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

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

Science of the Social Credit Measured in Terms of Human Satisfaction

The Economics of Real Things: June 2003

The crew was complete: it included a Boots,
A maker of Bonnets and Hoods,
A Barrister brought to arrange their disputes,
And a Broker to value their goods.

A Billiard-marker (whose skill was immense)
Might perhaps have won more than his share,
But a Banker, engaged at enormous expense,
Had the whole of their cash in his care.

Lewis Carroll, "The Hunting of the Snark"

Money is the way society allocates the use of new goods and services in the optimal way-puts new goods and services in the hands of those able to make the best use of them. Society allocates new capital goods and services for the work and new consumer goods and services to keep us while we work. The real investment is not the investment of money. The real investment is the investment of our time, our energy. The real capital is brains. A society that allocates new goods and services in the optimal way will attract brains and become rich.
    There is the nation as producer and the nation as consumer. The nation as producer consists of associations. The nation as consumer consists of individuals. The sole purpose of a production association is to enable wealth to be transferred to its individual stakeholders as consumers. Even Bill Gates cannot eat unless he can transfer wealth from associated production to himself. It should not be said that we eat at the expense of production, because that is the only purpose of production.
    Under social credit, absentee investors become a thing of the past. Society invests the use of new goods and services; and individuals invest the brains, the time, the energy. Thus, on the one hand, the stakeholders of an enterprise are those directly involved in it as managers, workers, suppliers. On the other hand, society as a whole is also a stakeholder because society has invested new goods and services. Thus, every productive organization should pay (1) those directly involved in it and (2) everyone in society.
    Money is claim tickets to new goods and services. All the money that production organizations work with is currently lent into existence by commercial banks. This means that the use of new goods and services is allocated by commercial banks. Commercial banks are allowed to do this under the authority delegated to them by the central bank, which the central bank holds from society. Therefore, it is not radical to say that it is society that allocates the use of all new goods and services.
    Although society currently does this by means of loans, it would be better to do it by means of investments. If society allocates the use of new goods and services productively in an optimal way, it should result in more and better new consumer goods and services that can be distributed as a dividend. And the more efficient production is over time, the fewer new goods and services need be allocated to production; and what is not allocated to production is dividend. Thus, society's return on its investment does not come in the form of money (for society can create money at will) but in the form of more and better new consumer goods and services that can be allocated with new money.
    The more efficient production is, the fewer people we need directly engaged in it. Suppose we need only 10% of the population thus engaged, then we want the best 10%. Society will allocate all new capital goods and services to the use of that 10% for production and a quantity of consumer goods and services to their upkeep, comfort, and enjoyment. If only the ablest 10% of the population needs to be directly engaged in production, then it would follow that the new consumer goods and services that need be allocated to businesses to pay wages and salaries could not greatly exceed 10%-for we are rewarding the 10% only with the right to consume more per month. Excess unconsumable wealth in the form of invested funds they will not have, because there will be no such investments. Since there are a limited number of places, we may expect a certain competition for the use of new capital goods and services by those for whom production is an artistic and scientific challenge (our "aristocracy of producers"). In addition, the dividend means that no one will be constrained to aspire to be in the 10% who doesn't enjoy the challenge for its own sake. Therefore, the amount required to reward the ablest 10% of the population could not greatly exceed 10% of consumer goods and services. The other 90% can be distributed equally to every citizen as a national dividend.

Distribute Today's Product Today

Speaking to the Australian League of Rights last October, I suggested five principles of social credit, of which the third was "Today's product is always shared out today" and the fifth was "We don't need everyone employed." Indeed, one might say that to share out today's product today and to allow for increasing disemployment are the two main objects of social credit economics. They correspond to the first and third of the three principles that Douglas first made public at Swanwick in 1924, namely:

1. That the cash credits of the population of any country shall at any moment be equal to the collective cash prices for consumable goods for sale in that country, and such cash credits shall be cancelled on the purchase of goods for consumption.
3. That the distribution of cash credits to individuals shall be progressively less dependent upon employment. That is to say, that the dividend shall progressively displace the wage and salary.

Distributing today's product today doesn't sound like it should be that difficult. In fact, with prices on the one hand, and money in people's pockets on the other, changing daily, it is quite challenging. How do we keep prices and purchasing-power (product and claims to product) together automatically and with the least fuss to everyone?
    Society allocates 100% of new capital goods and services and 10% of new consumer goods and services to the ablest 10% of the population in a kind of partnership. And in keeping with the idea of a partnership, let us suppose these goods and services are allocated not as a loan-an exact sum to be paid back-but as an investment by society. The ablest 10% are also making an investment-of their brains, time, energy-and both parties should claim a share of the proceeds. Between the two, society, which allocates all the material investment, should both bear the greater risk (as it is able to do) and reap the greater reward.
    A logical arrangement would be that if the ablest 10% agrees to a reward equal to 10% of new consumer goods and services, then they should also take 10% of any increase in new consumer production. In other words, as consumer output increases with improved methods, the work force will to take not the same amount as before but 10% of the larger total, and society will distribute 90% of the larger total as dividend. Everyone wins. Similarly, should the ablest 10% using all the new capital goods and services unexpectedly produce a bit less than before, then 10% of the difference will come out of wages and salaries, and 90% of the difference will come out of the national dividend.
    In money terms, suppose prices of new consumer goods and services are 100 (arbitrary) money units and wages and salaries are 10 units and dividends are 90 units and this time the work force produces 10% more than before-new consumer goods and services priced at 110 units. The work force has earned a wage-increase or bonus of one-tenth of the 10 extra units, for a total of 11, so the other 99 units may now be distributed as dividend. In this way, today's product is distributed today.1
    Such a system should automatically adjust production to desired consumption. In the situation imagined, if the 10% extra new consumer goods and services are allocated by means of 10 extra units at the beginning of the month and those units remain unspent at the end of the month and this is a consistent trend, it is a signal to production to slow up. Consumption is satiated and the improved methods have made it so that whereas before, 1/10 of the population was needed for production, now only 1/11 of the population is needed to produce the same amount.
    Suppose, instead of 1/11, it is an even 9%. It follows that 1% of the population can move from the work force to the leisure force and the 1 unit of money that was their wages and salaries can move from the work fund to the dividend fund. That would then be 9 units allocated to wages and salaries and 91 units to dividend. However, just as, in the previous example, we shared the increase between wage-bonus and dividend, so here, too, we might allocate 1/10 of the freed money to a wage-bonus, 9/10 to dividend. That would make 9.1 units allocated to wages and salaries and 90.9 units to dividend.
    If consumption is satiated and continues to be satiated, then all improvements of process will go to further decrease the necessary work force or increase the quality of the product (a factor that can be increased without limit).
    The above assumes that prices stayed the same (100 units). However, one could also say that if prices are related to costs, then 1 unit saved today can translate into a lower price tomorrow, resulting in a natural price fall over time. A lower price means that much less need go to dividend. If wages and salaries are 10 and dividends are 90 with prices at 100 and 1 unit is saved, bringing wages and salaries to 9 and prices to 99, then dividends will still be 90. Wages and salaries of 9 would thus buy about 9.1% of new consumer goods, and dividends of 90 would buy 90.9% of new consumer goods, which is the same result as before. Today's product is shared out today.
    Notice that since the material investment comes from society and the stakeholders in the business are those who are engaged in the business, who invest their brains, time, and energy, then as long as the individual stakeholders can be rewarded by wages and salaries, then there is no need for a "profit."2 Society and the work-force are in a partnership together, society providing the material means and the work-force providing the brains, time, and energy. Increased production is a profit of the partnership and is shared out to both parties as described.

What Use Is Money to the Seller?

In 1996 I wrote:

Money is simply the king's promise to the nation as consumer, on behalf of the nation as producer, that so much wealth exists and will be delivered as required. . . . The promiser doesn't lend promises, he gives them. For as soon as a promise is honored, it is cancelled. He may, however, want the cancelled promise back for purposes of accounting. It is a receipt, proof the wealth has been delivered as promised.3

Money is a claim ticket to existing goods and services. It is obvious what this means to a consumer. It enables him to buy existing consumer goods and services. But what use is money to a seller? It is not as obvious as it might appear.
    If money is to be an accounting system for wealth and if society is to take care that cash credits of the population shall be equal to cash prices for consumable goods, so that today's product can be distributed today, then money is going to have to be cancelled with every purchase (that is the second part of principle 1) and reissued only on the same basis that society issues all money, to allocate new goods and services. This concept is imaged at the present time in the fact that all the money that production works with is on loan. If money retrieved from sales were set immediately against loans, the whole amount would be cancelled out of existence and a new round of expenses would then be financed out of a new credit issue. This is, in fact, Douglas's second principle from Swanwick, namely,

2. That the credits required to finance production shall be supplied, not from savings, but be new credits relating to new production.

Suppose society allocates the use of existing goods and services to a company by giving it an account with a line of credit. Per principles 1 and 2, money retrieved from sales would be put into that same account and therefore automatically reduce the balance owed and so increase available credit by that amount. When the company puts $100 in and then takes $100 out, it is, in a very real sense, not the same $100, because it is all a line of credit. Periodically, society will change the company's credit line based on (a) the total capital and consumer goods in existence and (b) the performance of the company. All credit lines together must total 100% of capital goods and services plus about 10% (in our example) of consumer goods and services.
    In this system, there are no owners' dividends, because there is no private money investment. With only 10% of the able adult population required for production, we can insist on the very best. Since we create our own money, we have no use for "silent partners," who collect dividends but do no work, except insofar as we are all, as members of society, which creates the money, "silent partners" receiving the national dividend. There is society's allocation of consumer goods and services to wages and salaries, and there is the national dividend-that's all.4
    Ten percent of the population are in business (1) because they enjoy it and (2) to increase their personal consumption in the form of wages and salaries. So sales receipts to the seller are (1) a voucher from the public that will secure the seller a continued line of credit to pursue his vocation, and (2) an opportunity to earn wage-increases or bonuses. Since society's allocation of new goods and services is not a loan but a true investment, lack of sales receipts do not leave the company with a debt. They merely exhaust its credit.

The Open Corporate

We now make a short digression to an idea of Chris Cook of the UK to see if it has anything to offer us.5 Cook shows how various stakeholders in an asset-holding enterprise (money investors, suppliers, management, staff, and even customers) can align their interests by entering into an open corporate by means of a Limited Liability Partnership. The open corporate as a whole makes a profit as against the outside world, but its members do not make either profit or loss as against one another. Rather, the profit of the open corporate as a whole is distributed among the members in accord with their LLP membership agreement. This is facilitated by proportional shares (i.e., shares denominated in fractions adding up to 1). A proportional share is a percentage claim on the revenue stream produced by the enterprise. As such, it constitutes a unique kind of equity.
    The open corporate model is equally applicable to social (i.e., public) and commercial enterprises. Money investors would be invited to purchase proportional shares either outright or as an investment for a defined period of time (typically related to the expected lifespan of the physical capital that the enterprise uses). The latter option is called temporary equity and is designed to obtain the temporary use of money in such a way as to make borrowing at interest obsolete. For example, the Bank of Scotland (and two other investors) entered into a 27-year investment agreement with Hilton Hotel Group in 2002. Ownership of ten hotels was transferred to an LLP with both the Hilton Group and the B of S as members. The Hilton Group operates the hotels and pays rent to the LLP (or net rent to the B of S, after deducting its own proportional share). The management group is called the occupier or user with secure and exclusive rights of use under the agreement; and in this case both parties are investors.
    A charitable enterprise could be an open corporate in which the intended beneficiaries were enrolled as share-holding members, receiving their benefits per a members agreement.
    As applied to social enterprises, such as hospitals, schools, transport and communication utilities, and public housing, both service provider and service users would be share-holding members of a Community LLP (of 1,000 to 4,000 individuals). The service provider would pay rent to the LLP. Community members could receive their proportional shares of this rent in money when not using the service or else draw on this account when using the service. In this latter case, proportional shares of a Community LLP are functioning as money.
    An LLP can be a member of an LLP. This makes the system "scalable," that is, the nation can be conceived as a kind of "partnership of partnerships," built up from below by interests reflected in proportional shares of proportional shares. For this purpose, a distinction is made between land and property. "The only form of universally acceptable Japanese Money," says Cook in his Japanese example,

will be an electronic Yen backed by Land-Yen 3.0. . . . When divided into proportional 'shares', the aggregate of Land Values forms the basis of Yen 3.0. Property on the other hand would form the basis of locally fungible Money, which deteriorates in Value over time depending on the condition of the local housing stock and policy decisions in respect of urban renewal.

Yen 3.0 will consist of "proportional shares of future Land rentals." Land is to be owned by the partnership of partnerships (which could acquire it by creating money to pay off the mortgages) and rented by the users à la Henry George. Property would be owned by social and commercial LLPs and financed interest-free over the expected life of the property.

The Open Corporate in Social Credit

Clearly, there are aspects of this proposal that are inconsistent with social credit. The circularity of having proportional shares that are claims to revenue-streams payable in proportional shares may be a problem. I would suggest, instead of "revenue-streams," thinking in terms of streams of new consumer goods and services. If, as social crediters say, money "is backed by what it buys," "land-backed money" becomes irrelevant. Indeed, society's distribution, by means of the national dividend, of the balance of new consumer goods and services not needed by the work-force is, in effect, the producers' "land-rent" payment-for it reflects the fact that production took place in a place and was beholden to the lord of that place (society in its money-creating function) for access to new goods and services!
    To adapt this idea to social credit, we would get rid of the distinction between social and commercial enterprises, and we would also want to get rid of the assortment of money-investors. Per Douglas's second Swanwick principle, society in its money-creating function is to be the sole financial partner in all enterprises; and in that sense all enterprises are "social." In the Hilton Hotel deal, strike "Bank of Scotland" and write in its place "Society in its money-creating function." That, after all, is the authority that the Bank of Scotland is really exercising. Having society as the sole financial partner distributing its share of the benefits in the form of a national dividend disposes of both the "money-investor" and "consumer" member categories. That leaves the "hands on" people who are actively engaged as producers, merchandisers, and service providers-the 10%.
    What is most valuable, from our point of view, in Cook's proposal is the idea that the various contributors to production of a thing can be linked by a partnership agreement incorporating proportional shares to automatically distribute the usufruct of increased and improved production, so that all activities of production naturally converge on the final product. It gives the highest incentive to individual initiative and creativity, which itself is the best way to decrease the work-force and increase wealth. There is also enough of a hint here to see how, in line with Douglas's second Swanwick principle, society itself could play the role of financial partner in such enterprises and pay a return to each and every citizen.


1. The same result would be achieved by discounting consumer prices 1/11 (about 9.1%), which would make both the 10 units of wages and salaries and the 90 units of dividend buy more.
2. Indeed, if wages and salaries are 10, prices could theoretically be 10. This, however, would fail on the count of Douglas's third principle, that "the dividend shall progressively displace the wage and salary." Nor would it actually distribute today's product today, since 10% of the population would be unable to consume all the goods and services.
3. Triumph of the Past, December 1996, p. 1, col. 1; p. 3, col. 1.
4. The whole economy is a consumer production system, and capital production is merely a stage of it. Society does allocate capital goods, facilitating their transfer from company to company. Such transactions transfer costs from one stage to the next but do not, in themselves, add to cost, because (shorn of various added-on charges) they are reimbursements for wages and salaries (i.e., consumer goods) allocated in a previous period. What does add to the total cost of goods is the wages and salaries expended at each stage, and we have already posited these to be 10% of consumer production.
5. From various papers supplied by Cook, bearing such titles as "Co-operative Corporate Partnerships" and "Open Capital: The Last Big Thing?"