY
Fourth, enlarged and revised edition
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Fourth. enlarged and revised edition
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CONTROL & DISTRIBUTION OF PRODUCTION
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New and enlarged edition
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