ALOR - Science of the Social Credit Measured in Terms of Human Satisfaction

"All that is necessary for the triumph of evil is that good men do nothing"
Edmund Burke

May 2003: A Little Superproducer

In his book Social Credit, C. H. Douglas calls attention to a paradox: "If we regard the distribution of money power to all individuals, in opposition in [sic] the present tendency to concentrate it in group-organisations, as the first aim of economic freedom, we are driven to a somewhat hackneyed conclusion-that the means and the end are in this case identical. We can only defeat money power with money power."¹ The social credit movement continues to wrestle with this problem of sanctions. Douglas's predecessor Charles Ferguson has something to teach us in this regard. He finds a key to sanctions in the huge potential energy of production just waiting to be released by a progressive credit science. Douglas quotes Ferguson's associate H. L. Gantt that U.S. industry was only 5% efficient. If it were possible to use money/credit in such a way as to release even a modest fraction of that huge potential, that would be a competitive edge-a sanction-in the marketplace. It is true that the banking system has a monopoly on the creation of money and keeps it on a tether; but it is a long tether, and within broad limits, money can move rather freely.
    A social credit system properly so called requires control over the creation of money at the national level or of a money substitute at, say, the provincial level. So we would have to get the reins of government in our hands at one level or another. But Ferguson asks whether we can't take hold of the credit system in a different spot and ultimately get hold of credit creation that way. Even within the limits of the official money economy, can we use our credit science to create a production and service enterprise that will outperform all rivals? He is confident that the capital college will release so much of the untapped energy of production that it will become a little superproducer. It will produce twenty times more efficiently than any competitor in its field. This is why he does not find it necessary to introduce a local "ticket system" to substitute for the national money.
    But the Money Power possesses the ultimate sanction to pull the rug out from under the little superproducer! That may be, but it depends on a number of variables: How many capital colleges are there, and how much have they been able to accomplish before being perceived as a serious threat? If the public can get even a taste of the standard of living that is easily achievable and they try to take it away, the public may finally get its dander up. It must be stressed that the awesome power of finance is entirely psychological. If the public ceases to be mesmerized by the specter of debt, everything will change.
    Of course, our little superproducer is not a "sustainable" economy or a model for a nation. For one thing, it specializes and sells outside itself 100% of its production. It can succeed only because the rest of the economy is so inefficient. It will lose its advantage as soon as its competitors begin to imitate its methods. But by then it will have attained its end, it will have set a new standard. When by sheer force of competition there are many capital colleges in a nation, the time will be ripe to convert this huge, newly released energy of production to the purpose for which we really intend it-a self-sustaining, large-scale economy of abundance. The little superproducer is really just the "missionary" phase of the larger effort.
    A community spreading itself thin so as produce all its own basic needs is one thing. A superproducer venturing to challenge the capitalists at their own game is something else, although it is a community, too. The latter does not need its own internal currency, and indeed might have no use for it (it might specialize in something that no member of the community can use). But even though the capital college does not have its own currency, it does issue a credit instrument. I refer to its capital shares, which "represent substantial land-values acquired in perpetuity, to be administered as the physical estate of the college-furnishing the basis of its credit in New York and throughout the world." It issues these in exchange for land and property, and it also invests 10% of its net earnings into the physical estate, rewarding all workers with corresponding shares of new stock.²
    The capital college aims by its advanced methods to give the buying public a better deal than they can get anywhere else and to pay its workers (and investors and suppliers) better than anyone else does. It aims to raise the standard of living in a place. "Place" is defined by contiguous land, and dramatically raising the standard of living on contiguous land will make that land a de facto political jurisdiction. The capital college thinks of itself as a City in the making:

The New Finance goes into the Civilization business. It makes city-building the direct object of business enterprise. Applied on a comparatively small scale in the midst of our ram-shackle cities as they exist, the capital-college plan may be regarded as a scientific method of real estate development. All the cultural values of civilization register themselves as land-values. . . . The business organization that sustains the life of a community shall be identical with the cultural organization that makes life worth while. No distinction will be made between a business system directed to the lowering of the cost of living and a cultural system that aims to raise the value of life.³

So the capital college is a business system and a cultural system whose success in making life good is reflected in the increasing value of its physical estate and therefore in the increasing value of shares of its capital stock.
    In the self-sustaining, large-scale national economy of abundance, success in making life good will be reflected in the increasing purchasing-power of its monetary unit (and therefore its high value in terms of other currencies). The success of the little superproducer is reflected in the increased value of a share of its stock (and therefore its high value in terms of the national money). A share of its stock is also a kind of "ticket," but it doesn't need to circulate as money, because it attracts money from outside. If money from outside were to become worthless through inflation or so scarce that no one had any, these shares could circulate as money.
    I recently read Making Mondragón by White and White on the heels of Money: Understanding and Creating Alternatives to Legal Tender by Greco. When the most ambitious alternative currency systems were trading local services like baking, bricklaying, car tune-ups, crafts, massage, and dentistry, the Mondragón cooperatives were turning the Basque Country into an industrial region producing refrigerators, stoves, dishwashers, washing machines, water heaters, machine tools, and electronic components and doing research in microelectronics and robotics. Alternative currencies like LETS just have never been that ambitious.
    The Mondragón cooperatives succeeded because they created an innovative business system, including innovative ways of using money. There is room for more innovation along these lines to release more of the huge suppressed energy of production.

Japan LLP

I have been forwarded a proposal by one Chris Cook of the UK that has many features in common with the capital college and is likewise envisaged as leading to a national transformation, Japan LLP. (Cook sees Japan as a promising site for the experiment.) The idea is, under the legal category of limited liability partnership (LLP) to create something new, called a property investment partnership (PIP). A PIP is an "open corporate" LLP membership agreement between financier-members and occupier-members in relation to a property. "Open corporate" means that such people as suppliers and workers, instead of the usual contractual relations, will be stakeholding members of the PIP.
    This is facilitated by proportional shares. Proportional shares (e.g., shares denominated in fractions adding up to 1) "constitute an infinitely divisible, flexible and scalable form of Capital capable of distributing or accumulating Value organically as the Enterprise itself grows in Value or chooses to distribute it." The PIP raises capital by selling proportional shares (which it can, if desired, agree to buy back after a certain period of time at the then value): "Debt and Interest are replaced by Equity traded forward. . . . Risks and rewards are shared as in all true partnerships."
    The PIP owns the property, the occupiers rent it, and the rent is distributed to all members according to their proportional shares. The proportional shares are therefore proportional shares of the net rental income. The property would never have to be sold and thus would never be subject to inheritance tax or a mortgage: only the membership would change over time.⁴
    "It is in its application to existing 'publicly owned' or publicly financed housing, and to new development, that the real potential of the model becomes apparent." Ownership of these will be transferred to a public PIP (PPIP), of which the tenants will be members, as well as anyone who cares to purchase proportional shares. The tenants will pay rent to the PPIP, which will disburse it among all members according to their holdings.
    Cook now imagines a computer network as a public utility linking the members of every 1,000-to-4,000-strong community to one another. All residents and also the utility providers would be members of the PPIP. Among many other functions, the network would be a natural clearing-house for "the simple databases of obligations which underpin all commerce." It would take the place of a bank.
    Infinitely divisible proportional shares of the PPIP would function as money for LETS-type purely local exchanges. For exchanges between communities, area and regional LLPs and computer networks would be created, up to the level of the nation-Japan LLP-and infinitely divisible proportional shares of each LLP could function as money on its own level.
    "A programme of property valuation will be instituted in relation to Land and any Property on it." Japan LLP will then issue yen direct to owners of residential land to pay off the mortgage on the land and to owners of residential property to pay off mortgages on property. Only the latter is to be repaid, and that over the expected lifetime of the property. The former is "in fact an investment made by all in the fabric of Japan itself." Thus, the Land of Japan is to be the basis of the national currency (which bears the sexy title of "Yen 3.0"), and the property is to be the basis of local money:

When divided into proportionate "shares" the aggregate of Land Values forms the basis of Yen 3.0. Property on the other hand would form the basis of locally fungible Money which deteriorates in Value over time depending on the condition of the local housing stock and policy decisions in respect of urban renewal. . . . Integration of such local Money with Local Exchange Trade Schemes (LETS) which are increasingly popular in Japan would allow Individuals to create Value through their own efforts in improving the Property which they occupy.

A close comparison with the capital college is warranted and would undoubtedly enhance our understanding of both ideas. Both present a possible solution to the perennial social credit problem of sanctions.

Notes
1. p. 176f.
2. Charles Ferguson, The Technarchy and the Capital College (New York: Ferguson & Assocs., 1924), pp. 10, 18; see also "The Capital College," Triumph of the Past, November 2002.
3. The Technarchy and the Capital College, pp. 8. 19.
4. In a similar idea, I recollect receiving information several years ago from a company called Independence Trust that would help you create a trust to own your personal estate. You would be an officer in the trust, and your death would simply mean a change in officers, rather than a change of ownership of the estate. Thus, the estate would escape inheritance taxes and probate.