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 Capital College

By Michael Lane
November 2002

The social problem reduces itself to the simple quandary of a heap of unsaleable goods, and an idle workman who would use them as capital and pay for them out of his product--if only somebody with credit would go on his bond. (AN 5.2f.)

Any well-rooted social institution enjoying a good degree of general credibility in its community can set competent people up in business without asking the help of banks. (AN 4.2)

The capital college is the brainchild of Charles Ferguson, who coined the term social credit. It is presented in a pamphlet, The Technarchy and the Capital College (1924); in seven articles in the American News, an English-language newspaper published in Hamburg (1923-24); and in a paper called "Self-Sustaining Educational System" (1930).1 C. H. Douglas may have been alluding to the Technarchy in his January 25, 1934 speech in Sydney when he said that his anticipation of an age of plenty "was confirmed by the more responsible side of what is called the Technocracy Movement in the United States."2

What the term capital college means is: capital, a means of production; college, using the arts and sciences to mobilize capital. Its general character can be gleaned from the following:

As things stand every business concern has three principal parts: One to get capital, one to produce goods and one to sell the goods. Getting capital and selling goods are difficult and wasteful processes in proportion to the smallness and specialization of the business. It should have been discovered long ago that a general financing and selling agency can serve a hundred or a thousand production-units immeasurably better than they can serve themselves. . . . The general financial and selling agency will offer to underwrite the production costs and sell the products of self-directing industrial organizations for a fixed share, say one-tenth of their net earnings. (AN 5.3)

Anybody that under the most favorable conditions could produce a little more than he consumes, is invited to enter into a life-sustaining system in which he can develop to the maximum his service-ability and earning power. This system does not deal directly with individuals but with working organizations. It gives such groups, each in its own special occupation--capitalization, information, and appreciation. That is to say it underwrites their credit; it furnishes advisory management with reference to natural opportunity and economic demand; and it guarantees such publicity regarding services and products that they can be absorbed by the market at their real values. (AN 3.3)

Any responsible service-unit can become a constituent of the college. . . . As social intermediary, the college enables its constituents to get the tools and materials they require; it also enables them to market their products at their just valuation. The college keeps the service-abilities of its constituents in continual and sensitive correlation with effectual market demands. It also gives advice of a technological character—calling to its assistance the existing engineering societies and technical schools. But the emphasis of its function lies wholly in the field of social relationships. (TCC 12f.)

The college stands sponsor for the group in all its commercial relations with the community at large. They become members of a respected family. The College underwrites the credit of each group. It certifies to the business community that tools and materials used in the group's productive processes, shall be paid for out of the product. The college furnishes advisory--but not mandatory--management. It commands agencies of salesmanship and publicity. It markets the goods. (TCC 16)

"The primary requirement is not money but personal credibility" (AN 2.3). The college

may grow from an already-existing organization like a woman's club or a church, or it may be a new organization if well respected members of the community put their names to it.

The capital college offers certain services to other businesses for a tithe of their net earnings. These services may be roughly grouped as follows: (1) financing, (2) procuring, (3) technical advice, (4) selling, and (5) land allocation.


The nature of the financing function is well explained in reference to an example of a woman's club in relation to a lodging-unit, a board-unit, and a groceries-unit. The club management says to the three service-units:

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

This doesn't mean that we are going to lend you a lot of money. Now and then we may endorse a promissory note for you. But even that will be hardly necessary. All the three sorts of business you propose to engage in have a quick turn-over. The charge for your working plants takes the form of a fixed monthly rent that you can pay out of your business income. And since it will be everywhere understood that this respectable and responsible club is backing you, you can get credit say thirty to ninety days on all the materials you buy. (AN, p. 4, col. 1-2)

Two other statements elucidate the same idea:

It is like putting up a responsible friend at a desirable club. He gains; but it costs you nothing. (AN 5.3)

In making use of [credit-capital] one does not "run in debt" to other men—except as a mayor or a street-commissioner incurs an obligation to the people in accepting a public office. (RA 190).

The producer's lack of money now means that the bank has him over a barrel. This is Time-Leverage, or money-monopoly. Lending money at interest on securities is a way of exploiting distress, but it is not a true participation in business. Securities and interest burden the producer, whereas the true art of finance is concerned with freeing him. There is room for a new kind of bank that will conceive itself as a service organization and will prove it by saying, "If you don't gain, you owe nothing." It will not need securities and will not charge interest. It will not even lend money. It will merely persuade suppliers that they may safely advance tools and equipment to participating producers. The capital college takes on this role. Since it mobilizes credit more productively than a bank, the bank's customers will become its customers.


The procuring aspect of the capital college is well described as follows:

Commerce consists in the movement of capital-goods from the producer to the purveyor or from one productive organization to another. This movement is impeded by the general commercial practice of buying as cheap as possible and selling as dear as possible without regard to the interests of production and distribution. The new way--the more scientific commercial practice--requires that the capital goods merchant should regard himself as a financier, engaged in the business of allocating capital. Acting as financier the merchant should buy with constant reference to the peculiar needs of the producers and purveyors of his own community. He should get the best use-values that can be obtained for the money. He should pass these values to his local producers and purveyors at cost, plus storage and transportation charges. As financier the professional merchant ceases to think in conventional terms. He ceases to think of production and distribution as if they were for the sake of commercial profits. He understands that such a view is unpractical and preposterous. It puts the cart before the horse. (AN 6.3)

Treat commerce as the art of capital-allocation--the placement of goods in the hands of those who can make the most productive use of them, and can therefore afford to pay the highest price.3 Give the producer of the goods the advantage of the high price. If he is outside your system, he will come into it. . . . Eliminate all selling costs, save those that properly belong to the informative and value-creating services of good purveyors. . . . A great merchant uses his knowledge as a physician does, for the generating of human strength. A reputable physician does not gain by the sale of prescriptions: he is paid for knowing what to prescribe. The great merchant knows the resources of the world-market, and brings them to a focus. (TCC 22f.)

In getting the right goods into the right hands it puts the finishing touch to a thousand productive processes. (AN 4f.)

Superior market-information is routinely used to gain profits at someone else's expense. This is News-Leverage. It is not a genuine participation in business. The capital college does the opposite. It conceives itself a service organization and proves it by saying, "If you don't gain, you owe us nothing." "It is concerned that both parties to every transaction shall get all the gains that come of market-enlightenment and the elimination of unfunc-tional middlemen. The college gets no real estate brokerage and no commercial profits" (TCC 15). It will get its service-income when its constituents' goods go to market. It forbears to get a profit in any other way. This is the difference between the true art of procurement, which is a challenging and creative activity, and merely getting another nickel, which is not.

Technical Advice

Ferguson doesn't elaborate on the capital college's role as technical advisor, but we can borrow his earlier words on German banking prior to World War I:

In Berlin you go into a great bank like the Deutsche Bank and if you say: I think I can make two blades of grass grow where one grew before; I think I can raise the standard of living or make bread cheaper in the Empire--you will get a hearing. The fact that you could do this before the war is the secret of the strength of Germany. The engineer was in the bank. It was indeed an institution like a university, employing hundreds of chemists, agricultural experts, engineers to see what there might be in your proposition that by any means might make life more livable in the Empire.4

He does say in "Self-Sustaining Educational System" that the college would "invoke the aid of teachers and men of science--topographic, structural, industrial and commercial engineers--to advise as to the best use of each site, with reference to the desire and competencies of the people in the neighborhood" (SS 4.1).

The reason why technical input is advisory only is obvious. If the producer is asked to be responsible for the capital values that pass through his hands, he has to have final say as to their use.


The selling aspect of the capital college is explained as follows:

It is possible to discover a kind of algebraic formula or general equation--for small groceries and delicatessen shops in New York City. The question is:--given perfect advertising and the quickest practical turnover, how narrow should the profit margin be--in order to yield a maximum service-income? . . . The profit-margin can narrow down indefinitely, because the business is indefinitely expansible. It can begin with one shop and pass from block to block until there are many shops. . . . Having once found the true administrative equation--the business can be indefinitely extended. The possible economic gains run beyond calculation. For it is a principle of finance that when there is indefinite expansibility, the producer that gives the most for the least makes the most money. Mr. Henry Ford has illustrated this truth. (AN 4.3f.)

The purveyors under this system . . . will learn by experience that there is such a thing as a natural retail price-level, at which maximum service income corresponds to maximum service. They will find this level much lower than they suppose. (AN 6.3)

I take this to be an allusion to a diagram and text published by Ferguson's associate H. L. Gantt (whom Douglas also mentions), which also includes a reference to Ford.5 The diagram shows unit-profit as the vertical scale (height) and quantity sold as the horizontal scale (length) and constructs various rectangles to illustrate the result of different pricings. Unit-profit times quantity sold equals total profit, so the rectangle with the greatest area will reveal the optimal price. The highest price is not optimal, because it drives up selling costs. The rectangle with the greatest area is the long, low one, that is, the lowest possible price and high volume of sales. In such a structure, moreover, an incremental increase in height obtained by increased production efficiency results in a tremendous increase in the area of the rectangle.

Ferguson elsewhere says we should set prices so low that only a first-class management can make it work (RA 274). We don't need everyone employed, and there is no reason for the public to tolerate anything less than a first-class management. It is interesting in this context that in his illustrations, Douglas always uses 10% as an example of a profit margin.

I am not quite clear about the place of retail stores (such as groceries) in this system. I have already quoted Ferguson as saying, "Eliminate all selling costs, save those that properly belong to the informative and value-creating services of good purveyors." On the one hand, the college itself is a purveyor and seller. On the other, it has smaller purveyors and sellers among its constituent service-units. I have to leave this problem unresolved for the time being.

With production efficiency light-years ahead of the norm, the capital college makes the best affordable. Everyone wants the best, but only rarely can they afford it. The capital college makes the best affordable, both to producers and to consumers.

Allocation of Land

The college's role as allocator of land logically should come first, along with financing; but I have kept it for last because it does not figure in the summaries quoted at the beginning and is a special topic. The nature of the college's landholdings is revealed in the following paragraphs:

Any owner of real estate or fixed capital may transfer his title to the college and receive in return capital stock of the corporation. The issues of this stock are uninflated. They represent substantial land-values acquired in perpetuity, to be administered as the physical estate of the college--furnishing the basis of its credit in New York and throughout the world. The capital stock of the college draws as dividends the total annual rental-revenue of its real estate. (TCC 10)

Create a corporation to administer all lands that may be deeded to it in exchange for its common stock. Let this corporation make use of the land-values or fixed capital thus put into its hands, with a single eye to the development of wealth-producing ability. (TCC 21)

. . . (6) Would [the capital college] not then offer the possession of the several sites in a free and open competition of abilities--giving to the highest bidder a title saleable and heritable, but conditioned always upon payment of current costs of capital maintenance and administration? (7) Would not such competition raise the value of the sites to their maximum? (8) Would not the rising land-values serve as credit-collateral to protect the capital and assure suspended payments? (9) Would not such an administrative power absorb continuous land-areas, propagating itself by sheer force of the advantages it offers to all concerned? (SS 4.1f.)

Its attitude toward the rental values it commands is substantially the same as its attitude toward the commercial values that pass through its hands. It is concerned that both parties to every transaction shall get all the gains that come of market-enlightenment and the elimination of the unfunctional middlemen. The college gets no real estate brokerage and no commercial profits. (TCC 15)

Monopoly of land (this would include, e.g., utility franchises) is Place-Leverage. Using it to leverage rents or brokerage fees according to the law of supply and demand is a possibility, but it is not real participation in business. It is unprofessional, unartistic, uninteresting.

Rather, the college does the opposite. Just as with its treatment of credit and commercial goods, the college acts "with a single eye to the development of wealth-producing ability"—and lo and behold, this raises the value of the land. The college gives everybody "access to the place and space he can fill" (TCC 23). This is real city-building, and it is a more secure investment than monopoly.

There was a run-down area of Columbus, Ohio, called German Village. Some rich men formed the German Village Commission and German Village Society, bought up the properties cheap, and restored them. This was a form of monopoly. Real estate values went up, and the old tenants could no longer afford the rent and had to move. Place-

Leverage was applied against them. In other words, the rich men didn't really restore German Village at all. They sacrificed German Village in order to restore streets and buildings. If they really wanted to restore German Village, they should have enriched the existing tenants by providing them business opportunities suited to their capabilities in return for a tithe of their net earnings. This would have been a much more interesting and challenging task for the right sort of businessman

We are now in a position to understand the secret that guides the college's operation. Whether dealing with credit-values, commercial-values, or land-values, the college realizes that if it tries to get direct profits from these transactions, it cuts off its nose to spite its face, it saws off the limb on which it is sitting, it kills the goose that lays the golden egg. For credit, commercial goods, and land all come together and find their end in working organizations that serve the public. It is a whole, life-sustaining system. Thinking of these transactions as leverages to be taken advantage of undermines the working organizations where alone they come to focus. Amputating them from their true purpose destroys them as art. It is as if the arborist only thought about how to get the most money out of soil, air, water, and sunlight considered separately and left the fruit trees to fend for themselves. Where is the art in that?

"If a commonwealth would empty the shallow streams and stagnant pools of monopoly, it has only to canalize in accordance with gravitational law" (GN 193). In fact, the art of allocating credit, commercial goods, and land will pay better than monopoly. Therefore, the credit-monopolists will have to come over, or lose business to the college. The suppliers of commercial goods will come where they can get the best price, and the possessors of land will be eager to invest it in such a profitable enterprise. And in doing so, they will gradually be won over to a new idea.

College and Constituents

"The whole policy of the college is summed up in a technique for the automatic adjustment of equipment to ability" (TCC 12). "Each unit pipes out from the capital pool as much as it dares make itself responsible for—under the rule that everybody must pipe back into the pool somewhat more than he pipes out" (AN 3.3). That is, it is required "that working organizations shall be accountable for the capital-values passing through their hands; and that the capital charge shall have priority over any and all wages and salaries—all service-income" (TCC 12).

To this end, "month by month each group has a separate accounting with the college management" (TCC 16). Here is that accounting:

In figuring the monthly accounts of working-units, it is to be understood that this shop-rent charge6 must be added to the charge for raw materials and minor over-head items; and that the sum is to be deducted from the market-value of the monthly product, in order to arrive at net earnings. The earnings should far surpass current rates of wage and salary. . . . This amount is apportioned as follows: (1) The college-administration takes as "wages of superintendence," one-tenth. . . . (2) A second tenth . . . is applied to the extension or improvement of the college's physical estate. This is an investment credited to the workers, in proportion to their several personal contributions.7 (3) The remaining eight-tenths of net earnings are paid directly to the several groups, and distributed in accordance with whatever agreement the shop-manager may have entered into with his associates. (TCC 17f.)

To repeat, 10% goes to the college administrators, 80% to the production-units in cash, and 10% is invested in the physical estate of the college, the workers being compensated with dividend-paying shares. This percentage system displaces the wage and salary system:

In the beginning it will be necessary to hire a few people. But it is better economy to finance people than to hire them. And it is expected that that time will come when nobody from top to bottom of the system will be exempted from responsibility for the maintenance and increase of the general income. Even the woman that scrubs will be made to understand that she has gone into business on her own account. (AN 4.2)

As the college grows into a city, the 10% service-income earned by the college administrators is the only "tax" that anyone will pay (TCC 10, 14)

As for the investors, the aforementioned "shop-rent charge" should be sufficient to carry the estate (taxes, insurance, residential deterioration, any mortgage interest). Then residential rents (adjusted to the general level in the neighborhood) can either be declared as a dividend to the stockholders or added to the 10% invested in the names of workers and used to capitalize a new college unit (TCC 11, 17f.).


Douglas said, "The dividend shall progressively displace the wage and the salary." The fixed-wage system is the root cause of the inability of our present system to incorporate new technology without a gap arising between product and claim to product. The small scale of the capital college makes it possible for the "dividend" to displace the wage and the salary immediately. The "dividend" automatically distributes the fruits of new technology to members of the college.

When Douglas says "dividend," however, he means more than just a percentage system of paying workers. He means a percentage system of paying everyone in a society in which full employment is neither necessary nor desirable. I can think of two possible ways to address this in a capital college. One would be that if a capital college is making money hand-over-fist, then it could modify the 10-80-10 rule by including a dividend to everyone in the immediate community. The other would be for the college to incorporate creative activities that are not currently paid or considered as work, such that no one would be left out. Either of these would be very much in the spirit of Ferguson, who means the capital college to grow into a great city.

Under the conventional system, financing takes the form of tickets, which are good immediately to buy goods and services. They are paid out not only to buy tools and equipment but also in wages, which are likewise spent immediately. A business attempts to recover these expenses when its product goes to market, and repay its loan.

Under the capital college system, finance is the college's giving a supplier of tools and equipment confidence that it can safely advance goods to a production-unit. There is no loan of tickets, and there is no repayment of tickets. There is only a delayed payment in tickets, which are obtained from sales outside the college. There are no wage expenses in the system either, because expenses are before the fact, whereas payments to individuals in this system are after the fact.

Ferguson makes no particular provision for consumption of goods and services within the college. But since the college grows into a city, and "every city is a natural life-sustaining system" (AN 3.3), some such provision seems warranted. Is it satisfactory for citizens of the city to rely on exporting to people outside in order to get the purchasing power to buy its own goods? Or should citizens be able to claim the city's goods and services in a more direct way than people outside it?

The capital college is meant to be a "Flow, or a leaven, in the wider society of the Nation."8 The idea is not that it will replace the dollar with something else but that as capital colleges proliferate, the dollar itself will be drawn into the new system. The Technarchy and the Capital College was published in 1924, and five years later the New York Stock Market crashed. If a working capital college had existed in 1929, how would it sell for dollars when there were no dollars? A capital college or network of capital colleges might have survived the crash, but only if they had their own "backup" currency to serve as purchasing-power.

So a possible modification of the capital college would be for it to issue direct claims to product. It might give every member of the college the option of taking part of his percentage in college tokens. Whereas the ability of the public to buy the goods will vary according to the dollar, tokens will not vary because they are an actual share of the product.

Depending on what the college produced, such a token system might see little use or none at all; but held in reserve it would lend strength. People would know that the college or a network of colleges could take care of people in a depression just as a house with a backup generator can take care of people in a power outage. Alternate currencies arise spontaneously in such a situation, but what would be the advantage of having one that could hit the ground running! A capital college could end up being a lone bastion of civilization, a light in the darkness.

The present economic system is a system within a system. It is an unnatural system in fight-or-flight mode inside a larger, natural system. The method of action prescribed herein is merely to make use of the leverage supplied by the natural system, which has never ceased to exist, in order to finish off the unnatural system. This is a war, and the best way to fight it is to use natural leverage to create facts on the ground in advance of any political effort. I think we will then find that the main work has been done, and the government act will be almost an afterthought.


TCC = The Technarchy and the Capital College

AN = American News articles in Triumph of the Past, December 2002, with page and column number.

SS = extract from "Self-Sustaining Educational System" (1930) published in Triumph of the Past, Septem ber 2002, with page and column number.

RA = The Revolution Absolute

GN = The Great News

1. The only copy of The Technarchy and the Capital College I am aware of is owned by the Library of Congress. There is a microfilm copy of the American News at the New York Public Library and another in my possession. "Self-Sustaining Educational System" is a manuscript owned by the National Library of Scotland (MS 10599 ff. 94-96, misidentified in the catalogue as being by Patrick Geddes).

2. "12,000 People Hear Douglas!" Prosperity, April 1934, p. 47, col. 2; Gorham Munson calls Ferguson's group "the Technocracy group," Aladdin's Lamp (New York: Creative Press, 1945), p. 181.

3. That is, the constituents of the college insist on the best tools and equipment and can afford them.

4. RA 320; this is from a 1917 address to the Stevens Institute of Technology, New York.

5. Industrial Leadership (New Haven: Yale University Press, 1916), facing p. 112 and accompanying text p. 113f.

6. "Rentals the workers pay for their equipped shops."

7. "Its constitution requires that a tenth of the gains accruing from the joint efforts of the college administration and each service-unit, shall be put into the physical estate as stock-holdings. These stand in the names of the several workers of the particular unit concerned-in proportions approved by the responsible head of the group" (TCC 15).

8. This is Anthony Cooney's description of a Social Credit association in "The Anti Debt League: A Brief History," manuscript, August 10, 1966.