Curated by: Luigi Canali De Rossi

Saturday, August 11, 2007

Social Credit: Money As An Instrument Of Service - Louis Even

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If you have enjoyed reading The Money Castaways and the realizations you should have come to about money and the unjust interest rates imposed by the banks, here is a fascinating and alternative view of how credit and taxes could be managed in our countries today, as seen by Louis Even, the original author of the short educational novel above.

Photo credit: Hypermania

Social Credit is an economic ideology and also a social movement which was started in the early 1920s by Scottish engineer Major C. H. Douglas.

The Canadian social credit movement, of which Louis Even was one of its most active ambassadors, was clearly the international leader in taking Douglas ideas to the people, although the movement had followers also in other countries. For example, few people know that "in England, the Kibbo Kift Kindred, a small breakaway from the Boy Scout movement, transformed itself into the Green Shirt Movement for Social Credit, a political uniform-wearing paramilitary mass-movement, that marched, demonstrated and agitated in the 1930s for the introduction of a Social Credit system."

For a social credit-based system to sustain itself, Douglas claimed that some or all of the following need to happen:
  • People go into debt by buying on credit

  • Governments borrow and increase the national debt

  • Businesses borrow from banks to finance expansion, in a way that creates new money

  • Businesses sell below cost, and eventually go bankrupt

  • A state wins a trade war, putting foreigners in debt to us for our surplus of exports

  • A state has a real war, "exporting" goods such as tanks and bombs to the enemy without ever expecting to be paid for them, financing this by government borrowing

If these things don't happen "businesses are forced to lay off workers, unemployment rises, the economy stagnates, taxes go unpaid, governments cut back services, and we have widespread poverty, when physically all of us could be living in plenty."

Douglas believed that Social Credit could have solved these problems by ensuring that there was always enough money (credits) issued to buy all the goods that could be produced. His social credit solution is well outlined in these three core requirements:

1. For a "National Credit Office" to calculate on a statistical basis the amount of credit that should be circulating in the economy;

2. For a price adjustment mechanism that reflects the real cost of production (aggregate consumption in the same period of time);

3. For a "National Dividend" to give a basic guaranteed income to all regardless of whether or not they have a job.

Nicolò Bellia, who here in Italy, preaches and evangelizes through his books and writings an analogous solution he labels Anthropocracy, has also recently generously shared his personal views on these issues in a face-to-face conversation we video-recorded this past January (these are all in Italian though there is an English transcription accompanying them).

So what is exactly social credit and how can it solve the financial problems that trouble many of our countries these days?

From Parable to Reality

by Louis Even

Photo credit: Andrey Khronelok

A Debt Money System

The debt-money system introduced by Oliver into the Salvation Island made the little community sink into financial debt in proportion as it developed and enriched the island by its own work.

This is exactly what happens in our civilized countries, is it not?

Canada of today is certainly richer, in real wealth, than it was 50, 100 years ago, or in the pioneers' age. But compare the national debt, the sum of all public debts of Canada today with this sum 50, 100 years, three centuries ago!

Yet the Canadians themselves produced this enrichment by their labour and their know-how. Then why should they be collectively indebted for the result of their own activities?

For example, consider the schools, the municipal aqueducts, the bridges, roads and other fabrics of public character. Who build them all? Builders of the country. Who supply them with the needed materials? Manufacturers of the country. And how come they can be employed in public works? Because there are other kinds of workers who produce food, clothes, shoes, who supply all the things and services required for the wants of the constructors and manufacturers.

Thus the whole population of Canada by its work of different kinds, produce all those developments. If we must obtain goods from abroad, we send other goods abroad in counterpart of them.

Now, what do you see?

Everywhere the citizens are taxed to pay those schools, those hospitals, those bridges, roads and other public works.

The Canadians, as a collectivity, are thus compelled to pay what they produce as a collectivity.

You Pay Much More Than Double The Price

And this is not all.

The population is made to pay more than the price of what it produced. Their own production -- a real enrichment -- has become for the Canadians a debt burdened with interest. When years add to years, the sum of the interests can equal or even exceed the amount of the debt imposed by the system.

It happens that the population may have to pay two, three times the cost of what its members produced.

In addition to the public debts, there are industrial debts, also loaded with interests.

They compel the manufacturers and contractors to increase their prices beyond the cost of production, in order to reimburse the capital and the interests; otherwise they would become insolvent, bankrupt.

Both public and industrial debts are paid, plus interest, by the population, to the financial system. We pay taxes for the public debts, and a surplus of price for the industrial debts. Prices are swelling while the purse is flattened by taxes.

A Tyrannical System

These and many other facts are indicative of a money system, a financial system which controls instead of being a servant; a system to dominate the people -- as Oliver dominated the fellows of the Island before they rebelled.

And if the money masters refuse to lend, or if they make their conditions unbearable for the public bodies or for the manufacturers, what happens?

It happens that the public bodies give up many projects, no matter how urgent; and the manufacturers give up development or production plans that would answer to real needs of the people. This is a cause of unemployment. And those who still have something, or who earn a salary, must be taxed to prevent the unemployed from starving completely.

A Bar to Distribution

And this is not all.

Not only the money system indebts the producers, or paralyzes the production it refuses to finance, but it is a wretched financial tool for the distribution of the goods.

Notwithstanding the fact that stores, shops and warehouses are full, and that everything is at hand for an even greater production, the distribution of the goods already produced is stinted.

You can obtain only what you can pay. In face of an abundant production, there should be an abundance of purchasing power, of money in the wallets of the people. Such is not the fact. The price of the finished goods is always higher than the amount of money distributed as purchasing power in the course of their production. This is inherent to the accountancy of the present system of finance which has no mechanism to fill the gap.

The capacity to pay is not made to equal the capacity to produce. Finance and reality do not work at the same rate. Reality means an abundance of goods easy to produce. Finance means a lacking money hard to obtain.

To Correct What is Wicked

Thus the present money system is truly an oppressive one, when it should be a system of service.

This does not mean that we must do away with it, but we must correct it. The application of the financial principles known as Social Credit would make this correction magnificently. (Do not confound Social Credit with the political party which usurps that name while pursuing other ends and practicing an adverse policy.)

The principles of Social Credit, when applied, would make the money system a servant instead of a master. They were discovered and enunciated by a genius, C. H. Douglas (deceased in 1952). His first writings on this subject were published in 1918.

Not a Political Party

The first idea that comes to the mind of too many people living in Canada, when they hear the words Social Credit, is the idea of a political party.

But no. Social Credit is not a party, although there was a party by that name.

Social Credit is no more a party than Christianity is a party, even if, in some countries you find political parties with such names as Christian Democrats, Christian Party, Christian Center, etc. A political party exists purposely to seek power, to be or strive to be the group that rules the country.

Social Credit works in the very opposite way.

Social Credit will set the individual free; it will place the individual in a situation where he can himself be the ruler of his own life. Social Credit will thus distribute power to individuals not the power to boss their neighbours, but the power to order the goods they want from the potential production of their country.

Social Credit. Exact. Logical. Humane

Social Credit considers realities. It refuses to be hypnotized by the halo with which finance has been surrounded.

The economic realities are, on one hand, the production; not only the existing production, but the production immediately possible, the production capacity; and they are, on the other hand, the human needs.

Social Credit gives priority to the realities over the financial signs that are not realities, that must simply represent, and faithfully represent, the realities.

Social Credit and Financial Credit

This is why Social Credit makes a distinction between real credit (a reality) and financial credit (a representation).

The word "credit" comes from the Latin word "credere" and bears the idea of confidence. Even in everyday language, to give credit to someone, is it not to indicate that we have confidence in him?

Social Credit calls real credit of a country what really gives confidence in that country, confidence that one can live there without too much difficulty. The real credit of a country is its production capacity. It is its degree of possibility to produce and deliver the goods to the needs. And Social Credit affirms that financial credit must be the exact representation of the real credit.

It is therefore the production capacity that must determine the movement of finance.

It is absolutely not for finance to command, paralyze or limit the production capacity.

This is why Social Credit demands the establishment of a credit office that would keep an account of national (or provincial) credit. Any production, those of consumption goods and those of capital goods, would then be entered as an increase of wealth. And all consumptions (or destruction, or depreciation) would then be entered as a decrease of wealth. The net increase in wealth would be production minus consumption.

With very few and passing exceptions where a country would live at the expense of another, the production of a country surpasses its consumption. The country is becoming richer. It is therefore absurd to say that it is going into debt. The public debt is an absurdity.

And when a country is getting richer, its citizens must certainly draw advantage of it. This is what Social Credit recognizes, when speaking of a dividend to all, instead of debts and taxes on everyone.

Money Without Inflation

The present system is subject to inflation. Inflation means rising prices.

When money cannot begin without, as today, creating a debt, it is necessary that ways be found to draw from the public more money than there was put into circulation, so as to refund the debt plus the interest of the debt.

Whence taxes, that are added to prices or that diminish the purchasing power before the prices. Whence also increases of prices by industrials, who must draw from the public only the money to pay for the products, but also for the financial charges, the interests on the industrial loans.

Social Credit would suppress this cancer, this tumor upon the prices, since the production would be an increase of wealth, and not an indebtedness.

And, Social Credit would lower the prices to be paid by the buyers, since it would have the community pay only what it consumes, and not all what it produces.

If, as an example, in the whole country, the consumption was only equal to three quarters of the production, the buyers would only pay, on any article bought by them, only three quarters of the accounting price. The Credit Office would take care of compensating the retailer so that he may recuperate all of his accounting price.

This means that the amounts of money included in the prices, but not having reached the hands of the public, or directed towards saving or investment, are not applied to the purchase of the production, would be by the organism of credit replaced to the benefit of those who are in need of the products.

This would prevent the accumulation of products in the face of needs. And the mechanism to do it would have the advantage of operating with a decrease in prices, therefore in eliminating all possible inflation.

A Dividend to Everyone

The periodic dividend to everyone, recommended by Social Credit, is also in conformity with the economic realities.

The modern production, in fact, is more and more the result of applied science, of inventions, of improvements in production techniques, and of all these things that constitute a common good: an heritage transmitted and increased from one generation to the other.

The modern production is less and less the result of individual labour. Hoping to distribute the production only through the reward of human labour, is therefore contrary to the facts. It is at the same time impossible, for the money distributed as recompense for work can never buy the production that contains other elements in its prices.

Seeking salary increases with decreases in human labour, is also to change the meaning of the word salary. It is no more a recompense for work; it is the inclusion in the salary of the hired persons of what should be a dividend for all, since it is the fruit of progress and not of labour. This deviation is a hindrance to the desired goal, since in becoming a salary instead of remaining a dividend, these additional amounts go into the prices.

Social Credit would distribute the dividend to everyone, directly, without charging it to industry. It would truly raise everyone's purchasing power.

Besides being the recognition of a very productive community capital, this social dividend would at the same time be an excellent way of satisfying the primitive destination of the earthly goods. "Earth and its riches were created for all men" (Pius XII).

This is totally ignored by the present economic regime in its financial technique of distribution.

Social Credit would thus directly establish an adequate repartition of the goods of nature and of industry, instead of leaving the task to the surgery of taxation, that amputates and grafts continually, without ever healing the disease.

A share to each and everyone, guaranteed by the dividend to each and everyone from birth till death; and this share should be sufficient to at least insure what is necessary for life.

Louis Even - [ Read more ]
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posted by Robin Good on Saturday, August 11 2007, updated on Tuesday, May 5 2015

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