Social Credit and Foreign Trade

A question, an answer

It is not uncommon to hear the following objection voiced against Social Credit: “But how will foreign trade be carried out using Social Credit money? How will this money be accepted abroad?”

A very simple answer: “The nature of Social Credit money would be exactly the same as the nature of today's money. The same look and the same kind of metal or paper, the same bookkeeping, and the same way of transferring debits and credits.”

Problem solved. However, a few notions of foreign trade will show that, under a Social Credit system, foreign trade would meet with much less friction than under the present system, even if Social Credit was to exist on only one side of the border.

Imports and exports

Foreign trade consists of commercial trade which extends beyond the country's borders.

For Canadians, to purchase coffee from Brazil, oranges from Florida or California, silk from Japan, cotton from the United States, wine from France, cutlery from England, means to import goods. This is foreign trade. Imports are goods that come from abroad.

For Canada, to sell Canadian paper to New York, Canadian wheat to Europe, nickel to Germany, aluminium to Japan, fish to Italy, bacon to England, means to export goods. Again, this is foreign trade. Exports are goods that are sent abroad.

Foreign trade is a sound activity. It is completely within the providential order. God gave man the whole earth. He put on earth all that is needed to answer the material needs of the whole of humanity. But He did not put all things in all places.

Some countries produce some given goods easily and plentifully; other countries produce other things better and in greater quantity. It is thus profitable for men of different countries to trade their surpluses among themselves.

Products cross borders

In foreign trade, goods go from one country to another, in both directions, just as, within our country, goods go from towns to countryside and from countryside to towns.

At your local grocery store, you can see the products from towns alongside the products from the countryside.

But, at the same local store, you can also find things that come neither from our countryside nor our towns. You will find rice from China, tea from Sri Lanka, coffee from Brazil, bananas from the West Indies, books from France, and other things still, from almost every country in the world. They are there, so it seems, just as naturally as the potatoes from the neighbouring farm.

If you were to visit foreign countries, you would quite naturally find Canadian products. You would eat Canadian bacon in London; find flour from Alberta in France's bakeries, fish from the Gaspe Peninsula on Rome's tables, paper from the Province of Quebec in New York's large printing establishments.

Money does not cross borders

But would you so easily find Chinese, Japanese, Turkish, French, Italian or other kinds of currencies in Canada's wallets and cash drawers?

Goods go across borders, but money does not go across borders as goods do.

This goes to show that money has nothing to do with foreign taste. It is the products which have to do with the taste of consumers wherever they may be. One buys Chinese rice if one likes it, green tea from Japan if one likes it; but one does not spend one minute worrying whether the Chinese yuan or the Japanese yen is made of gold, silver, paper, rubber, numbers or hieroglyphics.

Products are universal; but money is essentially an internal matter. A country's monetary reform has nothing to do with tastes, ideas, or the government of other countries.

Goods paid for with goods

So money does not cross borders like goods do; and, in foreign trade, goods are paid for with other goods or services. If they are not paid for immediately, there is debit registered on one side, credit registered on the other, as when a storekeeper sells on credit.

Obviously, when a Canadian merchant orders a loadful of rice from China, he does not ship a loadful of wheat in payment. He goes to his bank and pays in Canadian currency, in dollars. The banker delivers a credit instrument that the Chinese merchant will exchange in his country for Chinese currency.

But another Chinese merchant will buy a loadful of wheat from another Canadian and will go to his own bank to effect his payment in Chinese currency. The bank will send a bill of exchange to the Canadian who exported the wheat, and the Canadian will be paid at home in Canadian dollars. In the end, It is the wheat shipped by one company that pays for the rice imported by another company.

The difficulties with foreign trade

The exchanging of the bills of exchange is done in banks or brokerage houses, and the preponderance of these bills of exchange, on one side or the other, determines what one calls the foreign exchange rate.

But trade between countries has nothing to do with the substance that the money is made of in either country.

Do you think that the German who sells his merchandise to us, and who is paid at home in German marks, wonders if one pays for it here in paper money, or metal disks, or with a simple cheque drawn on a bank or a credit union?

There is not the least difficulty in this regard.

The difficulties with foreign trade arise above all from two things:

1. The countries want to export more than they import;
2. The value of each country's monetary unit is unstable in relation to itself.

The first difficulty is smoothed away

A country, Canada for example, will want to export goods for $2 billion; but it will try, through tariff barriers or otherwise, to limit its imports to $1.5 billion. It wants to send abroad $500 million more in goods than it receives. Not out of charity: it asks to be paid. But it is reluctant to accept goods in payment, because it wants its citizens to remain occupied, working for wages that will allow them to buy the goods that remain.

Social Crediters have long understood and denounced this policy which is as absurd as it is unnatural. But as long as one continues to link the right to obtain goods to wages alone, as long as one refuses to complement this right through the distribution of dividends so as to raise the purchasing power to the level of the production being offered, one will continue to look abroad for the purchasing power our country's consumers are lacking, and one will continue selling abroad goods that the citizens need here but that they cannot afford to pay for. By exporting more than we import, we lower the amount of goods available to us, instead of allowing an increase in the amount of money available to us that would allow us to buy these products.

Thus is respected the rule which says that: No other source of purchasing power other than the personal contribution to production will be allowed.

Since all countries have, until now, stuck to this rule, all have tried to export to others more than they have imported from them. From whence come the economic frictions that are harmful to foreign trade and that lead to political frictions, with the tragic outcome of which we are aware.

Social Credit, by putting into circulation all the money needed to buy all of the country's production, puts an end to this madness. A Social Credit country is willing to export its surpluses, but in return it only requests the same amount of surpluses from others. The population of a Social Credit country has the money to buy what is coming into the country, with the money that would have bought what has gone out of the country. And the foreign country is happy to participate in this facilitated trade with the Social Credit country.

Social Credit therefore makes the first cause of friction disappear in foreign trade, at least in the country that adopts the Social Credit system. Trade between this country and all others is immediately facilitated and favoured.

The second difficulty is smoothed away

The second cause of friction in trade is the instability of the purchasing value of money in one's own country.

With foreign trade, a certain time elapses between the moment goods are ordered and the moment the merchandise received is paid for. The price is agreed upon and the drafts are drawn up at the same time the goods are ordered.

For example, a French businessman sells me Parisian goods worth 8,000 francs. I accept a draft that will make me pay him, in six months' time, let us say 200 Canadian dollars (the foreign exchange rate at the time of purchase).

If, in six months' time, the restriction of money has caused the dollar value to go up, I will deprive myself of as much purchasing power in paying $200 in six months' time as if I had paid $250 today, at the time of purchase. It is an injustice that exporters and importers always risk facing because of the continual inflations and deflations of the system.

Social Credit, by always maintaining the money supply at the level of the production volume, would better maintain stability in the value of the Social Credit country's monetary unit.

Foreign merchants would know what a Canadian Social Credit dollar would be worth in six months or a year's time: It would still be worth the same as at the time of sale or purchase.

Trade with a Social Credit nation would therefore be sought after. Those who say that Social Credit would be harmful to foreign trade say the exact opposite of what can be foreseen. This is either because they know nothing of Social Credit, or they know nothing of foreign trade.