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A Social Dividend to All

Written by Louis Even on Friday, 27 May 2016. Posted in A Sound and Efficient Financial System

— A social dividend to all? But does this not entail that a productive capital was invested?

Precisely. It is because all members of society are co-capitalists of a real and immensely productive capital.

It was said above, and needs to be repeated often, that upon being born, financial credit is the property of society as a whole. This is so because financial credit is based on the real credit, on the country's productive capacity. This productive capacity is made up, in part, by work, by the competence of those who take part in the production. But it is mainly made up, for an ever-increasing part, of other elements that are the property of all individuals.

There are, first of all, the natural resources, which were not produced by any man; they are a gift from God, a gift that must be at the service of all. There are also all the inventions created, developed, and transmitted from one generation to the next. This is the biggest production factor of our times. And no man can claim ownership of this progress, which is the fruit of many generations.

No doubt some people are needed to set progress to work — and these individuals are entitled to a reward, which they receive through their wages, their salaries, etc. But a capitalist who does not personally take part in the industry where he invested his capital is entitled nonetheless to a share of the results, because of his capital.

Well, the greater part of the real capital in modern production is in fact the sum total of the discoveries, of the accumulated inventions that allow us to obtain today more goods with less work. And since all human beings are, on an equal basis, coheirs of this ever increasing capital, all are entitled to a share in the fruits of production.

The employee is entitled to this dividend and to his salary. The unemployed person receives no salary, but he is entitled to this dividend said to be "social", since it is derived from a social capital.

— This is something new. But it seems logical.

Yes it is. And it is the most direct and concrete means by which every human being is guaranteed his fundamental right to a share of the goods of the earth. Every individual person possesses this right — not as an employee in production, but simply as a human being.

«Every man, as a reason-gifted being, has from nature the fundamental right to make use of the material goods of the earth.» — Pius XII (Radiobroadcast, June 1, 1941 )

And it is an inalienable right:

«Such an individual right can in no way be suppressed, not even by the exercise of other certain and recognized rights over material goods.» — Pius XII (Ibid)

Other rights, the right of property, the right of the wage earner, the right of the shareholder, etc, can in no way suppress the right of individuals '' to make use of the material goods of the earth.”

The Pope duly added:

«It is left to human will and to juridical forms of peoples to regulate more in detail the practical realization of this right.» (Ibid)

That is to say, it is up to the peoples themselves, through their laws and regulations, to choose the methods that will allow each man to exercise his right to a share in the earthly goods.

The dividend to all would achieve this. No other system ever came close to being this efficient, not even our present social security laws.

We do well in recognizing — and no one dares deny it — the right of each individual to basic necessities. But just try to exercise this right in today's world, when you have neither money nor the means with which to produce the goods you need — the productive means being more and more concentrated into fewer hands.

In our modern world, it is impossible for an individual to exercise his right to material goods without using money. Money has become a permit agreed upon to exercise a natural right.

The social dividend, a periodic dividend to all, a basic income guaranteed to everyone as a birth right, an income sufficient to cover at least the basic necessities of life, is the most important social request made by Social Credit Economics. It recognizes the undeniable fact that all human beings are the co-heir of past generations.

— But would this not amount to giving individuals something for nothing?

Well, just go and tell a capitalist that he is getting something for nothing when he is paid a dividend as a return on his invested capital! On the contrary, he would claim that an injustice is being committed if he was to be refused his dividend.

The same is true of each member of society, as co-capitalist, as co-heir of a real capital — a capital that is far more essential than the dollar bills or other monetary signs that have a representative value only.

An economy based solely on exchange cannot be a humane economy, given that more than half of the population has nothing to exchange: This is the case for children, for stay-at-home mothers, for the disabled and the sick, for the unemployed, for the older workers let go by industry, for the able-bodied men who have been replaced by machinery, etc. An economy based strictly on exchanges, an economy of “nothing for nothing” can only be a barbarian economy nowadays. Such an economy sacrifices the individual to regulations that are related to money, instead of being related to the human person.

While speaking on the topic of the distribution of goods within a socio-economic system geared to the priority of economic justice to individuals, the French thomist philosopher Jacques Maritain came to a similar conclusion:

Jacques MaritainJacques Maritain

“It is an axiom for the «bourgeois» economy and the mercenary civilization that one has nothing for nothing; an axiom linked to the individualistic conception of ownership. We think that in a system where the conception of ownership outlined here above (with its social function) would be in force, this axiom could not survive. On the contrary, the law of usus communis would lead to lay down that, at least and above all for what concerns the basic, material and spiritual needs of the human being, it is right to get for nothing as many things as possible...

“For the human person to be thus served in his basic necessities is, after all, only the first condition of an economy that does not deserve to be labelled barbarous. The principles of such an economy would lead to a better grasp of the profound sense and the essentially human roots of the idea of heritage in such a way that every human, upon coming into the world, may be able to effectively enjoy, in some way, the condition of being a heir of the past generations.” (Humanisme integral, pp. 205-206)

But could we not get the same result by increasing the workers' wages?

No, absolutely not, since increasing the wages only affects the wage earner, and gives nothing to the unemployed. Moreover, because all wage increases are added to prices, they do not therefore correct the gap between prices and purchasing power.

An individual income not linked to employment — such as a social dividend given to all — is more and more called for as productivity increases due to production being made with fewer hands. Once automation is complete and there are no workers left, how will the supporters of employment as a condition for the right to an income distribute the production? We are not there yet, but automation is progressing at an incredible speed. The distribution of purchasing power must reflect this situation.

Not only is raising wages in order to increase purchasing power not a solution in keeping with reality, but it is also an injustice. If wages are a reward for labor, they should normally decrease as the amount of required work decreases. These wage increases are taken away from the dividends that are owed to every citizen.

Much could be said about a dividend to every citizen; it is a question that startles those who have never bothered to rethink the false notions they take for granted.

And what value is there in the objection of those who persist in seeing as being immoral an “un-earned” money? Do they see as immoral the bequeathing of an inheritance of a father to his child who has never contributed to create this inheritance? Do they see as immoral the dividends paid out to millionaires who most certainly have not earned their millions? Or who have never produced any real wealth? Do they see anything immoral in the lavish salaries given to civil servants who do absolutely nothing for the people who pay these salaries by their taxes? And how many more questions of this kind could be flung in the face of those who are against dividends?

So, in the financial system advocated by Social Credit, which you say is sound and efficient, purchasing power would reach the consumers in two ways: one, through wages, salaries and other forms of remuneration linked to employment in production; and the other, by means of dividends not linked to employment?

Yes. Besides, this is already happening today. Those who are employed by production receive salaries, but capitalists receive dividends on their capital, even if they don't take part in production. If the capitalist is also an employee, he gets an income in two ways: through money linked to his job, and through money linked solely to the dollars he invested.

The same would apply under a Social Credit system, except that all citizens, by their simply being members of society and being the co-owners of the largest production factor, would receive a periodic dividend based upon that part of production that was made thanks to this real and common capital.

— But if both the rewards to employment and dividends to all can be used to buy products, what share must go to wages, and what share must go to dividends?

The same question now causes friction between capitalists and workers. The capitalists say: “Without our money, there would be no jobs, and therefore no production.” The workers say: “Without work, there would be no products.” In fact, both capital and labour are production factors, and it is usually agreed upon that the greater share of the money distributed must go to the workers who are also in greater numbers.

Under a Social Credit system, it is the capitalists (all of the citizens) who would be in greater numbers. In Canada, there are approximately 12 million wage earners — out of 30 million Canadians (in 1964). There are therefore 12 million workers and 30 million capitalists.

Moreover, production is due increasingly to the real capital that belongs to the 30 million people, rather than to the work done by the 12 million workers. If purchasing power was made to reflect with precision the part of production that is the result of progress, which is a common capital, and the part that results from the efforts of those who take part in production, the total amount given as social dividends would have to be much greater than the total amount given as wages and salaries.

— But it would mean giving more to those who do not work than to those who work. It would encourage laziness!

Do not jump to conclusions, which in this case, are also unfounded.

First, it is wrong to say that the individual who is not required by production would get more money then the one who is employed in production: They both would receive the same dividend, but the worker would receive his salary on top of his dividend.

There would remain between the two the same difference as before, that is, the amount of the wage or salary. But instead of being a difference between zero and the salary, it would be the difference between the dividend, on the one hand, and the dividend plus the salary, on the other hand. The "salary" incentive would still exist. And added to it, there would be the incentive of a "dividend to all", the importance of which would grow for the wage earner, as his sense of society would grow.

A dividend, based upon the dominant part that the real communal capital plays as a modern factor of production, would therefore constitute a generous amount.

We can understand that the transition from a low carb diet to a high energy diet might require that some adjustments be made. One does not go from a hospital diet to a normal diet without first going through a recovery diet.

Wisdom requires that the periodic dividend be increased gradually.

But the principle must first be applied. We must fully embrace an economy of plenty and of dividends to all, and leave behind an economy of scarcity where income is limited to employment.

— What did Douglas say on this topic?

Douglas expounds, as follows, the third of three principles of which the application would allow a system to be in keeping with facts:

«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, as productive capacity increases per man-hour. »

This means that an increasing part of purchasing power would come from dividends, and a decreasing part would come from employment.

In the broad lines of a plan he drew up for the implementation of his principles in Scotland, Douglas considered that a dividend could be given to every man, woman, and child. The sum of these were to add up to one percent of the country's total assets, evaluated in money. He added:

«The dividend thus obtained might be expected to exceed three hundred pounds per annum per family. »

Douglas wrote this in 1933. Traslated into Cdn dollars, this would mean an annual amount of $1,450 per family, that is to say, $121.50 a month; or (with an average of five people to a family), a $25.00 monthly dividend to every man, woman, and child in Scotland.

If this amount was thought to be reasonable in 1933, it ought to be at least $1200 a month today (in 2017) seeing that the cost of living has increased more than twenty times over since, and seeing the increase that has taken place in the productive capacity which allows for more goods to be delivered per person.

This was, in Douglas's mind, an initial dividend, a dividend which ought to increase as the productive capacity per man-hour would increase. (Ed.Note: The $1200 mentioned above is a very conservative estimate. 60% of GDP per capita would be closer to reality, that is: 60% of $50 000 = $30 000 per capita per year, or $2500 per month for every man woman and child in the country.)

In any case, considering Canada's present productive capacity, the periodic dividend ought to guarantee, now and in the future, to all citizens, the money they need to satisfy their normal needs. This would simplify and decrease the bureaucracy needed to run our social security system, while making it more efficient. Social and personal responsibility would find a better climate for their development.

— What do we mean by an “increase in the productive capacity per man-hour”?

An example will help us to understand:

Let us suppose that, over the period of one year a workforce of 100,000 men gave an output of 100,000 production units. And the following year, twice as many workers, that is 200,000 men, gave twice the output, that is 200,000 production units. The productive capacity per man-hour would be exactly the same for both cases.

But if, in the second year, we obtained this two-fold output, 200,000 production units, with the same workforce as for the first year (100,000 men), then the productive capacity per man-hour would have doubled.

Or if, the second year, we obtained the same output as during the first year, i.e. 100,000 units, but with half the workforce (with only 50,000 men), there again the productive capacity per man-hour would have doubled.

In practice, the productive capacity per man-hour increases each year in all industrialized countries. One can lower the number of employees, lower the number of working hours, without diminishing the total production; or, while maintaining the same number of workers and working hours, obtain an increased production.

This increase is not the result of a greater effort made by each worker, but comes from advances made to mechanical and technical tools — all in all, from progress — of which we are all co-heirs and co-owners, as we have already explained. It is only fair then that these owners, that these heirs; that all citizens be the ones who benefit from this increase by receiving a larger monthly dividend.

— But this would mean a lowering of the workers' current wages!

Not necessarily (although there are reasons that could justify this under a Social Credit system). But, by leaving wages at their present level, an increase in the monthly dividends to all, as the country's productive capacity increases, would diminish the ratio of total wages to total purchasing power.

In any case, the ratio of total wages to total purchasing power must be taken into consideration in a system that wants to be in keeping with the realities of the economy.

If a factory that employs 100 men, 40 hours a week, for a total of 4,000 man-hours a week, and has an output of 8,000 production units, then this factory has an output of 2 production units per man-hour.

Let us say that, by introducing more advanced machinery and some measures of automation, this factory would only need 70 men working shorter hours, i.e. only 30 hours a week, while producing more, that is, 10,500 production units during the week.

This would give 70 x 30 = 2,100 man-hours (instead of 4,000). And since the production of these 2,100 man-hours has gone up to 10,500 production units, this gives an output of 5 units per man-hour (instead of the 2 units before).

Productivity that went from 2 units to 5 units per man-hour is certainly not the fruit of more labour, since, on the contrary, the working week is shortened. It is due to advanced techniques, to progress, which is the Work of several generations and a communal capital that is more and more considerable, more and more productive.

This increase in productivity should benefit no other than the owners of this communal capital, namely everyone. To this social capital, must be associated a social dividend.

Three production units out of five are due to the application of progress in the modernization of the above factory. If it is fair to give 2/5 of the production to the producers (employers and employees) as their reward, the whole community (producers and non-producers) ought to share a dividend that corresponds to 3/5 of the production.

This is only an example to make us understand Douglas's proposition which says that progressively, as the output increases per man-hour, the percentage of purchasing power distributed in dividends must increase, and the percentage in wages and salaries must decrease.

If this proposition of Douglas had been adopted 40 years ago, (i.e. in 1924), the economic situation would have evolved quite differently from what we have seen. Instead of wage increases to workers who are less and less employed, we would have seen increasing dividends given to all, including to workers, to their wives, and to their children.

There would have been less inflation. Every individual having been provided with purchasing power, production would have better answered everyone's needs.

And since the purely financial obstacles would have been removed, the quantity of goods made and distributed would have been limited only by the physical capacity to produce or by the limit imposed by the saturation of consumption.

The wage earners would not have lost anything; like the capitalists, they would have received more dividends than wages.

— How would this monthly dividend be distributed to each and every member of society?

In the way that would be considered to be the most practical, the one that required the least bureaucracy, the way that would require the least amount of changes in the way the means of payment are transferred at present.

Family allowances are paid monthly to mothers for their underage children. Old Age Security payments and other similar allowances (for the blind, the disabled, etc.) are paid monthly to each eligible party and the same thing can be done for the monthly dividend to all.

We can also resort to the commercial banks. Each citizen would be registered at a local bank. Each month, the commercial bank would simply credit each citizen's account with the amount decreed for the monthly dividend. Here again, commercial banks would obtain interest-free credits from the Central Bank, upon request and without cost, to deposit a monthly dividend in each of the accounts found under their jurisdiction. To render this service, commercial banks would be paid by the Central Bank accordingly.

Another way the monthly dividend could be paid would be by using the Postal Service. This is the method that Douglas advocated in his scheme for Scotland: “The dividend shall be paid monthly by a draft on the Scottish Government credit, through the post office.”

Using today's computers, a method can easily be found that is fast, safe, accurate and efficient to distribute a monthly dividend to each individual. It would no doubt be easier to distribute a dividend to a co-capitalist than to collect taxes from a citizen.

— Would this distribution of money to the consumers through dividends, not lead to an inflation that everyone fears?

It would be an increase of money in the consumers' wallets, and I do not believe that the people who will benefit from this will complain. It is not when your income is raised that it hurts you. Have you ever heard anyone complain about a raise in income? It is when prices go up that everybody complains.

— But would this distribution of money through dividends not make the prices go up?

Cost prices would not be affected. Since social dividends are not paid by the producers, they would not be channelled through industry, the way it is now done for salaries, and industrial dividends. They would not be included in the cost price. They would be issued directly from the source of financial credit, itself the property of the people.

In today's system, which puts restrictions where none are needed, and none where some are needed, an increase of consumer money could give rise to an unwarranted increase in the retail price. But in a Social Credit system, prices are determined by true cost accounting: the cost price is determined by adding the different costs incurred during production. Furthermore, increases in the retail price are kept in check by the adjustment of prices and compensated discount that would be established when applying the first of Douglas's three propositions.

— Would there be a dividend during the years when the country's production does not increase?

Most certainly! Whatever the amount of production, there is always a substantial part of it that was made thanks to the real communal capital. It is only in the case where production would fall to zero that the basis for the dividend would disappear, and the basis for wages and salaries would also disappear, since there would be no production made.

Of course, when production is low, the total purchasing power must be low so as to be in keeping with reality. In such a case, both — dividends and salaries — can understandably be lower than during a period when production is plentiful. One can only distribute products that exist.

Some Social Crediters have explained the dividend as being the distribution of the increase in annual production. This is a mistake. The increase in production can justify an increase in the dividend, as we have seen. But, whatever the volume of production, there is always a part of this production that was made thanks to the use of the social capital — therefore, there is always a part of production that justifies giving a social dividend to all.

Others have said that the dividend would distribute the amount of money that is missing to fill the gap between purchasing power and prices. This is not correct either. The dividend certainly contributes to filling the gap between prices and purchasing power, but this is not what it is based upon. And even if there was no gap between prices and purchasing power, each citizen would still be entitled to his dividend, for the reasons we have recalled in the preceding paragraphs.

To guarantee a dividend to all is one of the functions of a sound financial system (Douglas's Third Principle). To establish or to maintain the equilibrium between the collective cash prices for consumable goods for sale and the collective cash credits (means of payment) of the population is another function (Douglas's First Principle). The Social Credit technique fulfills both functions, without one interfering with the other, through simple accounting operations applied to a social financial credit that corresponds to the country's real credit.  

Social Credit and private enterprise

The owner, while remaining the private owner of his enterprise, is at the same time an agent of the community who sets to work the real credit, the country's production capacity.

The banker, while remaining the private owner and manager of his banking enterprise, is at the same time an agent of the community for the channelling, to and from the Central Bank, of the financial credit which is based on the country's real credit.

The retailer, while remaining the private owner of his business and running it without constraints, is at the same time an agent of the community for the distribution of goods.

Social Credit is a firm defender of private property and private enterprise. But all private enterprises have a social function to fulfill. This would be accomplished automatically by a financial system in keeping with the propositions set forth by Douglas.

 

 

 

 

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