Social Credit Fragments,
2003-2005 Part II
the credit instruments that claim the goods and services of the entire nation,
the bank effectively takes custody of the goods and services themselves. The question
then is, What obligations are entailed on the banking system when it becomes custodian
of the national wealth? And the answer is, it has the obligation to issue this
credit in a social, rather than an antisocial, way - social credit.
Douglas's boots example in Economic Democracy, animal skin is turned into
rawhide, the rawhide is turned into leather, and the leather is turned into boots.
The national credit account is correspondingly written (1) up by the value of
the hides, (2) up by the value of the leather and down by the value of the (consumed)
hides, and (3) up by the value of the boots and down by the value of the (consumed)
leather. If the national credit account is thought of as representing the Cultural
Heritage, then we can say that the boots enter the stream of the Cultural Heritage
incrementally with each stage of production. Each stage makes the nation richer
and so results in a net increase in the National Credit Account.
capital account is a statement that the net assets of the association of the nation
are owned on behalf of, and for the benefit of, us, the citizens. Capital assets
are used by producers, who are always to an extent public agents, on our behalf;
and consumer goods and services are what we actually take possession of.
production" is an abstraction and as such doesn't enter in. But we can make it
more concrete if we remember that the economy is a consumer production system
and capital production is consumer production in embryo. So capital production
is "future production"!
"I do the work, I should decide where my fruits
are distributed." Unless you are building civilization from scratch on a desert
island, you are building on the work of others (some long dead) and require access
to the results of their work by means of money, which is a social product. So
you are a partner with society. You should decide where the fruits are distributed
exactly to the extent that you do the work. But to the extent that society is
your investing partner, we all have a stake in the product of your work, and the
most democratic way to express that stake is in the form of a dividend of consumer
goods and services to every man, woman, and child.
The cultural heritage
giv[es] birth to the national dividend. The national dividend is, after all, an
allocation of goods, goods that someone has produced, and therefore a denial of
the idea that the producer is the sole and absolute owner and disposer of the
product. To the extent that the cultural heritage is a factor of production, the
product belongs to all.
The nation, through a banking system as public
servant, will have to devote some quantity of consumer goods on the shelf as an
incentive for new production (by allocating them to production). Due to improvement
of process, this quantity may well be less than the full tally of goods on the
shelf. Then the balance of goods constituting the Cultural Heritage in effect
already belongs to the public. They only need to come and take physical possession
by presenting tickets (money). A National Dividend of tickets is a way to ensure
that this National Dividend of [consumer] goods takes place.
it seems to me that money as such should not appear on the [national] balance
sheet any more than tickets would appear on a theater's balance sheet. (A theater
would record printing tickets as an expense but not tickets themselves as an asset.)
A national balance sheet would still consist of items recorded at cost in money
values. [But] I don't think "Cash" should be one of those items. The national
balance sheet is not an accounting of money. It's an accounting of things, and
then money is merely the device by which the members of the association take physical
possession. In conventional accounting a dividend is really a dividend in money.
In social credit accounting a dividend is really a dividend in things, and money
is just a mechanism.
A+B in 47 Words
to individuals today are one thing and the payments to individuals that make up
the cost-history of the goods on the shelf today are another; and the natural
effect of advancing technology is to create a shortfall of the former in relation
to the latter.
The Age of Plenty
of the guy who would squander his leisure on, say, internet porn?" He must have
his dividend. Not only that but as long as your porn business is legal, it must
get the benefit of the compensated price the same as every other business. Abolish
poverty first, and then see how many women want to be prostitutes and porn actresses.
The same dividend paid to rich and poor alike will (if it is real purchasing
power) reduce the inequalities between them just as a blanket of snow reduces
inequalities on the ground.
"Saving for a rainy day" is a reaction to
artificial scarcity. When we have an economic system based on real plenty, we
will be able to count on the economic system to provide, not only today but also
tomorrow, and the habit of "saving for a rainy day" will disappear. Douglas asks,
"Why ration water on Lake Superior?"
"Suppose [my grandchildren's] dividends
were deposited by their parents into accounts which could be realized at the age
of 21." (K.) But what has happened to the goods in the meantime? The failure to
consume them ought rightly to send a message to production to slow up. If so much
goods remains over unconsumed from one period to the next, that is a signal to
produce that much less; and that will naturally make the next dividend correspondingly
smaller. It would go better with the idea of the dividend for parents to buy on
behalf of their minor children immediately, which I think they will do as they
get used to the new climate of real economic security. It won't be necessary to
worry about having enough money 21 years down the road. Remember, money can be
created as and when it is needed. And there is no reason to produce goods now
that aren't going to be wanted for 21 years. It's an inefficient use of productive
As we get goods on better and better terms by means of the dividend,
some people currently in the work force will be satisfied with their standard
of living and be tempted to drop out. That is fine, disemployment is efficiency.
As people drop out, there will be less competition for jobs. As there is less
competition for jobs, people will require bigger incentives in order to do any
unpleasant work. When the point comes that the incentives required are too high
in relation to the public's desire for more product, production will naturally
Dividends and compensated prices will allow naturally falling
prices, which are "the most perfect method of passing improvement of process on
to consumers" [Douglas, Brief for the Prosecution], to occur without dire consequences.
They will increase everyone's economic security, with the result that many will
voluntarily take a pay cut to do a job they like, take a part-time job to have
more time for other endeavors, or remove themselves from the labor force altogether;
and this, too, will be without dire consequences. By reducing workers, they will
reduce the need for automobiles to get to work and fossil fuels to run the automobiles.
They will relieve the pressure on a nation to export in order to keep its own
people employed. They will end the production of ever new editions of cheap junk,
because the empowered consumer will be able to demand quality. So they will secure
an equal or superior standard of living with less work and less waste and therefore
less consumption of resources. By making everyone richer and relieving them of
fears for the future and the next generation, they will enable people who have
reached the standard of living they want, to simply maintain it and therefore
to level off their consumption. They thus enable production to level off, without
Aristocracy of Producers
Douglas's "aristocracy of producers" means that production will be run by the
people who actually produce, not by professional managers.
be all the better for being owned by artists of industry who have their hands
on the process without having to answer to a stockholders' meeting.
science of economics comes into its own right there where industry becomes art.
My dad has been throughout his life a Unitarian minister. For him, being
a minister was its own reward, but he still had a family to support. So you wouldn't
have to pay him to be a minister. You'd just have to enable him to afford to be
a minister, and he would do it for the love of it.
Fred Royce was the
creative genius with a passion for work who designed the Rolls-Royce. Such a person
you furnish with everything he needs, but his labor wouldn't cost you much - indeed,
anything - because it was what he lived for. The steam engine was a product of
individual creative genius, but now its contribution to civilization belongs to
all. The alphabet was once undoubtedly the product of individual genius, but now
it belongs to all. So was fire. And it is precisely this sharing out of the dividend
of leisure due to technology that will empower individual creative genius that
is presently strangled in the crib for lack of money. As Douglas famously put
it: "The industrial machine is a lever, continuously being lengthened by progress,
which enables the burden of Atlas to be lifted with ever-increasing ease. As the
number of men required to work the lever decreases, so the number set free to
lengthen it increases" (my italics).
Serving a Democracy
Just as we don't need everyone employed, we also
don't need everyone to administer capital. We need everyone to enjoy the benefits
of capital that, by right, they already own. Capital should be administered by
the people fittest to administer it organized at the optimal size for productive
efficiency, that is, for maximum service to the consuming public. As Douglas put
it, it is an "aristocracy of producers serving a democracy of consumers." And
the best way to achieve that is to enable consumers to vote effectively with dollars.
"When the loom weaves by itself and the plectrum makes music by itself,
there will be no more slaves" (Aristotle). You quoted this and said, The loom
does weave by itself, and the plectrum does make music by itself, and we still
have slaves! Since we don't need so many workers, let everyone become an owner.
Not just a receiver of dividends, you said. Participation is everything, you said.
Now suppose I am a mother at home. I am participating, making an undoubted contribution
to society and doing what I do best. Why do you want to burden me with responsibility
for the loom, when all I want is the cloth? I don't know anything about looms,
I have no desire to learn anything about looms, and I don't care to make decisions
about them. The only decision I want to make is what kind of cloth I want, and
about that I will be very fussy. That's how I exercise my voice over the loom.
So by all means, let me own the loom and receive dividends. Indeed, it is my right.
But don't ask me to take a creative interest in it. There are plenty of people
who do take a creative interest in it, who for that reason will do it much better
than I. I have my creative interest right here at home. The loom weaves by itself,
and the plectrum makes music by itself, so we should indeed have leisure. Right
there is all the justification you need for a dividend to every person. I will
spend my leisure as a full-time mother and homemaker because that is what I love
best. Why give me "leisure" and then tell me I am to take a Justice-Based Management
course so that I can learn to exercise "power and accountability" in regard to
my loom? A public dividend, on the other hand, gives full scope to the creativity
of the artists of industry to compete in serving my needs.
like shareholders of a company, "own" the company [i.e., the nation and its wealth];
but social credit wisdom says that they do not exercise effective control over
the company by taking direct possession of it, nor do they exercise effective
control by electing the board of directors. They exercise effective control by
receiving dividends and spending them - by taking charge as shoppers. This is
what we mean when we call the money system an order system, and this is the way
national resources are "drawn upon" - they are "drawn upon" in answer to consumer
demands for goods and services expressed by shopping.
The consequence of the national dividend and compensated price
is to raise pay and lower prices in a place - to make everyone in the place richer
and give them an incentive to buy domestic goods. For that incentive to work,
it is not necessary for domestic goods to be absolutely cheaper than foreign,
only that they be affordable. In addition, a social credit economy will release
the huge energy of production that is now sabotaged, attract capital [i.e., brains,
see below], and sell to the world in any degree desired. It carefully distinguishes
foreign and domestic inputs and advantages the latter not artificially but by
freeing the domestic economy to achieve unprecedented heights. From a physical,
engineering point of view, production in countries with cheap labor is not really
more efficient. It is financially more efficient at present, but then our own
industry is 95% waste. When we institute a financial system that reflects reality
and eliminates that waste, a completely different picture will emerge.
just said that capital would fly to, not flee from, a social credit commonwealth.
But capital in what sense? Not capital in the sense of money - for am I not the
one who has been saying financing by absentee investors will become a thing of
the past? Not capital in the sense of natural resources and physical infrastructure,
for they do not so easily flee or fly. But capital in the sense of brains. The
money system is how society allocates the use of goods and services in the optimal
way - puts goods and services in the hands of those able to make the best use
of them. The real investment is the investment of our brains, our time, our energy.
Society provides the money - allocates capital goods and services for the work
and consumer goods and services to keep us while we work. A society that does
this in an optimal way will attract brains and become prosperous.
is no reason in the world why South Africans can't clothe South Africans. How
can you expect to hold your head up in the world of nations if you don't even
clothe yourselves, if you stand before us naked? And if you stand before us naked
and helpless, what authority have you to sign trade agreements? If you have the
factories and you have the naked people, you can clothe yourselves. No speech
about the complexities of your ticket system is going to convince me that you
can't clothe yourselves. And if these complexities are over my head, I'm not going
to give up and say, "Maybe you're right." I'm going to say, "Of course you can
clothe yourselves! Anyone smart enough to have factories and machinery and manufacture
clothing must be smart enough to make a ticket system that won't strip them naked!"
Starting from there, you need not know a thing about social credit, but you can
still know that there must be a possible ticket system that will enable South
Africans to clothe South Africans and take advantage of every labor-saving efficiency
in the process. Taking advantage of every labor-saving efficiency, South Africans
will find they are rich, richer than they imagined. Being rich, they will find
they are no longer forced by iron economic constraints to buy the world's cheapest.
They will be able to afford the priceless convenience of buying South African
and dealing with producers they can know and find and talk to. Now go design a
ticket system to serve that end.
The New Urbanism
(natural) systems are already strained beyond the point of sustainability" (L.).
Right, so if we could support a population 20 times greater with the same strain
we already have [by eliminating the 95% waste], we could easily support any realistic
projection sustainably, and continuing technological advance would increase our
ability to do that.
If you put me in a residential zone where I have to
drive a mile to buy an egg and make me spend 40 hours a week at some useless endeavor
so that even if I wanted to walk the mile, I wouldn't have time, then you can
manipulate me into expressing a "demand" for fossil fuel that is not really my
demand at all.
My friends at the Congress for the New Urbanism will show
you that it is socially inefficient to design cities for cars, rather than people
- that one-third to one-half the square footage of a major city is paved, that
roads are too wide, that people prefer mixed-use neighborhoods with a corner store
and other basic amenities in easy walking distance or reachable by good rail transit,
as opposed to residential zones totally dependent on automobile transportation.
The fact that people prefer this gives a clue that we can get it by empowering
People who can afford it pay a premium to live in such neighborhoods.
The narrow streets give you a comfortable feeling of enclosure and slow down the
traffic, making them pleasant places to walk and shop. They carry that feeling
of "charm" and "romance" that we seek as tourists but only dream of living in.
So if the economist says, "Let them put their money where there mouth is," I say,
"Okay, give them money, and see where they put it."
Wal-Mart is a case
of taking advantage of the scarcity of money, rather than relieving it. That is,
the price of the object is lower, but you have to put up with a fight with traffic,
a hike across a huge parking lot, ugliness, towering shelves, no help on the floor,
and poorly paid employees. Social credit says we should be able to have it all
- a pleasant walk to the store, beauty, human-scale architecture, zealous service,
happy employees, and the object. [By "taking advantage"] I mean that it offers
a worse bargain, but people on limited funds are obliged to accept a bad bargain
because a walking community, beauty, human-scale architecture, personal attention,
etc. are unaffordable luxuries.
1. That the cash credits of the population of any country shall at
any moment be equal to the collective cash prices for consumable goods for sale
in that country, and such cash credits shall be cancelled on the purchase of goods
2. That the credits required to finance production shall
be supplied, not from savings, but be new credits relating to new production;
3. That the distribution of cash credits to individuals shall be progressively
less dependent upon employment. That is to say, that the dividend shall progressively
displace the wage and salary.
[No. 2] is one of the three pillars
of social credit method, the other two being equation of prices and purchasing-power
and the financing of leisure.
Obviously, it's the same production [in
first and second part of no. 2]. He could have said, "new credits for the purpose";
but "new credits . . . new production" makes a parallel with Swanwick #1. Just
as credits and production go out together (Swanwick #1), so they come in together,
they are both new together (Swanwick #2).
Money should come in with production
and go out with consumption: "cash credits shall be cancelled on the purchase
of goods for consumption," and "credits required to finance consumption shall
be . . . new credits relating to new production." This cycle is not automatically
self-liquidating. So as necessary, let banks create money for consumers [nos.
1 and 3].
The whole point of the economy is to disemploy people, which
means to free them to employ themselves (Swanwick #3). The only way to gainfully
disemploy as many people as possible is to match consumer purchasing-power to
the cost (including debt) of consumer goods on the shelf at regular intervals
(Swanwick #1). "At regular intervals" means not at some hypothetical "eventually"
that we keep deferring. That means we produce only as much as we want to consume
as we want to consume it, and with the minimum of effort.
It is obvious
from principle 1 that the national dividend is to purchase consumer goods. Stocks
and bonds are not consumer goods, and if they were bought with "cash credits of
the population," that would leave consumer goods on the shelf and no money to
buy them with. And sure enough, principle 2 says, "Credits required to finance
production shall be supplied, not from savings, but be new credits," which means
exactly what it says. In other words, the social credit economy itself is our
nest egg - our insurance - and stock-and-bond trading will become obsolete.