Science of the Social Credit Measured in Terms of Human Satisfaction
Christian based service movement warning about threats to rights and freedom irrespective of the label, 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

Science of the Social Credit Measured in Terms of Human Satisfaction

Municipal Social Credit

by Michael Lane
March 2003

[About one thing I have changed my mind. I no longer believe that the compensated price (and accompanying price schedule) is necessary for social credit either at the municipal level or nationally. The broad sowing of the consumer dividend itself should be enough to empower the consumer and compel competitive pricing. --M.L., 2003]

The European nation of San Marino has a population of 27,000, Monaco 32,000, Liechstenstein 32,400, and Andorra a whopping 65,800. If it is economically possible to implement social credit in these nations, it should also be economically possible in a municipality.
      Sitting down to write a plan for the actual implementation of social credit forces one to address several difficulties that breezy theory takes no note of. Three areas of social credit, in particular, have been inadequately specified: (1) foreign trade, (2) price-setting, and (3) terms of business financing.


1. Ultimately, there are only two factors of production, man and nature. Man takes the materials of nature and works them up into more useful forms. He invests his labor, and labor fully describes the cost of production.
2. Some products, like food, are consumed immediately. Others, like a tool, are longer lasting; and still others, like the knowledge of how to make a tool, last forever. In this way, civilization is cumulative. Another way to say this is that part of the work is already done, part of the cost already paid.
3. Multistage production (e.g., logs, boards, furniture) is just the same process in miniature. The carpenter can make furniture because part of the work is already done.
4. In a money economy, labor is measured by payments to individuals ("A" payments). Therefore, we can analyze the cost of any consumer good or service as a simple addition of payments to individuals over the time involved in production. Whenever such payments are reimbursed from one company to another (e.g., the carpentry shop buys lumber), that is a "B" payment, which represents "all costs to date." If all stages were performed by one company, there would be no "B" payments; but the cost would be the same--payments to individuals over time.
5. Advance in the art of making things means they require less labor. In a money economy that means (1) less money paid to individuals and therefore (2) a cheaper product. This leads to a perfectly natural price fall.
6. The visible economy shows symptoms of compulsive growth and waste on a massive scale. Douglas cites the statement that the U.S. economy was 5% efficient, 95% waste. This fact calls for an explanation.
7. Hypothesis - The sawmill can dispense with someone's labor and make a cheaper board today, but the cheaper board won't become a cheaper chair till tomorrow. As a result, prices fall, but income falls ahead of prices: income is chronically short of prices, and markets do not clear.
8. The actual economy cannot tolerate this situation and reacts spasmodically in compulsive growth and waste (which can also be analyzed as purposive on some level). Pay for something, the economy says-anything-in order to keep income up with, or even a little ahead of, prices.
9. Thus, a huge potential energy of production is sabotaged-turned to waste-in order to enable markets to clear. In the Alec Guinness movie The Man in the White Suit, labor and management in a textile factory put aside their bitter differences to suppress a fabric that wipes clean and lasts forever. Lots of real inventions have met a similar fate.
10. If we take the money-and-price system in hand and make adjustments for income falling ahead of price, we can enjoy the natural price fall.1 The purpose of social credit is to release the huge energy of production that is already there, to release innate human creativity that is stifled by compulsive growth and waste.
11. Every municipality has people living and working within its bounds. Their work has a price on it, as do the goods and services they buy.
12. Individuals in every municipality, through mail order, the internet, and in person, purchase consumer goods and services from outside the municipality. Businesses in every municipality purchase capital and wholesale goods and contract for services from businesses outside the municipality. They may also pay individual employees and contractors outside the municipality.
13. Tit for tat, individuals outside the municipality purchase consumer goods and services from businesses within the municipality; and businesses outside the municipality purchase capital and wholesale goods and contract for services from businesses in the municipality and may also pay employees and contractors within the municipality.
14. Municipalities are typically in debt.
15. Many of a municipality's businesses and consumers are also in debt.
16. Insofar as these loans represent money created for the purpose, they are simply the confiscation, by means of credit instruments, of the borrowers' own credit.


1. Municipality to issue an Economic Declaration of Independence. Municipal government to create a credit office to issue credits good for all goods and services produced by all businesses within the bounds of the municipality and to facilitate exchanges between these credits and the national money at a rate based on ratio between consumer price index (cpi) inside the municipality and cpi in the country as a whole. Staff and funds to be reallocated accordingly.
2. Employees of businesses within the municipality to receive their pay in municipal credits, exchangeable for the national money at a rate based on cpi, subject to point 4.
3. "Export" - When a local business selling goods or services outside the municipality or a resident employed or contracted outside the municipality wants to be paid in municipal credits, the purchaser will pay the municipal credit office in the national money, and the municipal credit office will create the equivalent in municipal credits at a rate based on cpi and pay the seller with them. In this way, the municipal credit office obtains the national money. The credit office does not release municipal credits except as part of bona fide transactions. Municipal credits, as such, are not for sale.
4. "Import" - When a local business purchasing or employing outside the municipality or a resident ordering goods and services from outside the municipality wants to pay in municipal credits, the purchaser will pay the municipal credit office, and the municipal credit office will pay the seller with the national money at a rate based on cpi. Obviously, the municipal credit office can only do this to the extent that it has the national money. In short, "imports" are dependant on "exports."
5. Municipality to separate its own creditors and creditors of its businesses into two groups: those who lent their own money and those who lent money created for the purpose (banks and companies or agencies that are little more than fronts for banks). The former to be paid.
6. The latter "debts" to be repudiated as specious. If taken to court, the municipality on behalf of itself and its businesses to argue that these "creditors" merely translated the municipality's and its businesses' own credit into instruments. They "lent" the municipality its own credit and business its own credit under false pretenses. The case to be publicized as widely as possible.2
7. The municipality itself, backed by the businesses, to take over all of the latter loans. Every business to have an account with the municipality.
8. Credit card balances (and other personal bank-debt) of residents to be treated in the same way: If taken to court by Visa and Mastercard, the municipality on behalf of its residents to argue that these companies merely turned the individual's own credit (his earning-power) into instruments, lent him his own credit under false pretenses.
9. These loans, too, to be taken over by the municipality. Every resident to have an account with the municipality.
10. At the onset of economic independence and thereafter quarterly, all businesses within the municipality to report costs of their goods and services for sale, on a standardized format. Part of the cost is external (i.e., payments in the national money either through the credit office or directly), and part is internal (i.e., simple payments in municipal credits).
11. One time only, these costs to include total bank-debt (now owed to the municipality). One time only, costs of consumer goods and services to be recalculated based on costs of capital goods and services on which they depend.
12. One time only, residents' total savings to be calculated, and total outstanding personal debt (now owed to the municipality) to be deducted from savings.
13. Total internal costs including reappropriated bank-debt is Prices (a high number). Total savings less reappropriated personal debt is Purchasing Power (probably a negative number). One time only, the difference between these two numbers to be met by the creation of the equivalent in municipal credits by the credit office.
14. Half that sum to be credited in equal amounts to the accounts of every resident. Any positive balance remaining to be at that person's disposal. Any debt remaining to be the responsibility of the debtor.
15. The other half to be credited to the accounts of every business in proportion to its contribution to final consumer products sold in the municipality. Any positive balance remaining to finance a Sale at the business. Any debt remaining to be the responsibility of the business.
16. Quarterly, all businesses within the municipality to report costs of goods and services for sale, on a standardized format. Part of the cost is external, part internal.
17. The municipal credit office, in conjunction with businesses, to create a schedule pricing various goods and services at various percentages above cost (cost as defined in the quarterly report).3 This schedule to include capital goods and services, as well as consumer goods and services.4
18. Total internal costs of consumer goods and services for sale during the quarter is Prices (this number reflects costs over the time involved in production). Total payments to individuals in the municipality for the quarter is Purchasing-Power (this reflects current costs). Improved efficiencies means that present costs will be lower than past costs, or Purchasing-Power lower than Prices. The excess of Prices over Purchasing-Power to be matched by the creation of the equivalent in municipal credits by the credit office.5
19. Half of those credits to be paid as an equal quarterly municipal dividend to all residents.6
20. The other half to finance an across-the-board, quarterly percentage price discount on all goods and services offered by all retail businesses within the municipality that agree to the pricing schedule. The across-the-board price discount is a discount on the price as thus defined. To put it another way, the municipality offers a sort of fractional matching fund for retail sales.
21. A business that does not honor the percentages agreed on is automatically withdrawn from the plan and will lose its financing terms (see below) but suffers no legal penalty. The object is to create a schedule that will, with the "matching fund" attached to it, induce wide participation. The effect of the compensated price will be to reduce the consumer price index of the municipality and therefore strengthen the municipal credit unit in exchange against the national money.
22. Municipal credit office to provide both capital and retail businesses access to municipal credits in return for (a) a percentage of their net earnings and (b) their agreement to the pricing schedule.7 These conditions replace interest. This is not really "lending," for if the business fails, there is no debt, while as long as the business succeeds, the "loan" is indefinitely renewable. The credit office's function is to keep credits in circulation to the full extent that they can be used, not to exploit them for leverage. Such financing could even be used by a successful business to open new branches in other municipalities.
23. Municipal government to end all municipal taxation and get its revenue from (a) financing businesses for a percentage of their net earnings and (b) credits taken out of the municipal dividend/compensated price before it is paid. The huge energy of production and creativity released by the whole credit system should make the former considerable and generate a "war" fund.
24. Municipality to create a publicity office and news-center to serve its producers, publicize its Economic Declaration of Independence, and encourage kindred movements in other municipalities. A movement confined to one city can be crushed, but a movement liable to spring up anywhere cannot. Staff and funds to be reallocated accordingly.
25. Municipality and its businesses to refuse to pay state or national taxes on transactions solely involving municipal credits. We do not admit that this is an alternate currency: it is a ticket system. If I buy a theater ticket with money, I might pay a tax on it. But when I hand it to the usher, it isn't taxed again on the grounds that I am now making a purchase with "alternate currency." If the state or national government attempts to tax municipal credits at point of use as if they were money, every issuer of tickets will be vulnerable and will have a stake in the ensuing court case, which will be publicized as widely as possible.


Thanks to Bill Daly and Jeremy Lee for valuable comments on the first draft of this essay.
1. "Falling prices, by themselves, are the most perfect method of passing improvement of process on to consumers" (Douglas, Brief for the Prosecution, p. 66).
2. A nation with a foreign debt stands in the same situation and will need to adopt a similar strategy.
3. The Draft Mining Scheme says Capital "shall continue to carry with it all the ordinary privileges of Capital administration other than Price-fixing" and that industrial users of coal shall pay "Cost plus an agreed percentage" (Credit-Power and Democracy, pp. 149-51, my italics). The Draft Scheme for Scotland says that participating businesses must declare their average "profit on turnover" and "as far as practicable" maintain that average "where this is agreed as equitable for the type of business concerned" (Social Credit, p. 208f.). A discount on a price that is at the whim of the seller is no discount.
4. An alternative worth exploring would be to have a capital business release its goods at cost and take its percentage later from final consumer sales.
5. Under the present system, no one dares to work himself out of a job. Under social credit, the more people work themselves out of jobs, the more consumer credits can be created for all. The best physicians will have few patients.
6. Louis Even once said, "Even if there were no gap between prices and the purchasing power, each citizen would yet be entitled to his dividend," because "there is always a percentage of this production which is due to the real community capital" (A Sound and Effective Financial System, p. 26). How can this be? If we really counted all costs, we would have to count back to the dawn of time. Real costs would then be higher, and the dividend correspondingly larger. What has happened instead is that wars, revolutions, invasions, natural disasters, and bankruptcies have repeatedly wiped the slate clean. While the present proposal follows the usual social credit prescription of half dividend, half compensated price, the above consideration makes me think that as long as the pricing schedule is preserved, it would be better to release 100% of the new credits as dividend, and none as a price discout.
7. Taking a percentage of net earnings gives the municipality a stake in the fortunes of the business and an incentive to perform other services for it. For example, it could help the business find and contact the most advantageous suppliers, and it could publicize the business's product. If it did this, it would be performing a role analogous to that envisioned by Charles Ferguson for the "capital college." Also note that if the suggestion in note 4 were adopted, credit office, capital producer, and retailer would all be taking their percentage out of the same sales.