Science of the Social Credit Measured in Terms of Human Satisfaction
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Science of the Social Credit Measured in Terms of Human Satisfaction
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Book Review: by Geoffrey Dobbs

“Home” Journal August/September 1988

The author is an industrial Chaplain, and he starts with 31/2 pages under the heading: Christian Insights. He defends the action of Christians who bring their faith to bear on social policies, and selects six of the ‘insights’ that they have to offer. Of these, the most relevant would seem to be: that the world is God’s, and its created wealth is freely given; that wealth is earned as well as given; and that every individual is precious and ought to be free to develop his ‡ God-given capacities.

There is a very brief historical outline of the Poor Law from 1601 onwards and a longer treatment of the Beveridge Report, which makes it clear that Beveridge’s aim for a universal insurance which would, in time, abolish the Poor Law (e.g. National Assistance) has never been implemented. It does not mention that he refused even to look at a proposal for a social dividend proffered to him by Juliet Rhys Williams while he was writing his Report, but credits her with floating the idea in the 1930’s.

Bertrand Russell put forward essentially the same proposal in 1918, in his book Roads to Freedom, the same year that C. H. Douglas’s book Economic Democracy appeared in the New Age under A. R. Orage’s editorship. In 1924 a specific proposal for a National Dividend appeared in his book Social Credit in an appended Scheme for Scotland. This was, and remains, the best known of the proposals put forward by C. H. Douglas and the Social Credit Movement which he initiated, though never as an inflexible objective or a panacea, always as a part of a package accurately designed to cancel debt, prevent inflation, and to decentralise financial control of production to the consumers.

Therein lies the main difference from what Mr. Torry is hoping for, which is a new Beveridge Scheme, (p21) rather than a revision of the old one, but with a far more sweeping of income by taxation of earners and investors, not just to the poor, sick or unemployed, but to everyone, as an extension of the principles of the Welfare State. The proposed scheme is simple: a Personal Basic Income (PBI) would replace all benefits, grants, allowances, and would probably be paid into every citizen’s giro account (children’s to the parents’, probably the mother’s). It would be financed by a tax on all income other than the PBI itself, with no other exceptions or allowances.

*Malcolm Torry: Basic Income for All; A 25 page booklet (Grove Ethical Studies No. 68). Grove Books Ltd., Nottingham, 1988, £1.50.

‡ Please note I use the time-honoured convention that ‘his’ covers both genders in this context. The author writes: “in which he or she can express their God-given capacity” (my emphasis) which is both propagandist and ungrammatical, but exposes one reason for the established usage, since it avoids the clumsy repetition of he or she, his or her, man or woman, etc.

The Advantages are Great

The advantages are obvious: provided the PBI were sufficient for a decent subsistence, it would confer independence and freedom of choice of occupation upon all, and far greater flexibility on the employment system. That choice could include living somewhat austerely on the PBI alone, doing much needed voluntary work without pay, or with minimal pay, taking worth-while part-time employment, or full-time employment as at present. Employers also would be more free to employ the most suitable people, or to sack the inefficient without worrying about depriving them of livelihood or rendering them ‘unemployed’, since that condition, and the stigma attached to it, would cease to exist.

Innumerable causes of desperate dissension, frustration and degradation would disappear, though not, of course, all of them, and the conflicting ideals of basic economic equality for all, and freedom for initiative with earned reward for merit, would both be largely and harmoniously realised. The author admits the difficulties, and draws attention to the Basic Income Research Group and

the considerable literature now available on the subject. He rightly feels that the proposed great liberation of personal choice as to how and for what purposes to spend 'one’s life and energy, is fully in accord with Christianity.

So far, so good! That is the positive side of it. But as with the original Beveridge Report, the short account stresses the benefits from the receipt of money, to the exclusion of the negative side, the damage done by the compulsory taking of money under threat of the penalties of the law. The author briefly mentions the debate about whether the PBI should be set at or below subsistence level.

If below, then supplementary benefits would still be necessary for some ‘unemployed’ and the scheme would partly fail in its aim. But if it were as much as subsistence level, then taxation could be over 50%

What we should first ask ourselves is what real basis there is for such a basic income. If the money were available, do we have the materials, the energy, the tools and machinery, the skills, the manpower, to provide the means of living, the housing, clothing food etc, which a basic income could buy? Or if not could we acquire them? The answer surely, is Yes! In most cases in excess, witness for instance the ‘mountains’ of food being wasted, the closing of coal pits, unemployment in the building and clothing trades, closing of many factories, or cutting down of staff and production, and so on.

It is quite clear that poverty and deprivation in a country such as Britain is monetary, not based on the real wealth potential.

Based on Real Wealth — or Political Debate?

In real terms a Basic Income is certainly possible: the material ingredients are, or could be, present now. But the author is not thinking in real terms. He does not try to relate the amount of the PBI to the real wealth which is or could be available, but which is suppressed or destroyed and not distributed, or else purchased only on ‘credit’ (i.e. debt, mortgaging future income).

He assumes, as most do, that a distribution of money, irrespective of what is available to buy, should be decided by debate and discussion and feelings as to what would be ‘fair’ and expedient. He also assumes that the Basic Income can be financed only by depriving anyone who contributes to the wealth-making process of probably half their reward, by a tax levied on all earnings and investments - but he does not go into the consequences of such a penalty, though it must be clear that they would be disastrous. They must, in fact strangle the economy and render a subsistence income for all impossible.

It is strange how often Christian people, who in other matters are passionately against any form of compulsion, call for, support and promote that form of forced extraction of money under threat of fines or imprisonment known as taxation.

The proposal here put forward if carried out must necessarily constitute the most merciless discouragement of all gainful economic activities ever attempted, unless, indeed, as would probably happen, trades union or other organised pressure should succeed in inflating wages to cover the tax as well as a fair return in ‘take-home pay’ for the work done.

Dividends would also have to be more-than-doubled for the investment to be worthwhile. All this would mean galloping inflation with which the subsistence income could never catch up, since the PBI-tax itself would be the major factor in enforcing it. It always seems to be forgotten by those who favour taxation to reduce poverty that wages and salaries are costs and go into prices, and it is the poor who are hardest hit by high prices. What they are given out of other people’s wages is taken away again in prices. It is a futile cycle fed by a puritanic perversion of the charitable instinct, which has confused taking with giving.

As electronics proceeds and liberates more people from unnecessary routine labour, how can the wages of the dwindling minority provide a decent income for the growing majority, and why should they? Already, a vast amount of ‘employment’ performs no really useful function, and much of it a damaging or destructive function. It is undertaken solely for the acquisition of money, either as wages and salaries or as profits, and its product, if any, is forced upon the public by the techniques of advertising. But a tax-based basic income for all would require an ever-growing money-earning economy, however wasteful or futile. People who exercised their freedom to avoid such work in favour of more useful unpaid, part-time or lower paid work would simply be destroying the tax-base of their freedom.

Why always Taxation?

But why is it assumed that taxation is the only possible source of such a basic income? Already there is some alarm about the growing proportion of pensioners and the falling proportion of wage-earners to tax for their support. In effect the proposed tax-based PBI would be a pension for everyone, from birth to death.

Our whole economy is now run on credit, including the ‘consumer credit’ without which it would collapse. It must be repeated that this is debt, repayable with interest, mortgaging future pay, another reason why pay must be got, regardless of how.

If we add this burden of debt to, say, 50% taxation on all money earned (with no allowances, thresholds, or lower rates) it would mean that only a small proportion of the wage-element in price would be the actual cost of the labour. The rest would be quite extraneous costs. That is not real economics at all.

In the real world of production and consumption the cost of producing something is the labour, energy and materials used in its production. When the job is finished it has, in real terms, been paid for. Thus the capacity for ‘overproduction’ (in terms of current money incomes) which would in the first place form the substance for distribution as a Basic Income for all, has already, in real terms, been paid for. But not so in monetary terms.

All money, nowadays, is simply a system of figures, created as a debt repayable with interest, and every economic activity leaves behind it a burden of debt which, ultimately, somewhere in the system, can be repaid in full only by more borrowing. We have given many examples of this in HOME, e. g. of a block of flats which was demolished, leaving £43,000 annual loan charges for the next 43 years, and the Humber Bridge, with a debt now at £256 million and still growing, since the tolls cannot meet even the interest charges.

Our Artificial Debt Economy

The money which Governments spend is raised by borrowing. Taxation is necessary to repay the debt. Our whole economy is a debt economy and grinds on with enormous friction and misery and is manifestly breaking down, basically because it controls and distorts instead of reflecting and enabling the real economic situation. Economists, those experts on debt-economics, take the money system for granted as if it were an immutable reality rather than a man-made system of symbols on paper.

Our situation since the technological revolution (and indeed, before it) is ironic to the point of absurdity. I t is as if admission, say, to a banquet were in the hands of an entirely separate body which limited the tickets according to various theories of ticketry quite unrelated to the places and the meals offered. The fact which people are so loath to face is that our money is now quite as artificial, arbitrary, and centrally controlled a system of computer-and-paper-work as any ticketing system, though of course far more complex and subject to political, ideological and other power considerations which ought to be extraneous to its purpose.

Since, as we all know, the technological revolution has made it easily practicable to produce the necessities and common comforts of civilised living with an ever-decreasing work-force, are we prepared to demand: ‘let those who cannot find a paid job, and their families starve or go short, while we suppress or destroy that which could supply them’? For if not, we should realise that we all ought to receive our share of this inheritance which we owe to the scientists, technicians and inventors of the past and not in any way to our own work or merit.

Nevertheless, there is no production, and no wealth to share, without somebodyies’ work however much multiplied by technology. To pay the basic income out of taxation of the workers is to kill the goose which lays the golden eggs. Why should producing the means of everyone’s livelihood be treated as a criminal offence, subject to a perpetual fine of half the rewards of all labour – a penalty which would arouse violent protests if applied to a real criminal? Where is the ‘social justice’ in that?

Manifestly, a PBI is far from impossible in real terms, and manifestly it could be made practicable in financial terms, but only by a radical reform of the loan-credit system to allow of the monetization of produceable real wealth without borrowing, which would be resisted by the entire loan-credit establishment—admittedly a formidable opposition which could not be overcome quickly.

Maybe it would be a lifetime’s work, but surely that would be more worthwhile since it aims at a real objective than to devote one’s efforts to the punishing of wealth-production by confiscatory taxation.

N0 Mention of the New Economics

Mr. Torry assures us that the debate on this subject of the Basic Income is now widespread among the unemployed, the churches and academic circles, but he does not mention the world-wide, public discussion and extensive literature on the National Dividend as part of a more radical approach to the New Economics which took place between the two World Wars. Much of this may rightly be thought to be out of date, but the analysis and proposals of the late C. H. Douglas ought now to be looked at again with far more respect than they were shown at the time, for the course of events has shown that he was far more right than his critics.

From 1918 onwards Douglas pointed out in his writings and speeches that the deficiency in purchasing power, expressing itself as a growing time-lag between incomes and prices, was a permanent, built-in feature of the length and complexity of modern technological processes, as financed by loan-credit. Also that it must result in a continuous rise in the cost of living. At the time both these contentions were contemptuously rejected by professional economists as exaggerations of temporary effects.

Now, both continuous price-inflation, and a massive growth of consumer credit (i.e. debt) as an essential part of the economy without which it would collapse, are taken for granted. So is the continuous growth of technology replacing human labour, which Douglas—an engineer and pioneer of automation (the Post Office Tube) also predicted. His later development of a deeply Christian social philosophy under the name of Social Credit is even more worthy of study and discussion.

Douglas’s economics was concerned with the realities of production and consumption, with money as the enabling, not the controlling, factor. His best-known proposals: the debt-free national dividend and the anti-inflationary compensated price, both possessed an element of negative feedback, being governed solely by the need to equate money demand with the price of the real product available, rather than being arbitrary hand-outs determined by prevailing political or sociological opinion.

Economic Homeostasis

Thus, as the dividend varied in amount the need to take paid work would vary inversely, and with it the amount and ‘quality’ (i.e. specificity) of production - an arrangement tending to economic stability by homeostasis, now a commonplace concept, but then long in advance of its time. This is in contrast to present financing exclusively by borrowing with its dangerous positive feedback, (i.e. the more debt the more the need to borrow to repay it plus its interest) needing constant interference to correct its in-built instability with its threat of runaway inflation.

It is unlikely that human society is an exception to the rule that governs all living organisms (including our own bodies) and their associations, namely that their survival depends upon the development of some homeostatic arrangements ensuring the flexible stability of all their vital functions. Our debt-based economy is a one-way street leading to disaster. The instinct of survival alone should direct our intelligence towards its equilibrated correction, which must start with the obvious fact that debt (i.e. minus money) cannot be neutralised by more debt, but only by debt-free (i.e. plus-) money, in the correct amount.

At the time of writing interest rates on debt-money are being raised to check what is described as ‘the flood of money’ which is already raising the inflation rate. We are said to have too much money chasing too few goods, and our Conservative Chancellor is hoping by making borrowed money more negative to slow its rate of devaluation a little (e. g. to halt it at 6% per annum). The Labour Opposition criticises the reduction in Income Tax in the last Budget, and if in power would increase taxation (i.e. income deficit and cost increase) though it would scarcely dare to do so to the extent suggested to finance the proposed Basic Income. When they last raised Income Tax to confiscatory levels inflation was about 25% p.a.

This idea of controlling inflation by strangling debt with itself has dominated what is called orthodox economics for this whole century and has reduced the real value of money to one-fortieth of what it was within living memory. Yet those responsible have the nerve to deride as ‘inflationary’ the idea of substituting for the ever-growing debt a basic income of debt-free credit which would neither create wage-costs nor increase prices. “We already have too much ‘money’ ”, they would say, “to add more would make it worse!” which is like refusing to neutralise a strongly acid solution with an alkali, on the grounds that since a chemical has made it corrosive, to add more chemical must make it more so.

Between the economics of reality and that of debt-accountancy there seems to be a great gulf fixed which so far no one has crossed. We have tried to deal several times in HOME with this question of Christian Social Policy, which is the subtitle of Mr. Torry’s booklet. But at the risk of repetition one can but suggest to him and his friends that a Christian, surely, must give priority to the reality of the Creator rather than of the banker. And it is Christianity which teaches us that Grace alone is debt-free, and alone can redeem what, in human terms, is irredeemable debt.

© Published by the Australian League of Rights, P.O. Box 27 Happy Valley, SA 5159