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

Rare Charles Ferguson Essays

Charles Ferguson, the coiner of the term social credit, authored five books between 1900 and 1918. These are more or less available in libraries and in the used book market. Very rare, however, are his articles of the 1920s, published in the American News, an English-language weekly newspaper published in Hamburg, which are probably reprinted here for the first time. If it be objected that the application of these texts to social credit is not obvious, I would say that is their chief merit. They are like Big Sister to social credit and the product of a very independent mind. The texts are taken from a microfilm copy made for me by the New York Public Library. The use, by the American News, of non-English-speaking typesetters resulted in more than the usual number of errors, most of which I have silently corrected.

February 24, 1923

An Open Letter to the People of Hamburg

To the People of Hamburg!

You are the keepers of the main gateway leading from America to Continental Europe. You are also the guardians of a great commercial tradition. You can command the future if you know how. You must discover new ways of doing business.

The old ways are not good enough. You must go deeper into the science of Commerce than any City has ever gone.

It is desirable that a billion dollars worth of wheat, corn, cotton, copper and other staples should pass from the United States to Europe through the port of Hamburg during this present year. Your problem is to create a new credit system, one that will sustain a great weight with absolute security. What have you got to build with? Undoubted commercial and industrial abilities and an immense wealth of precious hereditary skills. You must build the new credit system from the stuff of creative power. That is the source of all human strength. The power of arms of the soldier, the policeman, the bailiff or bill collector—is only a more or less necessary discount upon the power of tools. Soldier, policeman and bailiff have been overworked in Europe. You had better let up on them. Give your whole attention to the development of productive power. It is sovereign. It is the foundation of society. It is the only solid basis for credit.

If you say that Germany has already developed productive power to the limit, you exaggerate. Germany has done as well in this respect as any other country—perhaps better than any. But no country has done more than scratch the surface of possibilities. There does not yet exist in any city in the world a financial-commercial institution directly devoted to the development of creative abilities and to the conservation and increase of the concrete capital stuff upon which such a development depends.

We are all tyros, fumbling amateurs and feeble experimenters in the organisation of the power that sustains life. There has never been such a thing as a Napoleon or von Moltke of commerce and finance. Nobody has yet marshalled armies of production capable of maintaining themselves under any and all circumstances and of advancing steadily to the conquest of new areas of enterprise and opportunity.

It is a disgrace to the intelligence of the race that we have not even grasped the idea that productive power can be organized otherwise than in specialised units-shops devoted to some particular kind of work. It is shameful that no attempt has anywhere been made to organize the productive power of a great city, as a single and self-consistent, life sustaining system. That is the natural use and meaning of credit. We shall never understand the nature of credit so long as we treat it as a commodity to be sold at the current interest rate to anybody that can put up a property collateral. Ruin has spread through the world because credit has been treated in this way.

Credit is not a commodity to be bought up and monopolized by property owners. As a matter of plain economic evolution, it is the very opposite of that. It is the historical means whereby productive ability is destined to outbuild property for the use and control of the whole volume of capital goods.

It would be surprising if Hamburg could not understand this. For Germany almost proved the point in her ordinary business practice during the years before the war. It was discovered that all commodities have a variable value dependent upon the reproductive power of the buyer. Consequently the German sellers and their agencies tended from year to year to give freer and longer credits without regard to interest. They took their compensation in the form of enhanced price or some sort of partnership in the producers' earnings.

The natural consummation of German Credit-Evolution would be the establishment at Hamburg of a powerful institution offering to underwrite the industrial and commercial credit of any and all bona fide production-units for a tithe or more of their net earnings. If the people of Hamburg will do this right now, you will find that the institution can issue a credit currency having the purchasing power of gold. The world is passing through a transfiguration. The old legal currencies are perishing because they are based on force. The only kind of money that can survive is a credit currency based on productive power. In effect you will have inaugurated an abiding system.

You will have to put into practice on a grand scale the principle that governs the operation of railroads and steam-ships, namely the adjustment of equipment to ability. The details may be what you please. The point is that there is no escape from the present situation in Europe, save through a fundamental rectification of business. The business system must be put on a social and scientific basis.

We must quit thinking in terms of legal documents and mere figures in a book. We must make the end and aim of business the keeping up of the current of fluent and perishable life-sustaining goods.

America will send great quantities of corn and cotton to Hamburg when it is made certain that every dollar's worth which [sic] goes into a working system that exists for the very purpose of conserving and increasing the concrete capital values committed to its care.

The terms of old-fashioned business must be reversed. Capital must cease to bear the shocks. All technical and commercial risks must be absorbed by the elastic income of the workers.

March 24, 1923

Organization of Productive Power

Credit breaks down in Europe and elsewhere because our customary practice violates the natural financial law. Finance, properly understood, is the underwriting of productive power. The natural procedure is that every credit-issue should be regarded as a placement of capital goods in the hands of a group of workers capable of augmenting the value of the goods by the application of their skill, and pledging their livelihood for the faithful return of the loan with such increase as may be stipulated. Since the conservation interest [sic], the workers' obligation should be absolute. Their earnings should absorb all technical and commercial risks, and their reward for their work should be small or great in proportion to its market value.

Our actual financial practice inverts all these terms. While we understand of course that the ultimate validity of every financial action depends upon production, we do not in ordinary practice underwrite productive power. We underwrite the personal obligations and documentary pledges of such property-holders as may fairly expect to make a profit by employing workers at fixed wages and salaries. No financial responsibility is laid upon the workers. Capital bears the risks and shocks. The system does not rest its weight upon productivity but upon property of variable value and upon speculative profits.

As things stand there is nowhere any such thing as reliable credit insurance—precluding the waste of capital. The executive committee of the National Association of Credit Men reports that a billion dollars worth of capital has been lost in the United States during the past two years, by bad credit-administration. The loss in Europe is beyond computation. It has broken down the international credit-system and is producing a condition of general indigence, even in countries distinguished for the richness of their natural resources and the excellence of their hereditary skills.

The principal cause of the universal confusion is unscientific finance. We have shaken the foundations of property instead of productivity, and by [sic] throwing upon capital the business-risk that cannot be effectively borne otherwise than by working skill and ability.

Happily it is not too difficult to reverse the tendency toward social dissolution that possesses the circle of commerce. We have only to return to the natural law of finance. It is easily possible to create in any city a stable unit of civilization. Credit can be made absolutely safe. A sound financial practice can organize a hundred, a thousand or a million workers in such manner that they can be depended upon to increase the capital fund from month to month and from day to day. And that is the rock bottom of finance.

A community that can certainly increase its volume of life-sustaining values from day to day is a safe consignee for commercial goods. Its promises to pay can go through any clearing house. It can issue a credit-currency having the purchasing power of gold.

The General Organization of Productive Power is a projected corporation, now in the hands of an organization committee in New York. It intends to establish first in this city and then elsewhere such civilization units as have been described. It will be found that the primary requirement is not money but personal credibility. The initial costs are mainly administrative. Given an unquestionable prestige, a credit institution does [comman]d a high initial capitalization in order to underwrite the credit of a multitude of productive organizations for a tithe of their net earnings.

March 31, 1923

The Communism of Creative Power

There are natural laws of business that business men in general do not understand. These laws have been working day and night. They are inexorable. They do not announce and define themselves. But they revenge themselves. Because they have been violated the business world has been thrown into confusion. We shall emerge from the confusion into a new order of things, happier than we have known or imagined—whenever a group of understanding men, in New York or any other city, begin to do business in accordance with the natural laws.

A single scientific business-unit, consisting say of a thousand persons, can force the whole business world over into a new era. The reason is that such a unit will generate an extraordinary economic and financial power, against which the old-fashioned business cannot compete. For example a normal business-unit will be able to offer a perfect investment security at ten per cent—or twenty if necessary. Thus if the average net income of real estate in Manhattan is under eight per cent, the new system—starting with the control of a few shops and offices—can in due time absorb the whole island, block by block.

The general character of the laws we have violated is indicated by the statement that property cannot produce goods, and so is safest when it quits trying to direct or influence the productive processes. We have supposed that the natural driving-force of business is the desire of propertied people to increase their holdings. The case is quite otherwise. The driving-force of business is the desire of all kinds of workers to increase their functional strength or earning power.

Note that wholesome life has two alternating and contrasting phases: productive activity and recuperation. In correspondence with these two phases of life a normal society has a dual organization. It organizes to get its living through industry and commerce. Then it organizes again in a very different manner to protect the leisure and privacy of individuals, so that each may develop a free and originating personality. These two forms of social organization may be described respectively as the productive system and the property system.

The productive system is naturally cooperative since the life of a community, in its wrestle with the blind forces of nature, cannot be maintained otherwise than by team-play, the interfusion of personal abilities. On the other hand the property system is necessarily individualistic. It exists to protect the individual from intrusion—using force.

The productive system contains the social vitality. It bears to the property system or protective system a relationship like that which the kernel bears to the shell of a nut. Production is certainly sovereign because it generates all the social power there is. The protective system has no power in itself. It draws power from the productive system and spends it in the form of force. Force is always a social discount; the more force the less power.

With these simple and undebatable principles in hand we should be able to see that the traditional notion concerning the social constitution is flatly wrong. Our politics is Ptolemaic. It is as absurd to say that social order is based on property and the police, as to suppose that the earth rests upon an elephant and a tortoise. In reality society is not Ptolemaic, but Copernican. Social order does not depend primarily upon the strength of the police-force but upon the momentum of the power-generating current that sustains the common life.

The mental categories of the statesmen and financiers are exhausted because they have taken the facts of the universe as they are not. Reality flies in their faces and staggers them.

Here is the thought we have got to think, in order to escape from hopeless bewilderment: We must conceive of a civilization-unit directly bent upon the conservation and increase of capital-goods, through a fluent mobilization of ability. We must grasp the idea that any ten thousand workers of diverse occupations, can be so elastically organized from a center of credit and information that the combination will infallibly make an economic gain every day. We must create an invincible and uncontingent security.

And here is the natural method of such an organization: You open an office. It is a general financing, managing and marketing agency. It underwrites the credit of productive groups for a fixed percentage of their net earnings. It gives managerial assistance—advisory not mandatory in the spirit of a university or institute of technology. Its aim is absolutely public—the gaining of functional power in the community by doing things better than they would otherwise be done. It markets the products of its constituents—since finance and marketing are merely two aspects of the same thing. Broadly stated the business of the agency is the development of the earning power of service-units, for a partnership share in the power. This is, beyond comparison, a safer and more remunerative kind of business than any now extant.

Why have we found it so difficult to conceive of an earning-power organization? Why has it been so hard to imagine a mobile combination of creative abilities—not fixed in any specialty but capable of every adaptation to get the maximum result? One needs to be a student of the pathology of the mind in order to understand why Alexander, Caesar and Napoleon, Croesus, Rothschild and Morgan failed to seize upon the secret of indestructible empire.

The history of the church, the university and the democratic ideal exhibit notable adventures toward grand-scale organization of free, creative men. This progressive effort—moving earthward out of cloudland—eventuates in modern finance. Now after many ages of mindwandering, we shall be able to see the obvious thing. Modern finance contains the revelation. However misunderstood and misused hitherto, it furnished a perfect mechanism for the organization of creative power.

The normal operation of finance throws all the concrete capital of a community into a common pool. It is a kind of communism—a much more effectual kind of communism than has ever been conceived by radicals. There is no arithmetical division of goods, yet there is a complete sharing of all gains—after the manner of a living organism. Everybody takes capital from the common pool in proportion to his functional value to the community—his reproductive strength. You will have a true picture of a scientific financial system if you think of all the fluent and perishable commodities and utilities that constitute the capital of a community, as moving in a circular current through the market; you see the dominant credit institution standing in the midst of the circular pool; it measures the service-ability of production units with a view to a constant increase of the volume and velocity of the capital-current; each unit pipes out from the capital pool as much as it dares make itself responsible for—under the rule that everybody must pipe back into the pool somewhat more than he pipes out.

This is automatic social-control. It is government without a gun. It is the most powerful kind of government that can be imagined. It is also the freest and happiest. It can pass from city to city around the world. Nothing can stop it when it gets started. It suits the nature of man and the nature of things.

March 31, 1923

Livelihood Insurance

Anybody that under the most favorable conditions could produce a little more than he consumes, is invited to enter into a life-sustaining system in which he can develop to the maximum his service-ability and earning power.

This system does not deal directly with individuals but with working organizations. It gives such groups, each in its own special occupation—capitalization, information, and appreciation. That is to say it underwrites their credit; it furnishes advisory management with reference to natural opportunity and economic demand; and it guarantees such publicity regarding services and products that they can be absorbed by the market at their real values.

This business of livelihood insurance like the business of life insurance can be made absolutely safe. It is merely a question of the amount of the premium paid by the insured. As things now stand in the working world there is such need of livelihood insurance that the premium can be fixed at a very high rate—a rate that will not only absorb risks and administrative costs but also yield an income that the insurers can use for public purposes or otherwise at their discretion.

The livelihood insurance premium is provisionally fixed at ten per cent of the net earnings of the insured concerns. In the long run the rate will of course tend to settle at whatever percentage is found to be adequate for the absorption of average risks and administration.

Since every city is a natural life-sustaining system, livelihood insurance treats each city as a distinct unit. Commercial transaction from city to city can be insured against loss by livelihood- insurance offices.

This is the solution of the labor-capital problem. It is also the solution of the foreign trade problem—and the problem of international peace.

For the simple truth is that civilization itself is nothing but livelihood insurance.

June 2, 1923

Finance Unveiled: What Any Woman's-Club Can Do

To speak the word Finance is to conjure up an image of power and mystery. One need not protest against the power, since it can be made to operate in a wholly legitimate manner; but the mystery is objectionable. It would be well to put an end to it.

The aim of these articles is to dispel financial mystery. Let us try to discover what finance really is—not by arguments but by illustrations. When we understand the nature of this all-pervading power, we shall see that everybody can have a share in it. It cannot be monopolized.

A certain woman's club in New York sets out to improve the general conditions of existence in the neighborhood of its clubhouse. It organizes three separate groups of business women to deal respectively with lodgings, board and groceries. Being a club of writers and painters it conceives its projects in pleasant human terms. The three groups are named seriatim: The Roof-Tree Unit, the Bread and Salt Unit, and The Market Basket Unit. Each group is regarded as a combination of service-abilities or art-powers—devoted to a particular kind of work. The first unit is made up of those who are artists in the forms of Shelter and Rest. The second group are artists in Cookery and Nappery or table- service. The third group are artists in the Relative Values of Nice Things to Eat. They know how to purvey the Most for the Money.

The Club Management says to these working units: "We have confidence in the practical worth of your artistry. We feel sure that you have earning power—that whatever work you plan and execute will show a fairly wide margin between the values you produce and the values you use up in your working processes. Accordingly we take no great risk when we make public guarantee, to all whom it may concern, that you will pay every obligation you incur in the prosecution of your business. We are going to give that guaranty. We underwrite your honesty and competency. We insure your credit. In a word, we finance you.

"This doesn't mean that we are going to lend you a lot of money. Now and then we may endorse a promissory note for you. But even that will be hardly necessary. All the three sorts of business you propose to engage in have a quick turn-over. The charge for your working plants takes the form of a fixed monthly rent that you can pay out of your business income. And since it will be everywhere understood that this respectable and responsible club is backing you, you can get credit say thirty to ninety days on all the materials you buy. So when we say we are going to finance you we mean we are going to mother you and father you. At bottom it is not a question of money at all—since on the whole you are sure to make good.

"Seeing that you belong to the family we expect you to help support it. The Club is going to do whatever it can for you; it is going to appreciate and advertise your goods, it is going to back you in the open market both in your selling and your buying. On the other hand, you will increase the Club's income by turning in to its treasury month by month a tenth-part of your net earnings—whatever they may happen to be."

It appears that this New York Club has made an important discovery in financial science. The interesting fact is brought to light that any well-rooted social institution enjoying a good degree of general credibility in its community, can set competent people up in business, without asking the help of banks.

Probably there is no town in the United States that does not need the kind of service this Club is going to offer. Consider what the three groups of capable young women are planning to do:

The Roof-tree-Unit breaks into a city block filled with more or less comfort-less lodging-houses. It rents those that are available—a dozen perhaps. It invites former lessees—if any of them happen to be good house-keepers—to come into the new organization on a percentage basis. It marshals its phalanx of Shelter and Rest—organizing a little house-keeping army in which the hired girl and the hired man tend toward extinction. In the beginning it will be necessary to hire a few people. But it is better economy to finance people than to hire them. And it is expected that that time will come when nobody from top to bottom of the system will be exempted from responsibility for the maintenance and increase of the general income. Even the woman that scrubs will be made to understand that she has gone into business on her own account. Her shares of the net earnings of the concern may be less than a tenth of one per cent. But the way of promotion will be open—a marshall's baton in every broom-stick.

Finally, the Unit that tackles the purveying problem faces its task as European statesmen face their fiscal budgets. For the buying and selling of groceries is the budgeting of households and communities—since the value of everything depends upon its relation to everything else. The good purveyor thinks in terms of the relative value of things for the uses of life as it is actually lived at a particular time and place.

Though every neighborhood has its peculiarities, it is possible to discover a kind of algebraic formula or general equation—for small groceries and delicatessen shops in New York City. The question is:—given perfect advertising and the quickest practical turnover, how narrow should the profit margin be—in order to yield a maximum service- income?

Thus our Market-Basket Unit approaches the purveying business in a wholly new way new, at least, so far as great cities are concerned. It is not trying to make money for absentee owners or investors. It is simply trying to earn the largest possible service-income by performing the greatest possible service. It treats its business as an art. Its attitude is professional. In getting the right goods into the right hands it puts the finishing touch to a thousand productive processes.

The profit-margin can narrow down indefinitely, because the business is indefinitely expansible. It can begin with one shop and pass from block to block until there are many shops.

The simple truth is that this Woman's Club has laid hold of finance by the handle. There is no limit to what may happen—through disclosure of the hidden fact that finance is simply a method whereby the socially strong can develop and share the repressed earning-power of the socially weak.

As things stand we are making use of only a small fraction of the ability of the race. Nearly everybody of first-class creative capacity is under-equipped. They don't need money. What they need is backing in the open markets of the world. They could put back into the markets every evening much more than they took out in the morning. It seems that what is needed is precisely the thing this New York Woman's Club is trying to furnish—a business system in which known abilities can be tried out at their own risk, in small operations that can lead to large.

The administrative heads of the Roof-tree unit seek the artistic and scientific line of least resistance. Naturally the first thing to do is to study the details of the actual situation—as clever business women know how to do. It is a question of cost-accounting on one hand, and a fine imponderable quality of comfort and contentment on the other. How to provide what New York utterly lacks, to wit: Low-priced lodgings fit for gentlefolk.

Having once found the right method—the true administrative equation—the business can be indefinitely extended. The possible economic gains run beyond calculation. For it is a principle of finance that when there is indefinite expansibility, the producer that gives the most for the least makes most money. Mr. Henry Ford has illustrated this truth.

The Bread and Salt Unit lays hold of its own peculiar problem in the same spirit. It understands something of the ceremonial, or, so to speak, the sacramental factors that go into the business of setting forth meals. It aims to give much for little by the power of artistry and craftmanship.

May 5, 1924

Would Unify Industrial Financing and Selling

The following is a summary description of actual conditions in every city in the world. The characteristics here noted express themselves with various degrees of emphasis, but they are everywhere substantially the same.

Capital goods move sluggishly from producer to consumer. The velocity changes slightly from time to time. But the volume tends to diminish. The life of the community depends upon the circulation of these goods. They comprise the materials that supply foods, clothes, housing, and transportation. They include also improvements of real estate. They are all evanescent—requiring constant renewal. They are for sale. Expensive agencies are supported for the purpose of selling them.

These agencies strive against one another in a melee of ceaseless effort to get the highest possible prices. In general, it costs about as much to sell the goods as it does to produce them—and the selling costs tend to rise. The community has no real capital whatever but the goods that are thus bought and sold in its market. It is by a misleading figure of speech that money and legal titles are called capital.

Over against this slow-moving and shrinking volume of capital goods stands an array of human skills and productive abilities well organized in specialized units, but badly organized as a whole—and very much under employed. The skills and abilities depend for their employment upon a multitude of unco-ordinated financial agencies. These agencies represent a volume of money and legal titles having a nominal value many times greater than the market value of all the tangible capital goods.

This is so because real capital is perishable, while nominal capital has a legal immortality. It grows from generation to generation. In the shape of public debts and the funds of necessary utili-ties it passes beyond the mutations of time.

Business Slows Down

Through the financial agencies this nominal capital controls the real capital of the community. The control is not systematic. It is vague and formless. Nobody concerns himself to conserve and increase the volume of real capital. Every new value document that comes into existence without new production diminishes the value of every other document. But no account is taken of that fact. The business of the community slows down. It is nobody's business.

The situation thus described is everywhere treated as if it were an act of God—a phase of a fatal "business cycle." This view is erroneous. The deadlock can be broken—never to recur. The true financial principle will be brought to light and when once revealed it will be thenceforth impossible to obscure it.

The root of the error is our false assumption that it is impossible to control the currents of real capital otherwise than through the agencies of massed money and legal titles. The error will be so obvious when once exposed—we shall see so plainly that marketable capital goods can be moved in new and natural ways—that we shall never be able to explain to our children how we came to be deceived.

Our excuse will be our failure to visualize the case as it really is. We have not yet realized the fact that capital consists mainly of commodities that the possessors are trying hard to sell. We have not understood that the reason why it costs as much to sell goods as it does to make them is the underfinancing of the workers that would buy and use and reproduce—if they had credit. We have not noticed that the product of one concern is the capital of the next—and so on in a circle of reciprocities throughout the whole length of a life-sustaining system. We have not observed that the marketing of goods has no necessary relation to the investment of money.

The Solution

Yet, after all is said in extenuation of our error, it will pass into history as the most remarkable of epidemic hallucinations that we should have imagined ourselves bound and helpless—when the fires die in the furnaces and the workers cannot work and cannot buy. For the social problem reduces itself to the simple quandary of a heap of unsaleable goods, and an idle workman who would use them as capital and pay for them out of his product—if only somebody with credit would go on his bond. This is the Gor-dian knot that needs to be cut. A slash of the sword of common-sense will do it.

As things stand every business concern has three principal parts: One to get capital, one to produce goods and one to sell the goods. Getting capital and selling goods are difficult and wasteful processes in proportion to the smallness and specialization of the business. It should have been discovered long ago that a general financing and selling agency can serve a hundred or a thousand production-units immeasurably better than they can serve themselves.

Here, therefore, we have the solution of the problem. It will certainly be applied, because it offers extraordinary opportunities of personal power and advantage. It is a business proposition that can be put into effect anywhere by a group possessed of a moderate degree of financial credit. A general financing and marketing institution, begun on any scale, will tend to absorb and control the whole volume of tangible capital in the market where it operates. And what happens in one city will happen in all.

Under some such title as "The Institute of industrial Insurance and Evaluation" the general financial and selling agency will offer to underwrite the production costs and sell the products of self-directing industrial organizations for a fixed share, say one-tenth of their net earnings. The earning power of a working organization is measurable by noting for a given period the difference between the value of its output and the values used up in producing it—including, of course, the cost of the use of shop and machinery.

Simplifies Finance

The central institution makes public guaranty that all obligations incurred by the industrial unit in its productive process will be liquidated out of its product. It makes itself responsible also for any possible deficit; but in practice it will be found that that possibility is nearly negligible, for technical groups with their livelihood at stake will very rarely earn less than nothing.

This business of guaranteeing that products will pay—in thirty or sixty or ninety days—for what they use up in the productive process is a priceless service. It is also very nearly costless. It is like putting up a responsible friend at a desirable club. He gains; but it costs you nothing. Such is the essential nature of financial credit. It has been misunderstood. The vast mechanism of our actual industrial finance is inefficient in proportion to its intricacy. Its intricacy proceeds from the notion that credit naturally belongs to those who have money. That is not the case. Credit naturally belongs to those that can produce goods. Its verb is not "have" but "can."

The complicated financial mechanism will be superceded by a very simple one. The shapeless purposeless mass of documentary wealth will cease to control the vital movements of the commodity market. We shall learn that credit does not belong to the property system, but to the production system, and that the latter is not subordinate to the former, but superior in power.

Let it be announced to-morrow, in Vienna or Chicago, that a responsible institution has opened its doors offering to underwrite the production costs of any or all bona fide productive organizations for a tithe of their net earnings, the business deadlock would be instantly broken. The movement of the commodity market would gather momentum from the hour of the announcement. An army of enterprise and skill, now under equipped or over exploited, would absorb the stagnant inventories and put the goods to reproductive uses.

Studies Needed

As for the general selling agency, it is indispensable to any life-sustaining system that has become too technical and complicated to keep its production-balance by mere market haggling. When "demand" ceases to be vocal in a real jostling market place, it becomes necessary to create some central organ of intelligence to study the needs of the community as a whole and tell the producers in advance—with approximating certainty—what is wanted and how much of it and at what price. How else is it possible to avoid the disproportionate production that periodically throws all business out of gear?

Our business organization is mentally inverted for the lack of such an organ of intelligence. Business begins by asking, what can I induce the public to take? It would succeed better if it began by asking, what does the public need?

Proportion is more important than statistics. If six things are necessary to life, you will die if you have only five of them. So it is with a social system. You can kill business by a coal shortage. Omniscience is not necessary. But a general view is.

Economic information is a governing power. Where the information is good and a thousand production-units are free to move along the lines of maximum service and reward, there is no need of mandates. The army of the arts marshals itself. We arrive by the instigation of natural law at a general organization of productive power.

May 31, 1924

How to Lower the Cost of Living in Central Europe

American News has a considerable circulation in many cities of Central Europe. This issue will be read in newspaper offices. I respectfully submit that if journalism throughout the world would begin to be professional in its commercial relations, commerce also would begin to be a profession.

Commerce will begin to be a profession when the power of publicity champions the cause of a civilisation [not?] in the terms of politics. It is necessary to speak in the terms of commerce. It is necessary that that power of publicity shall defend the market. It must insist that the public shall have good bargains—the best obtainable.

To be sure, this is asking a great deal—considering the fact that the press everywhere today derives its main support from the advertisements of an unprofessionalized commerce. We must indeed bear in mind that nobody is particularly to blame for this state of affairs. It is a huge historical misadventure, that must be corrected gradually and with general tolerance and good feeling.

I suggest that a practical step would be taken in the right direction if newspapers would dedicate a definite small space in every issue to the development of commerce as a profession. This space should be edited by a group of commercial men who want to use their skill, their knowledge of commodities and the markets—in a new way.

Commerce consists in the movement of capital-goods from the producer to the purveyor or from one productive organization to another. This movement is impeded by the general commercial practice of buying as cheap as possible and selling as dear as possible without regard to the interests of production and distribution. The new way—the more scientific commercial practice—requires that the capital goods merchant should regard himself as a financier, engaged in the business of allocating capital.

Acting as financier the merchant should buy with constant reference to the peculiar needs of the producers and purveyors of his own community. He should get the best use-values that can be obtained for the money. He should pass these values to his local producers and purveyors at cost, plus storage and transportation charges.

As financier the professional merchant ceases to think in conventional terms. He ceases to think of production and distribution as if they existed for the sake of commercial profits. He understands that such a view is unpractical and preposterous. It puts the cart before the horse.

The merchant as financier claims a vital interest in the business of the local client. He is advisory manager. He keeps the goods in sight through the process of purveying or manufacturing and retains a primary lien upon them. He does not sell capital, he lends it at interest. Naturally the interest-rate is comparatively high, but it is not usury. It is interest in the natural and original sense of the word. It represents a working interest in the business.

The interest rate may range from one to five per cent a month. Or it may go even higher—if the risks are great or if much supervision is required.

If there is need of outside financial assistance, it should be supplied by local commercial banks—at a commercial rate.

The purveyors under this system will be stimulated to budgetize the buying powers of their customers—and to make quick war [sic] returns. They will learn by experience that there is such a thing as a natural retail price-level, at which maximum service income corresponds with maximum service. They will find this level much lower than they suppose.

Professional journalism—in alliance with professional commerce—will make discoveries. The two professions are partners, and are inseparable. The Public Advertiser will divide the gains of Commerce—and they will be large.

The little space in the newspaper will grow to a great space. It will be found that Publicity, when it really speaks for the public, is an irresistible engine of finance.