Social Credit of the Left

That there is a social credit of the Left will come as news to many social crediters. To understand it, the reader will have to disabuse himself of the notion that socialism means nationalization of the means of production. This meaning became the paradigm after 1922, when the Labour party declared that social credit was not compatible with socialism. Before 1922, the Left still had room for a Morrisian vision of economics, in which "the ordinary things men made ought to be so made as to be a `joy to the maker and the user'." In The Political Economy of Social Credit and Guild Socialism, Frances Hutchinson and Brian Burkitt adopt the definition of Henry Smith: "Socialism is the economic equivalent of political freedom, equality and fellowship. Its defining criterion is the reduction to a minimum of conflict due to economic causes." When it rejected social credit, the Labour party rejected true socialism.¹
      In calling attention to the origins of social credit in the trades union movement, Hutchinson and Burkitt bring a new dimension to the subject. In 1907, A. R. Orage and Holbrook Jackson formed the Fabian Arts Group as a wing of the Fabian Society and purchased a bankrupt magazine, the New Age. The New Age declared its intention to examine the philosophical basis of socialism, to which end it provided a forum for the guild socialism of Arthur Penty and S. G. Hobson and the distributism of Hilaire Belloc and G. K. Chesterton. In consequence, the New Age became the black sheep of the Fabian Society, and by 1909 the rupture was complete.²
      In 1918, Jackson introduced Orage to C. H. Douglas.³ Of this historic meeting, Orage wrote:

One day, about a year after the Armistice [sic], there came to my office, with a personal introduction from my ex-colleague, Mr. Holbrook Jackson, a man who was destined to affect a beneficent revolution in my state of mind. [I] had often boasted that the New Age owed its "brilliance" to the rejected stones of the ordinary builders; and everything about Major Douglas made him personally and intellectually attractive. . . . His knowledge of economics was extraordinary: and from our very first conversation, everything he said concerning finance in its relation to industry-and, indeed, to industrial civilization as a whole-gave me the impression of a master-mind perfectly informed upon its special subject. After years of the closest association with him, my first impression has only been intensified. In the scores of interviews we had with bankers, professors of economics, politicians and business men, I never saw him so much as at a moment's loss of complete mastery of his subject. Among no matter what experts, he made them look and talk like children. The subject itself, however, even in the hands of a master, is not exactly easy; and, in fact, it compares in economics with, let us say, time and space in physics. By the same token, Douglas is the Einstein of economics; and in my judgment as little likely to be comprehended practically. In other words, a good deal of sweat is necessary to understand Douglas; and . . . very few will be the minds to devote the necessary time and labor to the matter. . . . He said many things in our first talk that blinded me with light; and thereafter I lost no opportunity of talking with him, listening to him talk. . . . It was a full year from beginning to study his ideas before I arrived at complete understanding. Then all my time and labor were justified. . . . Students looking for a long row to hoe may be directed to the increasing body of literature on the subject, inaugurated by the volume in which I more or less collaborated with Douglas himself--Economic Democracy. There followed Douglas's Credit-Power and Democracy, and several others.⁴

      Subsequently, Economic Democracy, Credit-Power and Democracy, The Control and Distribution and Production, and Social Credit appeared, in whole or in part, in the New Age. These and other Douglas works from the same period (1918-24) are what Hutchinson and Burkitt call "the Douglas/New Age texts," the fruit of the collaboration of author and editor. The direct collaboration ended when Orage went to Fontainebleu in 1922 to study with G. I. Gurdjieff.⁵ Curiously, Gurdjieff and Douglas have something in common beside Orage: both are notorious for jaw-breaking sentences.

      Hutchinson and Burkitt in fact regard "the Douglas/New Age texts" as still guild socialism. It is true that except for the "Draft Mining Scheme," they are not about guilds. But they are about getting the running of manufacture into the hands of people who actually know how to make things (as Xenophon's Socrates puts it, getting the flute into the hands of the flute player); and they are about socialism if that word is allowed its Morrisian sense. The texts outline "a socialist system of finance tailored to serve socialist, rather than capitalist, ends"; "a coherent economics of socialism"; "a comprehensive body of theory coupled with practical proposals for the reform of finance as a prerequisite to establishing a socialist economy"; "a route to a socialist economy in which economic conflict is minimised."⁶

The Role of Orage

In their laudable mission to reconnect social credit with guild socialism, Hutchinson and Burkitt go so far as to suggest that Orage was more than an editor and influence, that he was actually coauthor of the works published under Douglas's name. They go even beyond that to intimate that Orage was the real genius behind the texts, Douglas merely a "vehicle" who contributed little of his own save a technical insight into the money system. In spite of that, Douglas gets all the blame for the prose style.⁷

      It would require a strong case to overturn the evidence of the title pages of the books. The evidence the authors propose is (1) that Orage claimed to have coauthored Economic Democracy, (2) that the "Draft Mining Scheme" was accepted as the work of both authors, (3) that "The Labour Party and Social Credit" is written in the style of Orage, and (4) that there is no evidence that Douglas had any developed social philosophy prior to his meeting with Orage.⁸
      The statement that Orage claimed to have coauthored Economic Democracy rests on the passage already quoted, in which he calls it "the volume in which I more or less collaborated with Douglas himself." Whatever is meant by "more or less collaborated," the word the indicates that this role was limited to the text in question, and the whole context (even allowing for false modesty) speaks for itself. The "Draft Mining Scheme" is a four-page scheme accompanied by a sixty-one-page commentary, all of which forms the appendix to Credit - Power and Democracy. Orage gets full credit for the commentary on the title page of the book. The best evidence of Douglas's social philosophy is the works themselves, which testify to a long parturition.
      As for "The Labour Party and Social Credit," Hutchinson and Burkitt are simply mistaken. There is nothing in it that could not have been written by Douglas. Several touches of irony are distinctly Douglas-like: "It is fairly safe to assert that any Works Manager would be in a position of some difficulty if called upon to find a use for Mr. Webb in his works"; "The Fabian Society has been notably successful in intercepting, sterilising and misdirecting intelligent enquiry into the causes of social unrest"; "devoted itself to the devastating problem of Privy Councillorships for Labour Leaders"; "If an attack were levelled at a treatise on the game of cricket on the grounds that the author's theory did not conform to generally accepted views on stool-ball, it would be necessary to stress some general differences between the games, if for any reason an answer to such criticism were deemed to be desirable."⁹
      I do not assert that Orage could not have written these, but I am quite sure he could not have written the following:

During the late war, there were numbers of highly placed officials both military and civil whose success was only enhanced by the chaos, intrigue and obstruction which seemed to attend their best efforts. Absurd suggestions of treachery and corruption were freely made in connection with these persons--absurd because although their safety and steady promotion were of the greatest consequence to Germany and the International organisations by which she was supported, it was obviously in every way more convenient, cheaper and more effective that they should be paid by the British Public, and if possible be encouraged to imagine themselves to be serving it.¹⁰

This elliptical and ironical way of saying that Britain was her own worst enemy is vintage Douglas.
      Another proof is found in the expression "from the cradle, or before, to the grave, and after." The identical turn of phrase is found in a 1925 address by Douglas: "from the moment that he draws breath to the moment of his death, and after."¹¹ Finally, on the theory of Orage's sole authorship of "The Labour Party and Social Credit," it is odd to find the repeated use of the first person, including a description of the "Draft Mining Scheme" as "drawn up by the writer, and most ably expounded by Mr. A. R. Orage."¹²
      Furthermore, Hutchinson and Burkitt's stylistic argument is distinctly two-edged. Had it successfully proved Orage to be the author of "The Labour Party and Social Credit," it would only have proved Douglas's authorship of the other works, whose style they deplore. They acknowledge "the complete lack of editing" of the texts; and indeed it was Orage's policy to print articles verbatim, with no blue-penciling. But if the words are Douglas's and Orage published them verbatim, how did the latter provide "a great deal more than editorial support"? It can only have been at the level of ideas: author found in editor what most authors and teachers long for in vain, the ideal reader and pupil. That is why the texts are enhanced by reading them in a guild socialist context. There is no reason to bring their authorship into question.¹³
      The fact is, Orage and the New Age were the center of a rich intellectual milieu. Hutchinson and Burkitt list the "five main strands" of guild socialism as "Penty's medievalism, political pluralism, syndicalism, Hilaire Belloc's conceptualisation of the `servile state' and a Fabian belief in reformism as a means of social justice." But there is no reason why Douglas could not have read these authors, as well as Orage and the guild socialists, for himself, both in the New Age and independently. There is no fact that cannot be accounted for by Douglas's receptiveness to the whole milieu and no reason to doubt that Douglas was sole author of the books published under his name. "The Douglas/New Age texts" are, more simply, "early Douglas." If the content of the texts is guild socialism, it is because Douglas was the greatest guild socialist of them all.
      C. H. Douglas is one of the great prose artists of the English language. His long sentences are syntactically flawless and rhythmically modulated. His elliptical and allusive style is ideal for incorporating multiple levels of meaning. It is the only way, perhaps, to express his multidimensional thought, for no one has ever put Douglas's ideas in "simple" language without diminishing them. Paradoxically, although his sentences may be long, no author is more concise. The difficulty in reading Douglas is not looseness of conception but high intensity--too much meaning. In his mind everything really is connected to everything else, every idea immediately contiguous to a dozen more. There is therefore a haphazard quality to the progression till you suddenly find yourself at a familiar place, having arrived by a strange route. It's an adventure, but that is also why his books are ever young and never wear out. Anyone who hasn't realized this quality of Douglas hasn't read him yet. "It's economics, for heaven's sake! Just give me a clear exposition!" What Douglas gives us instead is high art--rich, playful, and profound. To a holistic mind like his, there's no such thing as economics. Orage read Douglas. And he must have known what he was doing, for the challenging prose didn't prevent the books from selling well and going into multiple reprints.¹⁴

Guild Socialism

Trades unions were born out of the horrible living and working conditions of the industrial working class. But they were weak because they were unnecessarily multiplied within industries and because they included only a small minority of actual workers. The guild socialists wanted to enlarge and strengthen the movement and then use it to abolish the wage system. They sought to enlarge and strengthen it, first of all, by turning the trades unions into vertically integrated guilds where master and man would find common ground and take pride in the work, and second, by extending such guilds horizontally to include every occupation, such that there would be no one not in a guild. Hobson thought the whole nation's economic life could be pretty well covered by twenty-two guilds, chartered by the state.¹⁵
      The object of attack for which this army was mustered was wages as a system of payment. In equilibrium theory, "unless or until the products of nature or the services of society become `commodities', that is, subject to exchange on the market, as far as the economist is concerned they do not exist." Hence, people lacking land or capital counted economically exactly to the extent that they were successful in "selling their labor" in the market. And "selling their labor" meant that they parted with it absolutely, relinquishing all further claim to its fruits. By making labor sell itself as a commodity, the owners of land, money, and capital succeeded in appropriating two-thirds of the price of products. The guilds, having an effective monopoly of labor, would demand the whole price and distribute it, but not as wages for work. Guild socialists proposed instead to break the artificial bond between personal income and employment: "Payment would be on a service basis, continuing through sickness and idle times, rather than as remuneration for hours worked or in relation to productivity." It would maintain not only the employed but also reserves in every occupation. Their American contemporary Charles Ferguson summed up the concept when he wrote, "Do not hire people; finance them." For this purpose, guilds would also be banks, with a labor-based monetary unit.¹⁶

The Cultural Heritage

Whereas equilibrium theory recognized three factors of production--land, labor, and capital--there was a fourth factor so huge it escaped notice, the cultural heritage. While this concept was recognized by Hobson in connection with inventions, its enormous significance was first apprehended in "the Douglas/New Age texts." It represents something whose vastness is apt to dwarf the imagination.¹⁷
      What is the cultural heritage as a factor of production? The following are quotes from Hutchinson's What Everybody Really Wants to Know About Money (numbers are pages):

The non-money value system [sustains] economic relations among people and between communities and their local environment. . . . The abundance of nature combined with human ingenuity and invention can provide an ample sufficiency for all (23). An economy based upon the production, distribution and exchange of material artifacts and the services associated with their production is unsustainable over the long term. Its existence depends upon the unseen support of forms of non-monetised social cooperation and on the natural environment's continuing ability to provide resources and absorb waste (26).
      Without access to the common cultural heritage of the "intellectual commons," claims to the benefit streams of land and labour become ephemeral (62). Hunting was only able to develop into warfare and trade on the basis of communal provision of necessities, underpinned by the development and preservation of a common body of knowledge. It is impossible to over-stress the dependence of the human group on the `steady state' subsistence economy based on knowledge of, and cooperation with, the natural world (81). The economic bedrock of human society remained rooted in the cooperative activities of gaining subsistence and rearing the next generation, . . . cooperation within families and communities, and with the natural world, in the rebuilding after destruction and in the maintenance of supplies of food, fodder, shelter, clothes and fuel, coupled with the rearing of generations equipped with physical, intellectual and emotional skills (98). The formal economy is parasitical upon its foundations in the social and natural (99).
      The industrial revolution had been made possible through inventions of tools and processes which were the product of the combination of human cooperative ingenuity with the common cultural inheritance of knowledge and skills acquired over untold past generations (132). The manufacturing sector of the economy drew from and was dependent on the wider community of workers, artists, inventors, consumers and citizens (135). Whatever the nominal system of economic interaction, all members of the community were in reality dependent upon . . . the land and natural resources, the fabric and infrastructure of buildings and communications, artistic traditions and the full range of "intellectual property," the knowledge of skills and process build up by countless generations of the past (135).
      [The guild system] was able to recognise the work of priests, preachers, artists, craftsmen, journalists and authors as an essential contribution to the common wealth, rather than a drain upon it or a luxury to be afforded after the creation of material wealth. . . . In order to encourage the free play of "idle curiosity" essential to new discoveries, certain guilds would exist to manage the work of inventors, pure scientists and any other groups, including "housekeeping women," who are normally excluded as economic agents (137). Home care, child care, knowledge, invention, education, the web of culture and the care of soils and countryside belong to, and are the responsibility of, all the members of the community (143). A distinction can be drawn between "internal" and "external" goods. Internal goods, like memories or the ability to speak Italian, are not exchanged on the market. [It is true that] musical skills may only be exercised through possession of a musical instrument. However, the internal goods themselves become part of the person (146f.)

Production "is 95 per cent a matter of tools and process":

Imagine one man tending a machine that prints circuits: is the value of the printed circuit his labour time? The value of the printed circuit is design value: the design of the circuit, the design of the machine. Men turn out resistors and capacitors and transistors: these would be utterly worthless curiosities did not designs exist for television sets and computers and amplifiers. . . . What has multiplied the value of their work is design done once for all. [The cultural heritage] includes many esoterica: the results obtained by mathematicians long dead, the formulae of anonymous metallurgists, even, we may hazard, Brancusi's sense of form, which in a time of motorized box kites anticipated the aluminium cylinders we fly in today.¹⁸

The characteristic feature of these things seems to be that they all represent a permanent enhancement of the life-value of the community. And to a large degree they also represent creative work that is its own reward, work that may need to be financed but does not need to be compensated by a wage, needs to be made possible but does not require an incentive. It is, in other words, productive leisure. The saying goes, Time is money, measuring the greater thing by the lesser. The real saying should be, Money is time, that is, the purpose of money is to free up our time.
      What has happened, however, is that the cultural heritage has been sectioned off and turned into monopolies. In the words of Frederic Howe:

If you want to get rich (that is, very rich) in this world, make society work for you. Not a handful of men, not even an army of men, but society itself; . . . for by a simple process of addition, the pennies of the millions make up the millions of the few. . . . All a railway has to do is offer the service, and the growth of population and business makes money for them. They cannot get away from it. While they sleep, society is at work for them. . . . Every immigrant who landed in the city, every child that was born, made money for us.¹⁹

However, mere maldistribution of fruits is not the half of it. The real crime is sabotage of industry itself, as Howe also observes:

Monopoly palsies industry, trade, life itself. It encloses the land and the nation's resources. It limits opportunity to work. It erects its barriers about our resources; not to use them, but to exact a monopoly price from those who do. Monopoly denies to man opportunity. It fences in millions of acres of soil, of coal and iron mines, and of city lots. It closes the door to competition and to labor.²⁰

Of the $99 price of Microsoft's Windows 95, $96 was sheer tribute based on intellectual property right protection of Microsoft's license.²¹ As exorbitant profit is the incentive, the solution Douglas proposed was to restrict profit to a percentage over cost (varying for different industries based on risk). Because it is concealed in his compensated price proposal, this concept often escapes notice.

Sufficiency

The concept of the cultural heritage leads in turn to the concept of sufficiency:

The abundance of nature combined with human ingenuity and invention can provide an ample sufficiency for all. The problem is not so much to increase production as to limit it to meeting the demand for sufficiency without having devastating effects upon the real economy (the natural environment and the people who rely upon it for their livelihoods). The existing money system is incapable of handling inventions designed to create a pleasing sufficiency. By eliminating built-in obsolescence, superfluous packaging, transportation and waste, a sufficiency of high-quality local food, clothing and other essentials could be produced for local markets.²²

I think Hutchinson and Burkitt overstate the difference between their sufficiency and leisure on the one hand and plenty or age of plenty (appearing in many social credit writings) on the other. Bear in mind Thomas Robertson's generous reading of Basic Needs to include personal adornment; space, beauty, and privacy in a living space; amusements, hobbies, cultural pursuits, variety at work, friendship, marriage, sex, children, education, travel, aesthetic enjoyment, intellectual pursuits, and even "mild alkaloids" and his insistence that our standard for social services should be that of "the man of means." Bear in mind that they themselves speak of an "ample sufficiency" and "consumer-determined sufficiency." Bear in mind their dictum that what priests, preachers, artists, craftsmen, journalists and authors provide is to be considered essential service, not luxury. Bear in mind that plenty is the constant refrain of the later writings of their favorite guild socialist, Orage. Finally, bear in mind that "the Douglas/New Age texts" cited H. L. Gantt (associate of Charles Ferguson) to the effect that the U.S. industrial system was operating at 5% efficiency. If the benefits accruing from the elimination of 95% waste were distributed, is plenty too big a word for the leisure that would result? What they mean, of course, is that compulsive consumption would no longer be necessary to make the economy work and that there is an opportunity for a renewal of values.²³
      Arthur Penty is quite right to point out that what is wealth and what is waste is not always obvious: "If a man has to travel from New Cross to the City every day for employment he helps the tramway to pay its dividends, but he is the poorer for having to take the journey. He is perhaps richer by the time he saves as compared with the time he would lose in having to walk. But the fact that a man lives in one part of the town and works in another is itself . . . a liability."²⁴ This, by the way, answers the people who think the unanswerable argument for Planning is traffic laws. How many people are on the road because they want to be on the road? How much of the volume of traffic actually serves no one's wants either directly or indirectly? If 95% of the activity of the industrial system is dead-waste, then 95% of the road traffic directly or indirectly set in motion by it is probably dead-waste. Eliminate that, and then we'll see where we really stand. I could imagine a society in which traffic rules were merely courtesy rules, with liability in the case of actual collisions. At what point in the history of the automobile did collisions become a serious problem?
      There are many examples of anomalies. In Canada a bushel of corn sells for less than $4, a bushel of cornflakes for $133. Car accidents and oil spills add to the national wealth because emergency services, insurance claims, hospital care, cleanup operations, and replacement of vehicles and property all register as positives. The Depression saw newspaper headlines of the type "Herring glut threatens starvation," "France `welcomed mildew'," "Hurricane `helps' sugar position," and "International plan for destruction of cocoa."²⁵
      Then there is apple-sauce:

Apples grow well throughout the U.K. It takes a few seconds to core an apple and pop it next to the roast in the oven. Within minutes the skin can be peeled of (and composted, no waste) leaving a delicious, flavoursome apple sauce to go straight onto the table. Yet, at the height of the apple harvest and during the following seven months during which apples are easily stored, supermarket shelves display jars and packets of apple sauce. Not only have these apples been stored and transported, often from the far side of the world, but the processing and packing, transport, distribution and retail processes involve work and environmental costs which add nothing to the quality of the product in terms of flavour, convenience or nutritional value.²⁶

Yet by "a process of arithmetical legerdemain known as cost accounting," value is added in the amount of all the labor, overhead charges, selling charges, and profit.²⁷

The Draft Mining Scheme

The Draft Mining Scheme of Douglas and Orage was written in 1920, when the government was getting ready to relinquish its wartime control of the coal-mining industry. It was this scheme that the Labour party considered and rejected in 1922 in favor of nationalization. Nineteen-twenty was the year of Montagu Norman, deflation, industrial unrest, and the Emergency Powers Act. The coal-mining industry was particularly hard hit, and in 1921 when government control ended, a wage cut provoked a three-month strike. These simmering troubles were to precipitate a general nationwide industrial strike in 1926.²⁸
      Orage used the term social credit in the Draft Mining Scheme, but credit for coining it must go to Charles Ferguson, who used it five times in The Great News, published in 1915.²⁹
      The scheme proposed to turn the Miners Federation of Great Britain into a vertically integrated guild with branches in each geological mining area and including all workers and managers both active and retired. Thus, each branch would represent a mining community. Mining communities considered as a factor of production would be the credit basis for a guild bank with branches in each geological mining area. This bank would be served by a national bank acting as a clearing house. The colliery owners would continue undisturbed in their dividends and privileges except for price making. They would publish a periodic financial statement showing the cost of production of coal. The government would keep track of figures of national production (including appreciation) and national consumption (including depreciation) in general. Unconsumed production (i.e., net increase in the national wealth) in any given period would be the signal for the issue of new credits by the clearing house. The credits would be issued in the form of a subsidy on the price of coal for home heating (the compensated price). The full price of coal would be cost plus a percentage (the profit rule). The percentage of the price subsidized for the home user would be equal to the percentage of the national production in general that remained unconsumed. The industrial user would pay the full price, and the home user would enjoy a discount based on the increase in the national wealth.³⁰
      Improved efficiency in any industry would go to reduce the figure for national consumption and so swell the subsidy for home use of coal. However, only half of improved efficiency in the coal industry would be so counted. The other half would be paid in new credits from the clearing house direct to the colliery owners and the guild bank (the dividend). This would be a stimulus to invention and a particular benefit of participation in the scheme, which, however, is designed to be extendable to all industries. Finally, the mining community (through its bank) and the colliery owners would have the privilege of financing new improvement and expansion (and receiving dividend-producing shares of new capitalization) in proportion to the size of their contribution to the industry as measured by their proceeds, that is, as payroll is to dividends, or about 9:1. There was a crying need for such investment, and Orage calculated that in this way, in ten years' time, the guild bank would own half the capital of the industry. Over time in this manner, the mining community and the colliery owners would become one and the same.³¹
      Hutchinson and Burkitt lay great emphasis on the Draft Mining Scheme:

Employees leaving the industry would retain their voting power in the producers' [i.e., guild] bank, serving to create local industry-community links, a vital aspect of the Scheme. As producers' banks developed they would come to represent the community at large, rather than merely those employed in the various industries to which the banks were attached. As new processes and technologies were introduced, displaced worker-producers should retain their economic rights. As time progressed, the majority of shareholders in an industry would be retired workers or heirs of former workers. In this way share ownership would be spread throughout local communities, enabling producers' banks to replace payment for specific productivity by payments of dividends on communal work. . . .
      The final stage of the Scheme involves the steady withdrawal from active industry on the part of pre-existing shareholders of the banks. In this way, shareholders would consist mainly of economically passive recipients of the social dividend as proprietors of the industrial plant of the community. As the community was placed in effective control of its economic resources wage-slavery would become redundant. . . .
      The Credit Scheme could be applied to any institutions providing employment within a local area. Wherever people work together for money, whether in industry, the arts, education, farming, medicine, retailing or any other essential service, their pooled financial resources [i.e., monetized real credit] could provide the basis for recovery of control over their own work. Guild socialists adopted a reformist approach, seeking to unite all who work as producers of goods and services within a locality with each other, and with local consumers. Through a gradual dispossession of the "profiteers" and absentee bureaucrats of the centralist state, local communities could reclaim control over their own resources. ³²

The A+B Theorem

The A+B Theorem is C. H. Douglas's great philosophical poem about time, history, civilization, life, and death and is susceptible to many levels of interpretation. It reads as follows:

In any manufacturing undertaking
the payments made
may be divided
into two groups:
Group A: Payments made
to individuals
as wages, salaries, and dividends;
Group B: Payments made
to other organisations
for raw materials,
bank charges,
and other external costs.
The rate of distribution
of purchasing power
to individuals
is represented by A,
but since all payments go into prices,
the rate of generation of prices
cannot be less than A plus B.
Since A will not purchase A plus B,
a proportion of the product
at least equivalent to B
must be distributed by
a form of purchasing power
which is not comprised in
the description grouped under A.³³

      Hutchinson and Burkitt's treatment of the A+B Theorem is informative and accurate except for the following:

Without the `B' payments (which may be spent on wages, salaries and dividends in the production of intermediate products) people could not buy the existing volume of consumable goods. . . . `B' payments are a form of new purchasing power which stimulates demand and hence prices in the present period without simultaneously increasing supply in that same period. However, current investment increases the supply of consumer goods in the future period. Hence `B' payments of the right amount must be undertaken in the future. . . . Increased production must be of a type paid for by `B' payments.³⁴

A consumer good on the shelf is the culmination of a series of intermediate products and capital goods that led up to it. Hutchinson and Burkitt here correctly observe that intermediate and capital production is assigned two separate and conflicting purposes. One is the common-sense one of leading to consumer goods on the shelf tomorrow. The other is through its payroll and dividends to finance purchase of consumer goods on the shelf today. However, the difference between A- and B-payments is not that of outlay of consumer- and intermediate-production firms, respectively. Rather, both types of firms make both types of payment:

A is for Allowances
To buy Apples and Ale,
B is for Back-Bursements
To buy Blubber and Ball-Bearings.

Thus, the payments they are speaking of are A-payments of intermediate and capital production to be reimbursed by B-payments at the next stage; and the payments required in the future are not B-payments but (as the Theorem says) an amount equivalent to B.
      While they reject the concept of a deficiency of purchasing power found in many social credit writings, the difference appears to me to be purely verbal. Their point remains that the production of "Blubber and Ball-Bearings" has been assigned the very unnatural purpose of financing the purchase of "Apples and Ale," which otherwise could not sell for lack of money. Production is thus overworked to make up a latent deficiency of money. True enough, the economy could not function if the deficiency were not made up, and even as it is, it only "functions" with a regular crop of bankruptcies. Orage in his later writings does not hesitate to use the term deficiency.³⁵

The Boots Example

I would now like to look at some of Douglas's examples and why they are unsatisfying. I will consider the boots example from Economic Democracy, the Figure from The Monopoly of Credit (reproduced by Hutchinson and Burkitt), the ship from Warning Democracy, the house from The Control and Distribution of Production, and the linen-making machine from The Monopoly of Credit.
      The boots example concerns three stages of production: a tanner, cobbler, and boot seller. If it was one vertically integrated company, transfer from one stage to the next would take place without money. As it is three separate companies, a social bank acting as a clearing house is needed to facilitate the transfer. The bank is custodian of the national real credit. The bank knows that new hides exist when the tanner gets a shipment of them and turns the invoices over to the bank. The new hides represent an appreciation of the national real credit, of which the bank is the custodian. Therefore the bank writes up the national credit account by the value of the hides and issues financial credit to the tanner to facilitate the transfer.
      The tanner produces the leather, adds up all his costs plus a percentage (the profit rule), and delivers it to the cobbler, who in turn submits the invoice to the bank. The bank then knows that the hides no longer exist but that leather exists in their place. So it writes up the national credit account by the value of the leather and issues financial credit to the cobbler, who pays it to the tanner, who returns the price of the hides to the bank, which writes down the national credit account by their value. The end result of the tanner-cobbler transfer is that the national credit account is written up by the value of the leather and down by the value of the hides, which no longer exist because they are part of the leather.
      The cobbler-boot-seller transfer results in the national credit account's being written up by the value of the boots including the boot seller's wages and commission (I don't know why) and down by the value of the leather, which no longer exists because it is part of the boots. Based on this, the boot seller needs to collect £2500 from the public. Just as in the Draft Mining Scheme, the price will be subsidized based on the excess of national production (including appreciation) over national consumption (including depreciation). For example, a general consumption rate of 40% would justify the bank's writing up its account by 60% of £2500, or £1500. The simplest way to subsidize the price would be to wipe out £1500 of the boot seller's debt and let him collect £1000 from the public. When this is collected and returned to the bank, the bank writes down the national credit account by that amount for the boots taken off the market. Since it wrote the account up by £2500 and down by £1000 and all other transactions cancel out, the bank shows in respect to the boots business a net appreciation of £1500, being a share of the national unconsumed production.³⁶
      To be fair, Douglas offers the boots example as an illustration of the national credit account and the compensated price, not of the A+B Theorem. He stipulates that "of the total work of the community for one month 60 per cent remains for use during a subsequent period" without pretending to show how such a situation would come about. The fact that the boots example resembles the Monopoly of Credit Figure, which does claim to explain A+B, makes it tempting to use the boots example in the same way. Yet the endeavor runs into trouble.
      Assuming the best case that all profits count as dividends, the price of £2500 consists of wages, salaries, and dividends (A-payments) of £1400 plus a net B-payment of £1100, which was the tanner's expenditure of £600 for hides and supplies augmented by the cobbler's £500 for supplies. Now all three business are operating all the time, and boots are being sold all the time. Therefore, in any given cycle, £1400 is paid out in wages, salaries, and dividends; £1100 is a net B-payment (£4450 against £3350 received); and boots go on the market for £2500. If this was a closed system and people in the boot industry actually had to buy all the boots, the price subsidy would be £1100. Because it is part of a national system, the price subsidy is based on the national rate, and it becomes £1500.
      The problem with this is that at least three unnamed businesses are counted as generating costs but are not counted as distributing current purchasing power. They are the unnamed suppliers to the tanner and cobbler, the businesses responsible for £1100 in costs. If the tanner, cobbler, and boot seller are operating all the time and paying out wages all the time, so are these. In any given cycle, they pay out £1100, partly in wages which are purchasing power and partly in B-payments to yet other businesses operating all the time whose wages also have to be counted. It is an interesting question where this sequence ends, but in any case it seems that virtually the whole of the £1100 should be available unless something changes. Thus, while the boots example embodies fascinating insights about the relation between money and things, it does not show how it comes about that production runs ahead of consumption. It merely stipulates it.

The Figure

The Monopoly of Credit Figure is very similar. A consumer good is produced in five months by five companies. In January, labor is applied to material to make a product (e.g., hides). The left-curving arrow marked B represents the purchase of that product by the next stage (February), which in turn adds more material and more labor to make a new product (e.g., leather). B increases from stage to stage because it is cumulative, just as in the boots example. Thus, the May stage makes a very large B-payment that reimburses all labor and material to date (four units of each), adds a unit each of material and labor on its own account, and costs the final consumer good at ten units. The A-payments would be the five units of labor alone. It might appear as if Douglas conceived of the A-payments as saved until May, but such is not the case. This is just Douglas's shorthand way of expressing that all five companies are operating all the time and paying out wages all the time and putting goods on the market all the time. Every month five units are paid out for labor and ten-units worth of goods go on the shelf. Five cannot buy ten.³⁷
      The problem here is the same one we ran into in the boots example. The cost of ten units consists of five units distributed as wages for labor (A-payments), plus a net B-payment of five units, which is for materials, and about these materials, we can ask the question Whence? We then find that (as with the boots example) they represent unnamed businesses that are counted as generating costs but are not counted as distributing current purchasing power. Every month they pay out five units, partly in wages (which are purchasing power) and partly in B-payments to yet other businesses operating all the time whose wages also have to be counted. Therefore, virtually the whole of the five units should be available unless something changes.

The Ship

The government contracts the construction of a ship for one million pounds. The shipbuilder has a half-million and borrows a half-million from the bank. He pays out £900,000 for materials and "overheads" and £100,000 in wages. The government pays one million for delivery of the ship, and the shipbuilder repays the bank, which cancels the money. Douglas comments, "You will see quite clearly, I think, that a ship priced at £1,000,000 exists, but the equivalent purchasing power in respect of this ship has not merely changed hands, half a million of it has absolutely disappeared."³⁸
      At first blush it might be objected that since the ship is already purchased, there is no reason for any of the purchasing power to exist. The answer to this is that the government is not the ultimate consumer. The government therefore resembles the boot seller, whose receipt of the boots resulted in the national credit account's being written up by the value of the boots and down by the value of the leather. Just so, the government's receipt of the ship should have the result that the national credit account (having already been written up by the value of the materials) would now be written up by the value of the ship and down by the value of the materials. That would be the fund from which purchasing power would be released to finance purchase by the ultimate consumers, citizens. Remember that the national rate of consumption (including depreciation) is the basis of the compensated price on all consumer goods. The simplest way for citizens to purchase the ship would be for the national credit account to be written down at intervals as the ship depreciates. That would increase the national rate of consumption and so decrease the price subsidy during the life of the ship, with the result that the ship (or its consumption, which is the same thing) would be paid for through prices in general. What happens instead is that there is no writing up of the national credit account, and the ship has to be paid for by taxes, which depletes existing purchasing power and prevents the sale of existing goods.
      Does this illustrate the A+B Theorem? The million-pound price consists of wages, salaries, and dividends (A-payments) of £100,000 plus a net B-payment of £900,000 for materials and "overheads." This leads to the same problem we encountered with the boots example and the Figure, for these companies also operate all the time and pay wages all the time. Or do they? The answer may lie in the question asked earlier, Where does the sequence end? Douglas stabs at it here when he points out that taxes toward the reduction of the national debt leave goods on the shelf to pay for articles that no longer exist. In the same way, Douglas implies, the price of the ship is swelled by a whole history of payments to companies that no longer exist and so pay no current wages.
      Alternately, it is suggested that part of the charges have not even this relation to real costs but are simply rent charged on the basis of monopoly. As Howe put it, "Every immigrant who landed in the city, every child that was born, made money for us." If such charges "were not applied to reserves and so forth in accordance with what is called `sound finance', they would be distributed in dividends, and would be available as purchasing power." Instead, they are allocated to "reserves, depreciation, etc." as if they were real costs. If the market permits the high price, these charges are allocated to fictitious costs; if not, the fictitious costs make a loss on paper. The implication is that "sound finance" results in money simply withheld from circulation for the sake of withholding it. Douglas concludes, "If you are going to ask the consumer to pay for depreciation, etc., you must give him the money with which to pay."
      Hutchinson and Burkitt rightly observe that Douglas's was an intuitive mind (Political Economy, p. 12). He here intuits something that he has not quite brought to the surface, and that is that if you make an example that covers an extended period of time, new features begin to appear that you do not see in examples like the boots example and the Figure. That is why the boots example and the Figure do not work. The new thing that enters in is the cultural heritage, and a heritage is not a cost but a gift.

The House

The house example sheds light:

If A ordered a house off B, and B, having built it, lived in it for ten years and then insisted on charging his rent to A in a lump-sum addition to the price, A would probably complain; but when B put his overhead charges, the rent of his control of production, into the price of bricks for A's garage, . . . A is being asked to pay, in prices, for something--viz. a period of use-value, past, and therefore destroyed and non-existent--of which the effective purchasing power never was distributed either as wages, salaries, or dividends. . . . What may remain is the credit-value of this period of use, its assistance to future production, which may form a solid basis for a distribution of purchasing power possibly much in excess of the use-value charged into prices.³⁹

The key here is that depreciation is not an additional cost on top of the price of a house or a factory, it is the price. Thus, B cannot argue that the house cost him so much to build, and then on top of that he had to bear the cost of ten years' depreciation. By that logic, once the house was a rotten hulk, it should sell at double the price! So, in the actual case, suppose that when the brick maker was paying a mortgage on the brick works, he charged the mortgage as overhead into the price of bricks. Now he owns the works free and clear and has completely recouped its price from his customers but still charges what the brick market will bear and records a cost for "depreciation." In fact, he has the use of the works free for the remainder of its productive life, and what he charges for "depreciation" is actually pure profit. This also gives him an incentive to divert his attention from quality and production to commercial competition and manipulation of the market.
      Now B, the builder, has to buy bricks at the market price and has to pass this cost on to A. Nevertheless, A is still thereby being asked to pay "depreciation" on a brick works over and above the purchase price of the works (which has already been redeemed) and therefore over and above all wages, salaries, and dividends paid out in the building of the works. Thus, the unencumbered brick works is one of two things: (1) the absolute property of the brick maker, which absolute ownership he can use in the right market conditions to inflate his profit margin or (2) the property of the brick maker but also a part of the cultural heritage, since the public has redeemed its purchase price. In the latter case, the bricklayer's profit must be based on his costs, the unencumbered brick works being a plus on the national credit account and justifying either a discount on the price or a dividend to pay it. Selling something according to cost is one thing, selling it according to value (which varies with the market) is something completely different. The social credit solution to economics is in principle the same advocated by Ruskin: it is not just to allow price to be determined by the market; price is determined by cost, and the market says yea or nay; if it says yea, it will be yea to a fair price; if it says nay, the product is not made at all.

The Linen-Making Machine

The linen-making machine example is different from all the others. It is also the only one that explicitly incorporates a machine. A textile manufacturer owns flax fields and linen-making equipment. There are two phases. In the first phase, the owner hires a man to turn the flax into linen, resulting in a batch every six weeks. The hired man's wages are a pound a week. The cost to the owner of a batch of linen will be the man's wages for that period, six pounds. The owner further offers the man lodging and the use of a potato patch for a pound a week, an offer the man accepts. Every six weeks a batch of linen has to be sold for at least six pounds, and six pounds has indeed been distributed. Yet if it is a closed system, the man has only a pound. In the second phase, the man is replaced by a robot (which was made by the man in place of a batch of linen). The robot burns potatoes for fuel and uses the house as its shed. The cost to the owner of a batch of linen will still be reckoned at the rental value of the house and land, six pounds. Every six weeks a batch of linen has to be sold for at least six pounds, yet no money at all has been distributed.⁴⁰
      In the first phase, suppose (as with the brick maker) that the land, house, and equipment are owned outright and have long since paid for themselves so that recouping the purchase price is not an issue. Then by our logic, they are part of the cultural heritage and the public has a beneficiary interest in what they produce. Just as the brick maker must base his profits on real costs and is not permitted to rent out a bit of the property with every brick, so the textile manufacturer may not rent out a bit of the property with every batch of linen. But if that is so, how do we escape the conclusion that he may not rent it for money at all? He could only charge for costs that he actually bears, such as upkeep. Just as the arbitrary rent of the brick works is the B-payment for which no corresponding wages, salaries, or dividends exist, so is the arbitrary rent of the house and potato patch. In the example, the linen could actually be sold for one pound, because the other five pounds have already been recouped in "rental."
      In the second phase, the cost of the robot is the wages of the man to make it, or six pounds. Therefore, as soon as that is recouped, it too is part of the cultural heritage. At that point, in this abstract example, there are no costs, and the linen can and should be given away. "Sound finance" would have the textile manufacturer allocate six pounds' worth of house-rent and land-rent as a cost. Ruskin would not. Douglas would say that either it must not be counted as a cost or if it is, you must give people the money to pay it with.

Civilisation as a Manufacturing Undertaking

The distinguishing feature of the cultural heritage, I have suggested, is that it consists of permanent enhancements of the life-value of the community. Can we not make this a little more precise? It has become tiresomely repetitious to say that Anthony Cooney has anticipated us:

About 50,000 years ago a new technology appears--pressure flaking. Flint tools were made by applying pressure to a piece of flint, the core being discarded after flakes of various sizes and shapes had been obtained. This new method enabled knives, arrowheads, scrapers, etc. to be made, which in turn made it possible to shape bone and wood into usable shapes-fish-hooks, needles, even combs. . . . The evidence of cave-paintings is that men, as a result of the new technology, had leisure. The observation of the natural world, which the cave-paintings testify to, had what people like to call "practical" results; the discovery that the fruits and grains of plants were in fact their seeds. To discover this was to discover that a supply of food could be maintained within the immediate area of the dwelling place. . . . The discovery of agriculture greatly increased human potential. About 10,000 years ago another new technology appears; the grinding and polishing of flint. This enabled large pieces of flint to be shaped as hammers, axe heads and so forth. Co-incidental with this is the discovery of the lever principle and its application in the form of handles to hammers and other tools, and ultimately to the wheel.⁴¹

Thus, hammers, axes, and wheels depend on a dividend of leisure owing to agriculture, and agriculture depends on a dividend of leisure owing to carving, which depends on pressure flaking. Painting, of course, is not merely testimony to observation, it enhances it. Therefore, painting is a productive part of the process on which hammers, axes, and wheels depend; but the fact that it is productive does not make it labor, does not make it a cost. Labor, in Ruskin's definition, is "the quantity of `Lapse', loss, or failure of human life, caused by any effort. . . . Labour is the suffering in effort, [and] the `Cost' of anything is the quantity of labour necessary to obtain it."⁴²
      Now we observed with the boots example that if it was one vertically integrated company, transfer from one stage to the next would take place without money without materially affecting the analysis. B-payments from and to companies within the system cancel out, and the net B-payment outside is what remains. But what if there is no company outside the system, which feeds on itself (petroleum fuels the machines that drill the petroleum, etc.)? If we continue to follow costs backward, we go backward in time until eventually we reach a point where something changes because a company is no longer in business or a process is no longer used. Remember that the whole analysis was predicated on the assumption that all the businesses in the system were doing business all the time and making A-payments all the time. But if we go back in time far enough, that is no longer true. Studebaker the automobile manufacturer does not make the A-payments to carpenters that it did when it was a carriage manufacturer. Such discontinued A-payments are the equivalent of B-payments.
      One could make an example like the Monopoly of Credit Figure except that instead of B-payments outside the system, there would be discontinued A-payments in a single system, and instead of January, February, and so on, the time element will read, "12th millennium B.C., 11th millennium B.C." In other words, take the whole history of human civilization as a "manufacturing undertaking" per the A+B Theorem. Although finance does not exist for much of this history and when it does is interrupted by natural disasters, plagues, falls of empires, invasions, wars, revolutions, and bankruptcies, real cost and real profit are continuous.
      I do not have the knowledge to make such a Figure, which would require an understanding of the interrelationships of inventions and discoveries, including the relationship of physical inventions and discoveries with inventions and discoveries in the realm of ideas and culture. However, the following list of inventions and discoveries by millennia, culled from time-lines in popular books on inventions and discoveries, may be suggestive.⁴³
      The creative explosion in the millennium just past was a thing beyond all previous experience. It saw the birth of new social forms: the mendicant order, the university, the free city, the end of serfdom, the common law, Parliament, the nation-state. It was a revolution in finance and industrial organization: the guild, the bank-note, the bill of exchange, the joint-stock company. It was a revolution in education: the New Learning, the little red schoolhouse, universal literacy, the free public lending library, the science of child development. It was a revolution in power: the overshot water wheel, the coal-burning steam engine, the electric motor, the battery, the petroleum-burning internal combustion engine, jet propulsion, solar cells, and nuclear power. It was a revolution in transportation: the caravel, the submarine, the locomotive, the automobile, trams and buses, flight, spacecraft. It was a revolution in geography: the Mercator projection, America, the North Pole, Panama and Suez, the moon. It was a revolution in ideas: the inductive method, the heliocentric universe, the calculus, thermodynamics, relativity, social credit. It was a revolution in medicine: the thermometer, vaccination, anesthesia, aspirin, penicillin, antiseptics, vitamins, insulin. It was a revolution in the recording, transmission, and manipulation of sound and light: the telegraph, the telephone, the phonograph, the tape recorder, radio; the microscope, the telescope, corrective lenses, photography, the spectrometer, cinematography, neon, animation, television, color, xerography, laser and radar, fiber optics, videotape, communication satellites. It was a revolution in the storage and manipulation of words and numbers: movable type, double-entry accounting, the newspaper, the typewriter, offset printing, the slide-rule, the computer, robots, the microchip, the internet. It was a revolution in agriculture and food preservation: farm machinery, refrigeration, canning, high-yield seed. It was a revolution in textiles from the spindle wheel to the spinning jenny to synthetic fibers. It was a revolution in domestic life: indoor plumbing, clocks, the piano, the match, the light bulb, utilities, home appliances, central heating and air, plastics, the zipper, the ball-point pen, teflon. It was a revolution in styles in all the traditional arts--architecture, sculpture, painting, music, and poetry--and in the new arts spawned by new media: recorded music, radio theater, photography, filmmaking, and television production. This explosion of creativity was based in the West.
      The first millennium of our era saw the birth of Christianity and a social order built on it that revolutionized man's relation to the world and revolutionized the human association in its aspect as a manufacturing undertaking. Charles Ferguson is not being flippant when he calls Christ "the inventor of credit-capital, social commerce and the corporate idea."⁴⁴ For this millennium the time-charts record the public hospital, the water wheel, the single-shell dome, the suspension bridge, the windmill, the wind-car, the canal locking system, the horizontal kiln, clinker-built boats (overlapping boards), boats sectioned for buoyancy, the keel-and-mast, the lateen sail, the stern-post rudder; steel, brass, the aeoliphile (steam toy), gimbals (balancing device), the propeller, the pump, the wheelbarrow, the moldboard plough, the horseshoe, the padded saddle, chain mail, the wood plane; the pointed arch, stained glass windows, porcelain, whisky, the lens, magnetism, the decimal number system, longitude and latitude, the sextant and quadrant, clockwork, block printing, paper, and paper money.
      To the first millennium Before Christ belong the canal, the bireme and trireme, the aqueduct, the tiled roof, municipal sewage, the Roman road and bridge, the lighthouse, the fire department, the catapult (employing torsion); the anchor fluke, the crane, the cog (toothed wheel), the trip-hammer, the crank, pitch-sealant, gunpowder, concrete; the stirrup, the kite, the crossbow, the screw, rigging, wheel-bearings, the iron-tipped plough, the lock-and-key, the lathe, glassblowing, knitting, the mirror, the candle. Measurement of time, space, and value were facilitated by the observatory, the sundial, the Julian calendar, the astrolabe, trigonometry, the compass, and the coin. The library arose, storehouse of the written word. Hippocrates developed the art of medical diagnosis, Euclid worked out theorems in geometry, Pythagoras developed the science of harmonics, and the lyre and organ were invented. Water pressure and static electricity were observed, and Athens made the first essay in political distributism (democracy).
      The second millennium B.C. saw iron smelting and iron working, boards, the pulley, water-controlled rice paddies, maize, horse riding and the bit, pottery glazing, colored glass, the bath tub, the bell, and skis. In literature, medical, mathematical, and linguistic knowledge were put into writing. The invention of the (phonetic) alphabet made it possible to reproduce language with thirty symbols, and Abulfaraj composed the first encyclopedia. Other "intellectual" inventions were parchment, the astronomical clock (Stonehenge), and musical notation.
      In the third millennium, the pyramids were massive displays of engineering, erected with the mechanical assistance of levers and ramps. The same millennium saw the wooden ship, the brick dam, the weight-distributing arch, a road network, the ox-drawn plough, the horse-drawn chariot (light for speed), the adze for smoothing timber, the bow drill, soldering and welding, bronze-working, silver casting and silver sheet, cotton, silk, hemp, dyes, embalming, glass, and pitch-glue. Lampblack was ground with a solution of glue or gums and applied through a reed to sheets made from the sedge-plant papyrus. That and engraving were both ways of fixing intellectual material in durable form: history, "precepts," a city plan, a calendar. The abacus facilitated calculation. Leisure activities included the music of the sistrum and board games.
      The fourth millennium saw mass-produced pottery, the copper blade, the plough, rope, the donkey, the brick, the land-boat (cart) rolling on a set of wheels-and-axles, the wind-powered boat, the making of bronze and the mining of gold, and feats of hydraulic engineering in the irrigation of the Nile. In the "imaginative" realm are found accounting, the stringed instrument (harp), vertical projections (maps) carved into clay, a cylinder seal to reproduce images, and above all, writing--the words of the mouth represented by signs. The latter again reminds us that these popular books on inventions and discovery only show the tip of the iceberg: language is a creative human and social product that has been developing all this time and continues to develop, yet it finds no place in the books. This explosion of creativity in the Middle East was the fruit of the enormous dividends from settled agricultural life, whose unit was the village, developed over the previous seven millennia.
      The tight crisscrossing of twisted vegetable fibers to make a durable, flexible material (linen) belongs to the fifth millennium B.C., and preparation of the ground for seed was made easier with the hoe. The door, swinging from sockets, could be opened and closed. Brilliant copper was liquefied out of stone by intense heat and formed into desirable shapes. The sixth was a red-letter millennium with the invention of beer. Rice was brought into cultivation, and grain was crushed with a wheel in the quern (think pepper mill). The ability to tell water where to run by cutting channels made possible the small, self-sufficient agricultural community, the village. In the seventh, the wild pea and bean and the wild pig and cow were brought into the fold. A stone disk was rotated to spin wet clay at the center, the wheel. The vessels the potter made by means of it were symmetrical and graceful beyond previous conception. The eighth saw the domestication of the wooly sheep and the beginning of the unique symbiosis between man and dog. Floating vessels of reed and hollowed wood transported people and cargo atop the water.
      In the ninth millennium B.C., game was stalked and shot with a bow-and-arrow, wild wheat and barley seeds were taken and sown in fields, and the wild goat was bred, yielding a dividend in health from meat and milk, as well as valuable materials in hide, bone, and sinew. The prosperity brought about by settled agricultural life gave territory a new significance. It was an opportunity for culture to develop inwardly (culture is a world); but for this its concentrated wealth needed to be protected from the outside, hence the city: Jericho was enclosed with a wall. In the tenth, wild grains were crushed with a mortar and pestle, while some ponderer came up with the idea of zero as a number, the foundation of the decimal system. In the eleventh, game began to be domesticated, their fat was fuel for stone lamps to carry light indoors, animal and human shapes were molded in clay and hardened with fire, and wind instruments were played. The twelfth saw harpoons and fishing hooks to catch and retrieve fish, spear-throwers employing leverage to gain force in game-kill, and the fire-making art to convert fuel into heating, cooking, and light. Can the A+B Theorem be applied to this picture?

The Root of Economics

Lewis Carroll's classic opens with Alice considering "whether the pleasure of making a daisy-chain would be worth the trouble of getting up and picking the daisies." Here is the whole of economics in a nutshell. Recall Ruskin's definition of labour: "the quantity of `Lapse', loss, or failure of human life, caused by any effort. . . . Labour is the suffering in effort, [and] the `Cost' of anything is the quantity of labour necessary to obtain it."
      Consumption being the end of economics, economics can be divided into everything leading up to consumption and consumption itself--the "trouble" and the "pleasure." The "trouble" is labor, function, a job, risk, production, cost, the means; the "pleasure" is payment, profit, payoff, consumption, value, the end. Consumption is naturally individual and direct, whereas in production--a function--we seek to spare individuals by acting indirectly through mechanisms.
      A mechanism is "any organised system for carrying out a specific function."⁴⁵ An example is a capital asset that keeps producing over time: a shovel makes more pleasure for less trouble. Another example is a productive association: ten men work a shovel (nine pull on ropes, one guides), making a human machine. The thing to notice is that production is by nature diachronic, whereas consumption is by nature synchronic; production is cumulative, whereas consumption is always new; the labors of the dead still produce, yet only the living consume.
      Let's return to the boots example. The national credit account represents the cultural heritage. The B-payment from the cobbler to the tanner signalled the entry of leather into the stream of the cultural heritage and the exit of hides. The B-payment from the boot seller to the cobbler signalled the exit of the leather and the entry of boots. The essence of a B-payment is that a thing is paid for. The thing that pays for it is money, which I have elsewhere called "the king's word," a promise of things. A B-payment means a promise has been redeemed.
      Each stage takes material, works it up, and passes it on to the next stage at cost plus risk (the profit rule). The payment that makes this transfer is called a B-payment and includes all labor and risk costs (A-payments) to date. The boot seller makes exactly the same sort of calculation when he figures the price he must collect from the public. If we think of the public that buys the boots as the final "firm" in the chain, the price would be a B-payment, an "external cost," the "trouble" exacted of the community for the "pleasure" of wearing boots. A+B makes a new B.
      According to the Theorem, B-payments are "external costs." A-payments, therefore, must be internal costs. From the point of view of a productive association, A-payments are payments to members of the association, and B-payments are payments to other associations. From the point of view of Alice, her external cost is her expenditure of energy outside of herself, her trouble. Her internal "cost" is her payment to herself for her trouble, the pleasure. In other words, labor itself is B, and the reward is A.
      If Alice and her friends form a cooperative daisy-picking association, there is no external organization, but their expenditure of labor itself takes the place of a B-payment, and their sharing the proceeds is an A-payment. The thing to notice is that in production the members' direct loss (labor) is the association's direct gain, while in consumption the association's direct loss is the members' direct gain. The purpose of the association is to continuously sacrifice itself for the enhanced life of its members. Alice and her friends "consume" themselves to produce cut daisies to consume the daisies to "produce" themselves: "The final outcome and consummation of all wealth is in the producing as many as possible full-breathed, bright-eyed, and happy-hearted human creatures."⁴⁶
      A-payments and B-payments have two faces each--one black, one red. In the Theorem, A-payments (to individuals) are black for individuals (Apples and Ale) and B-payments (to organizations) are black for organizations (Blubber and Ball-Bearings). Therefore, A-payments must be red for organizations (Allowances), and B-payments must be red for individuals (Back-Bursements). B-payments are red for individuals in the sense that they are paid by the ultimate consumer. But at the same time, B-payments are black for organizations; that includes the nation itself, of which the consumer is a member. Therefore the loss to the consumer by the ultimate cumulative B-payment which is the price is offset by the gain to the consumer from the dividend which is an A-payment from the nation to which he belongs. Therefore, A and B are not "costs" in the same sense. B is in essence a cost to individuals and therefore absolutely a cost, whereas A is not. A is a "cost" only in the sense of an adjustment between the members of an association and the association itself. The members pay themselves through the association.
      From the point of view of the consumer, price is an external cost, a B-payment, and consumption is an internal "cost." As such, consumption should be an adjustment between the members of the nation and the nation itself. The essence of B is cost (a minus) and the essence of A is dividend (a plus). This is from the point of view of the ultimate consumer. Therefore one can say that whereas with reference to everything leading up to consumption, A+B makes a new B, from the point of view of the ultimate consumer, B is the cost of A.
      What all this is leading to is that every B-payment along the way means that a thing is paid for, which augments the cultural heritage, a change that should be reflected in the national credit account. Leather is a capital asset, and the moment a capital asset has been paid for by "the king's word," it enters the stream of the cultural heritage. It is as if the public is buying the boots progressively, and therefore at the end need make only the last payment. The national credit account is the way the members of the nation pay themselves through the nation. Therefore, from the point of view of the ultimate consumer, B is the cost of A, but most of B can be paid indirectly from the national credit account. Only the last round of labor needs to paid directly by sacrifice of the consumer.
      Douglas said that the price of boots would be subsidized based on the excess of national production (including appreciation) over national consumption (including depreciation). The members of the daisy-picking cooperative "consume" themselves to produce cut daisies to consume the daisies to "produce" themselves. If Alice and her friends are a nation, this says that any cut daisies left over go to subsidise the "price" (i.e., their labor). In simple terms, the surplus would be shared out, and it would absurd for anyone to continue the old grind. The enduring fruits of past labor subsidise current labor.
      Over time, they might devise better and better ways of picking. A way is something that never wears out. Such a circumstance would subsidize the "price" progressively. This means that the members of the nation could progressively "consume" themselves less while "producing" themselves more: the nation would flower in its members.
      The Theorem says, "A will not purchase A plus B," that is, the reward of the last round of labor and risk is not enough to recompense the last round of labor and risk plus all labor and risk to date. Some B (as we saw in the house example) is purely fictitious, not representing any past A-payments at all. Some B represents past A-payments that were squandered. Before Douglas, H. L. Gantt called attention to the fact that nonproductive costs, instead of being reckoned as loss, were routinely charged into the prices of products. A factory operating at half-capacity would charge the whole of its over-heads into prices even though half of them were being wasted.⁴⁷ The solution is the profit rule, which necessarily entails a strict definition of cost.
      Some B represents past A-payments that were legitimate at the time but are now rendered unnecessary. Here is the "something that changes" that we were looking for. Something is always changing. Since the A-payments it represents have been discontinued, how can this B be "paid for"? The solution is the national dividend.
      The A+B Theorem puts a profound philosophical question: Is all trouble to date to be considered as the "price" of pleasures to be "paid for" by trouble on the part of consumers? "Is the whole history of civilization, from the point of view of its production of wealth, to be understood as an immense inherited cost--a net loss that we must continue to labor to make up--or, on the contrary, an immense inherited credit earning us, even before any labor on our part, a dividend?"⁴⁸

The Cost of Fire

The problem we found with Douglas's examples is that they were not comprehensive enough. There was always something outside the system. But we can think of the history of human civilization as a single cooperative production association existing in the present. The vast proliferation of production of our society has its living roots in the suffering endured by the fisher, the baker of clay, the planter of wheat, the pryer with a stick, the teller of water where to run, the tamer of the goat and of fire. I chose the twelfth millennium as a cutoff point because the time-lines have nothing to report for the thirteenth, and before that, the gaps widen. In our millennium, inventions have reached a critical mass so that they proliferate by bouncing off one another. The earliest inventors had not this advantage, nor had they models to follow. They had to work blind. Between the observation that rubbing the hands together produces heat to the deliberate striking of a spark and nursing of the flame, what misery had to be endured! Most people today, although the concept is familiar enough, would give up in exhaustion before they could make a fire. How, at a time when portable light and heat was science fiction, did someone succeed? What dim imagination first rose above the tribal mass to try it? It is no mean accomplishment for a millennium, and without it, none of the rest could have happened.
      What does this mean to us when we flush the toilet? If all costs go into prices, it means a very expensive flush. It is only stating the obvious to say that the fire-making art was invented in the cold and dark. Fire was paid for by this suffering and became part of the cultural inheritance. But if, instead, the cost of all comforts carry over from one generation to the next and one millennium to the next, then each generation has to endure the cold and dark again to "earn" fire. Indoor plumbing is not the creation of a lifetime. Therefore, it cannot be paid for in a lifetime. Therefore, no living person may enjoy it. It is as if each generation were obliged like survivalists to create civilization from scratch. Obviously, if that were the case, there would be no civilization.
      The lever is an even more obvious example, because it is literally incorporated everywhere. To a brute imagination, the way to break off a branch is to attack the base. The realization that a branch could be snapped off at the base by moving the extremity (a sort of "remote control") required observation. Then someone noticed you could brace the far end of a stick against something solid and pry with it. Then it was discovered that two variables--the length of the stick and the position of the bracing-point--altered the power generated. Many applications of this principle had different appearances and were not at all obvious. If all costs go into prices, then all the pains undergone in the perfecting of the lever must be factored into every application of the lever today.
      Civilization has proceeded only by violating this principle of cost-accounting. Fundamentally, B is the trouble and A is the pleasure, and motivation depends on A>B. If B carries over indefinitely, however, then B>A, all work is palsied, and life is a horror. No sacrifice of pleasure by the current generation can ever make a heap equal to the sacrifices of all past generations. And what will we make such sacrifices for if our children can only inherit the same old grind? If we imagine past generations looking on, how must they shake their heads to see us refusing to accept their sacrifices in order to "merit" them the better! As if we could ever "merit" them! Economic Calvinism! Too proud to accept a gift! What will become of us?
      What carries over indefinitely is not B the trouble but B the capital asset (the Blubber, not the Back-Bursements), bequeathing to future generations not more trouble but dividends. The total trouble does indeed measure the cost of the asset to human civilization as a whole. These sufferings are our living roots. It is because their labors are great that the charge to us is light. They can sacrifice themselves for us, but we cannot (because of the nature of time) sacrifice ourselves for them. We cannot lessen their labor, only ensure that it bears fruit. Those whose labor we can lessen are our children. We do not want our children to "pay" us, we want them to be happy.

Social Credit

If civilization has proceeded only by violating the cost-accounting rule that all costs go into prices, it follows that this rule, insofar as it is applied, is at war with civilization. Where we see the most continuous application of the principle (i.e., in government budgets), we also see debt that if enforced, would be enough to bring on a new Dark Age. National debt is simply a price, and civilization proceeds only by winking at the price. If the principle were applied rigorously everywhere and all businesses had continuous centuries-old budgets like governments, all businesses would accumulate vast debts like governments. Then consumers would no more be able to pay the cost of living than taxpayers can pay the national debt. Indeed, the government-sized corporations that bestride the globe today have already reached this stage.
      Let's return to the boots example. We found that A-payments of £1400 plus B-payments of £1100 made a "new B," or price, of £2500. How much money does the boot industry make available to pay this price? There is absolutely no way to tell, because there is no automatic relation between money paid out in the past, which generates costs, and money paid out today, which buys the boots. To attempt an answer, we assumed that nothing changes. Not only is there no ground for this assumption, but if it were true, we would still be in the Stone Age. Suppose that at time t1 a boot lasts four years. At time t2 an improvement is made that at no greater cost produces a boot that lasts six years. Everyone is already shod, so it should be possible to reduce the rate of production (trouble) by one-third. That means all businesses in the system should be able to start paying out a third less at time t2. Yet prices at time t2 will reflect the higher costs at time t1. Therefore, the price of boots at time t2 will exceed money distributed by the boot industry at time t2. (This includes capital production firms, which are, after all, only stages in consumer production.) Such a system cannot be self-liquidating. A system that is not continuously self-liquidating at time t1 and time t2 and time t3 is not self-liquidating at all.
      This phenomenon could have arisen normally with the introduction of multistage production, but the consequences are dramatic. Consumers cannot obtain necessities, producers cannot make ends meet. The prize goes to the producer who excels at commercial competition (controlling markets) rather than industrial competition (building a better mousetrap). Thus, monopoly is rewarded, quality and service killed. As long as the enduring fruits of past labor are not permitted to subsidize current labor, as long as consumption is offered only as a prize for toil and danger, so long will individuals call for toil and danger under the name of "jobs" and "opportunities."
      No one would deny that this is a core Douglas observation, but does the A+B Theorem capture it? We have seen that some B is purely fictitious and under the profit rule would not appear in costs at all. Other B represents reimbursement for past labor in the form of purchases of capital assets. Now the whole point of a capital asset is that it lasts for a while, pays for itself, and saves trouble; and the longer it lasts, the quicker it pays for itself, and the more trouble it saves, the better. If such a purchase is not "one time only," it must nevertheless be infrequent if it is not to defeat its own purpose. This applies whether the purchase is a new machine or a new factory. Its purpose is not to keep people employed, and it should not keep people employed.
      The boots example included B-payments of £1100 to unnamed companies for "hides and supplies." Suppose the "supplies" are new machines and that these machines are the secret of the six-year boot (or a third-cheaper four-year boot). The purchase of the machines would then represent reimbursement for past A-payments that should not need to be repeated. And this means that we have no right to assume that all businesses in the system are operating all the time and paying out wages all the time and that nothing changes.
      If this seems a little odd, it is because it is not permitted to occur. All appearances to the contrary, the natural tendency of business is to put itself out of business, to spare the consumer the cost of a new pair of boots and the producer the trouble of making them. Under social credit, the moment the machine is bought by the boot industry by means of money (the king's word), it enters the stream of the cultural heritage and augments the national credit account. It is from that fund that the price differential resulting from the application of the machine will be made up. In this respect the producer is an agent "of the community because using of the authority that only the king's word can confer. [He] is perfectly free to offer his own word in payment of bills. But if he wants the king's word, he must meet the king's terms."⁴⁹
      When does a thing become part of the cultural heritage? When a B-payment is made. That means that a capital asset is paid for. Of course, a capital asset is only an asset in respect to ultimate consumption. If as measured by ultimate consumption it doesn't come to more than it costs, its purchase was a mistake. Thus, when a B-payment is made, the consumer goods that will result are paid for up to a point. The need for a dividend arises in multistage production from the time lag between the purchase of a capital asset (B) and its fruition in lower-priced (or longer-lasting) final goods (A).
      Social credit is a lot like leap year. The 365-day year is a little short of the solar year, so we add a day every four years to make it come out right. We don't think of it as particularly radical. If we omitted it for 120 years, however, so that we were celebrating Easter in the winter, Christmas in the fall, we would realize how radical it really is. Similarly, our cost-accounting runs behind actual production, so we add a periodic dividend to make it come out right.

Naturally Falling Prices

Social credit has always specified the use of both a compensated price and a national dividend. It is an interesting question where exactly the balance is to be struck between these two complementary operations, for it is clear that the greater the dividend, the less the discount can be, and vice-versa. Could we even do with only one of these, and if so, which one?
      Although the compensated price and national dividend are similar, they have quite different effects. Suppose a circle of three have incomes of 0, 2, and 4 per week (total of 6) and prices are 12 per week. There is therefore 6 per week to be applied from the national credit account. If we apply it as a dividend of 2 per week each, their new incomes are 2, 4, and 6 per week. But if we apply 6 per week by halving the price, the effect is the same as if we had doubled the money, yielding incomes of 0, 4, and 8 per week. In other words, the dividend adds to purchasing power, while the compensated price multiplies it. Thus, the dividend is more equalizing in its effect.
      The whole point of social credit is to allow production to slow by releasing workers from trouble. The dividend must progressively displace the wage and salary because full employment is neither necessary nor desirable. The dividend is thus indispensable. In that case, could we go with all dividend and no compensated price? Yes! The compensated price is the social crediter's usual answer when accused of advocating inflation, but that is not quite accurate. It is the profit rule that makes social credit not inflationary. The compensated price conceals the profit rule; but they are two quite separate things, and not the least advantage of "dividend only" would be that the profit rule would come into its own.
      In saying that the point of social credit is to allow production to slow, we are not at all saying that any wants should go unsatisfied but that "nonproductive production"--the 95% waste that H. L. Gantt identified, which is literally mere busyness--should be eliminated.
      I once proposed that pegging bank loans to a consumer price index would serve the same function as the compensated price. The idea was that the money unit buys more with improvement of process and that this gain is a natural way to make a profit. The producer would naturally sell at a nominal loss but an actual profit through the increased buying power of the unit. If the loan principal were pegged to a price index so that as prices naturally fell, the principal would be satisfied by repayment of a smaller and smaller nominal amount, then the producer could afford to sell for a nominal loss (but an actual profit) and B would not appear in prices in the first place:

Suppose a B cost of 1.00 is incurred and by the time the product is offered for sale, the consumer price index has fallen from 1.00 to .90. In that case, a price of .90 would be break-even and a price of .99 would be a 10% profit even though nominally a "loss"! . . . You borrow 1.00 to spend on capital improvements, which increases output, which tends to lower prices, which makes money worth more. If the consumer price index falls from 1.00 to .90, you should be permitted to pay back .90 for 1.00.⁵⁰

If this analysis is correct, prices at time t2 should be able to fall to the level of the money distributed at time t2. It is only the necessity of recovering enough to pay tribute to the monopoly of credit that forces companies to form monopolies to sustain high prices. In fact, a natural price fall is turned into a completely artificial price rise (inflation) by systematic overproduction and waste that are possible only through monopoly. In other words, improvement of process leads to falling prices, falling prices are fatal to business, and so improvement of process has to be sabotaged, and the means by which it is sabotaged is the rule that all costs go into prices. As the rule "works" only on the assumption that nothing changes, so the effect of actually applying it is to retard change.
      The idea of pegging loans to a consumer price index is simpler than social credit and has a certain elegance. Yet it would be like "compensated price only" and as such is open to the same objection that it only enhances the purchasing power of those who are already paid through the production system. It fails to address the fact that full employment is neither necessary nor desirable. It lacks the equalizing character of the dividend. The equalizing character of the dividend is important because "seed equally scattered produceth a goodly harvest" and "money is like muck, not good except it be spread."⁵¹ The cultural heritage belonging equally to all, great disparities in income prove that it has been carved up into monopolies. Carving monopolies out of the cultural heritage "palsies industry, trade, life itself, . . . encloses the land and the nation's resources, not to use them, . . . fences in millions of acres of soil, of coal and iron mines, and of city lots."⁵² The proceeds of the means of production in excess of the profit rule must (progressively as they pay for themselves) be assimilated to the cultural heritage and distributed as a dividend to every man, woman, and child.
      Although the loan-pegging idea must be discarded, it raises the question how the "dividend only" system would sustain the natural tendency of prices to fall. In the circle-of-three example, suppose that at time t2 the middle person's services can be dispensed with. Prices are at 12, and predividend incomes are now 0, 0, and 4 (total of 4), so there is 8 to be applied, and the dividend is raised to 2.67, yielding incomes of 2.67, 2.67, and 6.67. At time t3, the price falls to 10 (the effect of the layoff at t2), and predividend incomes are 0, 0, and 4, so there is 6 to be applied, and the dividend returns to 2, yielding incomes of 2, 2, and 6.
      Such a natural price fall need hold no terrors for the productive association, for profit is already written in, and there is no difficulty selling. You may say that the innovation that makes it possible to dispense with a worker costs something; but (1) a successful innovation, by definition, saves more than it costs, and (2) since "the `Cost' of anything is the quantity of labour necessary to obtain it" and "labour is the suffering in effort," it is quite possible for an innovation to cost nothing (e.g., innovations introduced by workers spontaneously through pride in the work). So prices should consistently fall over time. This doesn't apply only to innovations in the narrow sense but to all capital. If a factory is purchased and the price recouped over a long period of time t1-t2-t3, then at time t4 per the profit rule, prices must fall. And at any given time t1, t2, t3, or t4, total capital expenditure should be exceeded by total savings as capital assets mature into the cultural heritage. So on average prices must fall, and the cultural heritage must grow greater and greater.
      Civilization so far has advanced against the most tremendous odds, for it has advanced while dragging along behind it a deadweight almost equal to itself. If the detritus of past costs were cut loose, civilization must go as on greased wheels. Society possesses a vast scope for voluntarism that remains untapped. Douglas once expressed this faith by suggesting that if all postal employees were allowed to retire on pensions equal to their salaries, "traffic on St. Martin's-le-Grand would be congested for some time, but [thereafter,] we have no doubt whatever that a staff would be found at work."⁵³ Everyone has a dream. Instead of compensating people for doing what they don't want to do, finance them to do what they do want to do. Since "labour is the suffering in effort," the gain in efficiency would be something amazing. Then we'll see what still needs doing.
      The dividend, together with naturally falling prices, finances people to do what they want to do. This productive leisure is the greatest possible stimulus to invention. Only that which no one wants to do is a real cost. As things stand, without the dividend, we have no way of knowing how much or how little that may be. That which no one wants to do will have to be sweetened with a wage. The wage will be determined by the market, and it will have to be generous, since no one will need it. There will be every incentive to invent a way to eliminate the expensive, unpleasant job.

The Age of Plenty

In connection with the house example and linen-making machine example, we ran up against a question that is challenging to the social credit of the Right: "Just as the brick maker must base his profits on real costs and is not permitted to rent out a bit of the property with every brick, so the textile manufacturer may not rent out a bit of the property with every batch of linen. But if that is so, how do we escape the conclusion that he may not rent it for money at all?" There is no escape from this conclusion. The ability to rent something for money (the king's word) indefinitely cannot be squared with the profit rule (or therefore with the compensated price). Ownership will no longer be absolute and property will no longer be leverage. Under social credit, you will not be able to rent or sell a capital asset (including productive land) for money once it has paid for itself. In the Age of Plenty, will we care? I think we will not.
      In the Age of Plenty, the solicitude we are habituated to feel about money will disappear: "Making things is man's natural vocation. Selling them is only an unpleasant necessity."⁵⁴ The best people today intuitively recognize that the industrial mechanism owns the people who operate it and creates a soulless breed of man. If they do not stay out of it entirely, the best rebel by remaining at lower echelons by preference, while those of easy virtue rise to the top. In the Age of Plenty, with no advantage to gain, our great industries will be run by people who want no further reward but the chance to make useful things.
      Douglas's A+B Theorem has made us look closely at the cost accounting rule that all costs go into prices. It was not obvious in the short term, so we looked at the long term. We found that civilization has proceeded only by violating this rule and that where this rule is applied over a period of time, it works at cross purposes to civilization. Violent social disruptions--wars, revolutions, panics, and the like--may be interpreted as consequences of this contradiction in policy. With this in mind, we looked again at the short term and found the flaw: the whole point of a capital asset is to save more labor than it costs and allow a fall in prices. Therefore, B-payments should not, in the nature of things, be increasing expenses. Prices should not rise, they should fall. Yet if the rule that all costs go into prices is applied rigorously, prices (i.e., the trouble exacted of the community in return for the right to consume) can only go up.

Industy and Art

Art "lets the light of Heaven shine through things of the earth, so that they transmit and reveal the quality of a soul."⁵⁵ It might be imagined that Douglas's writings have nothing to do with art, but the fact is, they are about nothing else. For Douglas, industry is art, and the engineer is an artist. Can anyone, from the catalog of inventions and discoveries in this article, pick out the art from the industry? The purpose of social credit is to set industry free, for art is not compatible with compulsion. This places Douglas squarely in the lineage of William Morris.
      Morris's practical work was in stained glass, furniture, tiles, wall paper, textiles, calligraphy, and book production. Douglas's was in trains, planes, telephones, hydroelectric plants, an electric underground mail-train, and racing-yachts (which he personally designed and built). Their common ground is their insistence that every article be made for use, for consumption, for enjoyment, for people; that the only valid and the most productive work is work done freely for the pleasure of it; and that such work is art. While Douglas was at home with power technology, every page of Douglas asks how we can employ such technology without sacrificing human-scale qualities to it. How do we put technology at the beck and call of man dwelling at the foot of the Tree of Life?⁵⁶ Techne is Greek for art.
      Morris's copy of Marx was well-thumbed. He affiliated himself with the Left because, in the 1880s, the alternative was the Right. Yet he lacked a taste for doctrine, preferring work with hand and eye. In his feeling for the social possibilities of creative work, Morris was intuitively reaching beyond what the Left could offer. It was a matter of frustration to Morris that the products of his firm were priced beyond the reach of the working classes. Instinctively he believed there must be a way for quality and beauty to be expected and enjoyed by everyone. Morris never solved this problem, and the Left never solved it either. Morris remained dissatisfied.
      C. H. Douglas's discovery of the solution to this problem is a landmark in the history of social science. Paradoxically, the key to the revival of handicrafts is the social credit dividend of technology; for the dividend on the one hand finances the productive leisure of would-be craftsmen and on the other finances the purchase of crafts.⁵⁷ Social credit economics means the best of everything. If the best is handmade, it will be handmade. If functional objects can be beautiful and individual and last, won't we want them to be so? Douglas not only proposed the idea but worked it out in detail through the money-and-price system. In so doing, he left the Left far behind.

NOTES
1. Pp. 18, 29, 31, 86, 105, 113, 116, 183; Hutchinson, What Everybody Really Wants to Know About Money, p. 33.
2. Wallace Martin, The New Age Under Orage, pp. 21, 24, 122, 201, 204-8.
3. Martin, New Age, p. 270f.; Maurice Reckitt, As It Happened, p. 165.
4. "An Editor's Progress," Commonweal 1926:402f.
5. Political Economy, pp. 2, 137.
6. Xenophon, Oeconomicus 1.10-12; Political Economy, pp. 59, 105, 133, 182.
7. Political Economy, pp. 1, 9f., 12f., 30, 80f., 103; Hutchinson and Burkitt, "Towards a Re-evaluation of the Role of Finance in the Causation of Environmental Degradation," Social Crediter 78(1999): 46f.
8. Political Economy, pp. 9f., 13, 30.
9. "These Present Discontents" and "The Labour Party and Social Credit," pp. 22f., 25, 29.
10. Ibid., p. 26.
11. Ibid., p. 23; Warning Democracy, p. 94; my italics.
12. P. 20.
13. Political Economy, pp. 1, 30, 103; Martin, New Age, p. 35.
14. Political Economy, p. 103.
15. Political Economy, pp. 1, 15, 19-21; Hobson, National Guilds, pp. 136, 145, 150, 159.
16. What Everybody, pp. 136, 176; Political Economy, pp. 19, 28; Hobson, National Guilds, pp. 125, 147, 181-83, 272; The Technarchy and the Capital College (1924), p. 20.
17. Political Economy, p. 59f.; What Everybody, p. 50; Hobson, National Guilds, p. 187.
18. Political Economy, p. 60, quoting Douglas and Kenner, respectively.
19. Confessions of a Monopolist (1906), pp. 143, 147-49.
20. P. vi.
21. What Everybody, p. 124, chapter by Alan Freeman.
22. What Everybody, p. 23f.
23. Robertson, Human Ecology, pp. 265, 375f.; Hutchinson and Burkitt, Political Economy, pp. 33; Burkitt and Hutchinson, "A New Political Economy," Social Crediter 75(1996): 17; What Everybody, p. 137; Orage, Political and Economic Writings, pp. 62-71 (8 times in 10 pages), 89, 101, 142; Douglas, Credit-Power and Democracy, p. 16.
24. Restoration of the Gild System, p. 28.
25. What Everybody, p. 146; Social Crediter 80(2001): 3, 27.
26. What Everybody, p. 160.
27. P. 133, quoting Douglas.
28. Quigley, Tragedy and Hope, p. 486f.
29. Pp. 144 (quoted in Triumph of the Past, April 2001, p. 4), 156, 162, 180, 202; cf. Political Economy, p. 132f.
30. Douglas, Credit-Power and Democracy, pp. 148-51.
31. Ibid., pp. 149, 180f., 184f.
32. What Everybody, pp. 46, 48, 141.
33. Monopoly of Credit, p. 35f.
34. Political Economy, pp. 45f., 50.
35. Political Economy, pp. 48, 84; Orage, Political and Economic Writings, pp. 73f., 82, 218f.
36. Douglas, Economic Democracy, pp. 126-130; cf. Political Economy, p. 51f.; for some reason they change the boot-seller-to-cobbler payment from Douglas's £2200 (£1650 + £550) to £2000.
37. Douglas, Monopoly of Credit, p. 37; Hutchinson and Burkitt, Political Economy, p. 44.
38. Warning Democracy, pp. 101-3.
39. Control and Distribution of Production, p. 114f.
40. Monopoly of Credit, pp. 39-41.
41. Social Credit: Politics, p. 37f.
42. Munera Pulveris 59-60.
43. Sources: Kevin Desmond, A Timetable of Inventions and Discovery (New York: Evans, 1986); Trevor Williams, A History of Invention, rev. ed. (New York: Checkmark, 2000); Bill Yenne, 100 Inventions That Shaped World History (San Francisco: Bluewood, 1993); John Brockman, ed., The Greatest Inventions of the Past 2,000 Years (New York: Simon & Schuster, 2000).
44. Revolution Absolute, p. 31f.
45. Thomas Robertson, Human Ecology, p. 529.
46. Ruskin, Unto This Last 40.
47. Industrial Leadership, p. 122f.
48. Triumph of the Past, December 1996, p. 2.
49. Triumph of the Past, May 1998, p. 3.
50. Triumph of the Past, June 1998, p. 2; cf. August 1997, p. 2f.
51. Berkeley, Querist 1.214; Bacon, Essays 15.
52. Frederic Howe, Confessions of a Monopolist, p. vi.
53. Control and Distribution of Production, p. 100.
54. Triumph of the Past, May 1998, p. 1.
55. Triumph of the Past, January 1997, p. 3.
56. Cf. Triumph of the Past, January 1997, p. 3.
57. Cf. Triumph of the Past, April 1999, p. 3.