It is urgent to put an end

to the scandal of poverty in the world

The most urgent reform:

to correct the financial systempoverty in Ethiopia


by Alain Pilote

Every day on earth,
an estimated 40,000 children
die of hunger or of diseases
that had not been cured
because of a lack of money.


Nobody can remain indifferent to the problem of poverty and hunger in the world. The news media tell us about poverty and famine in Third World countries (for example, on the world scale, over one billion seven hundred million people have to search through the garbage in order to find something to eat and stay alive), but we don't need to go far to see poverty: this problem exists in our own “backyard”, in our own developed societies.

To correct the financial system

John Paul II


John Paul II

The Church cannot remain indifferent to situations like hunger in the world and indebtedness, which jeopardize the salvation of souls, and this is why she calls for a reform of the financial and economic systems, so that they will be put at the service of the human person. Pope John Paul II's calls along these lines are countless. Already, in his first encyclical lLetter (Redemptor Hominis, March 4, 1979), the Holy Father spoke of “the indispensable transformations of the structures of economic life... of poverty amidst plenty that brings into question the financial and monetary mechanisms... man cannot become the slave of economic systems.” And for now, we will add only this other quote from the Pope:

“Again, I want to tackle a very delicate and painful issue. I mean the torment of the representatives of several countries, who no longer know how to face the fearful problem of indebtedness. A structural reform of the world financial system is, without doubt, one of the initiatives that seem the most urgent and necessary.” (Message of the Pope to the 6th United Nations Conference on Trade and Development, Geneva, September 26, 1985.)

The Roman Catholic Church therefore presents the moral principles on which any financial or economic system must be judged. And so that these principles may be applied in a practical way, the Church calls on the lay faithful — whose proper role, according to the Second Vatican Council, is precisely to renew the temporal order and bring it in order with God's plan — to work for concrete solutions and the establishment of an economic system that conforms to the teachings of the Church's social doctrine.

Social Credit

It is for this reason that Louis Even, the founder of the “Michael” Journal, decided to spread the Social Credit doctrine — a set of principles and financial proposals set forth for the first time by the Scottish engineer, Clifford Hugh Douglas, in 1918. The words “social credit” mean “social money”, money issued by society, as opposed to the present money that is a “banking credit”, money issued by the banks. When Louis Even discovered the great light of Social Credit in 1935, he immediately understood how this solution would wonderfully apply the teachings of the Church on social justice.

No to Communism

The social doctrine of the Church stands above existing economic systems, since it confines itself to the level of principles. An economic system is good or not to the extent it applies these principles of justice taught by the Church. For example, Pope John Paul II wrote in his encyclical letter Sollicitudo Rei Socialis, in 1987: “The tension between East and West is an opposition... between two concepts of the development of individuals and peoples, both concepts being imperfect and in need of radical correction... This is one of the reasons why the Church's social doctrine adopts a critical attitude towards both liberal capitalism and Marxist collectivism.”

One may understand why the Church condemns Communism, or Marxist collectivism, which, as Pope Pius XI wrote, is “intrinsically evil” and anti-Christian, since its avowed goal is the complete destruction of private property, the family and religion. But why would the Church condemn capitalism? Would capitalism and Communism be two of a kind?

Yes to a capitalism that is cured

No, what the Church condemns is not capitalism in itself (private property, free enterprise). On the contrary, far from wishing the disappearance of private property, the Church rather wishs its most widespread diffusion to all, so that all may become real owners of a capital, and be real “capitalists”:

“The dignity of the human person necessarily requires the right of using external goods in order to live according to the right norm of nature. And to this right corresponds a most serious obligation, which requires that, so far as possible, there be given to all an opportunity of possessing private property... Therefore, it is necessary to modify economic and social life so that the way is made easier for widespread private possession of such things as durable goods, homes, gardens, tools requisite for artisan enterprises and family-type farms, investments in enterprises of medium or large size.” (John XXIII, encyclical letter Mater et Magistra, May 15, 1961, nn. 114-115.)

Capitalism has been vitiated by the financial system

The faults that the Church finds in the capitalist system do not come from its nature (private property, free enterprise), but from the financial system it uses, a financial system that dominates rather than serves, a system that vitiates capitalism. Pope Pius XI wrote in Quadragesimo Anno, in 1931: “Capitalism itself is not to be condemned. And surely it is not vicious of its very nature, but it has been vitiated.”

What the Church condemns is not capitalism as a producing system, but, according to the words of Pope Paul VI, “the calamitous system that accompanies it,” the financial system:

«“This unchecked liberalism led to dictatorship rightly denounced by Pope Pius XI as producing `the international imperialism of money'. One cannot condemn such abuses too strongly, because — let us again recall solemnly — the economy should be at the service of man. But if it is true that a type of capitalism has been the source of excessive suffering, injustices and fratricidal conflicts whose effects still persist, it would be wrong to attribute to industrialization itself evils that belong to the calamitous system that accompanied it. On the contrary, one must recognize in all justice the irreplaceable contribution made by the organization and the growth of industry to the task of development.” (Paul VI, encyclical letter Populorum progressio, on the developement of peoples, March 26, 1967, n. 26.)

The defect of the system:
money is created by the banks as a debt

The financial system does not accomplish its role, because it has been diverted from its end. Money should be an instrument of service, but the bankers, in appropriating the control over its creation, have made it an instrument of domination:


Pius XI

“This power becomes particularly irresistible when exercised by those who, because they hold and control money, are able also to govern credit and determine its allotment, for that reason supplying, so to speak, the lifeblood to the entire economic body, and grasping, as it were, in their hands the very soul of production, so that no one dare breathe against their will.” (Pius XI, encyclical letter Quadragesimo anno, May 15, 1931.)

There is no way any country can get out of debt in the present system, since all money is created as a debt: all the money that exists comes into circulation only when it is lent by the banks, at interest. And when the loan is paid back to the bank (this money being withdrawn from circulation), it ceases to exist. In other words, new money is created every time banks make a loan, and this same money is destroyed every time loans are paid back.

The fundamental flaw in this system is that when banks create new money in the form of loans, they ask the borrowers to pay back more money than what was created. (The banks create the principal, but not the interest.) Since it is impossible to pay back money that does not exist, debts must pile up, or you must borrow also the amount to pay the interest, which does not solve your problem, but only worsens it, since you end up even deeper in debt.

This creation of money as a debt by the bankers is the means of imposing their will upon individuals, and of controlling the world:

“Among the actions and attitudes opposed to the will of God, the good of neighbour and the «structures» created by them, two are very typical: on the one hand, the all-consuming desire for profit, and on the other, the thirst for power, with the intention of imposing one's will upon others.” (John Paul II, encyclical letter Sollicitudo rei socialis, n. 37.)

Unpayable debts

Even if there was only one dollar in circulation in the country, this dollar has to be lent by a bank in order to exist. Let us suppose the bank lent it at an interest rate of 6%. So, at the end of the year, $1 must be paid back to the bank plus a 6% interest, or 6 cents. The fact is that there exists only $1 in the country, not $1.06. It is impossible to pay back the interest, even if it is only 6 cents, since the 6 cents is simply not there! Even if the production of the country doubled or tripled during the year, this did not create one more cent, since only banks can create money in the present system.

So, for the same amount of money to remain in circulation, year after year, debts must necessarily pile up, and there is no way they can ever be paid off. In the present system, the only way there can be no debt, is to have no money at all in circulation!

The most absurd thing in all of this is that governments persist stubbornly in borrowing, at interest from private banks, money that they could create themselves, interest-free, thus forcing the citizens to pay interest charges on an astronomical debt, when there should be no debt at all! The first duty of any sovereign government is to issue, create its own money for the needs of its citizens. For governments to have given up this sovereign function to private corporations (private banks) is the greatest betrayal of history.

It is not the bankers who give money its value, but the production of the country. Bankers produce absolutely nothing; they only create the figures that allow the nation to make use of its own productive capacity, its own wealth. The Government, through its central bank, can just as well create these figures itself, without going through the banks, and without getting into debt.

Since money is an instrument that is basically social, the Social Credit doctrine proposes that money be issued by society, and not by private bankers for their own profit:

“There are certain categories of goods for which one can maintain with reason that they must be reserved to the collectivity when they come to confer such an economic power that it cannot, without danger to the common good, be left to the care of private individuals.” (Pius XI, Quadragesimo anno.)

The effect of compound interest

Institutions like the International Monetary Fund and the World Bank pretend to help countries in financial difficulties with their loans, but because of the interest charges (compound interest) they have to pay back, these countries end up even poorer than they were before the loans were made. Here are some striking examples:

During the period 1980-1990, Latin American countries paid $418 billion in interest on original loans of $80 billion... and they still owed the capital, even though they paid it back more than five times!

In Canada, things are even worse: 93% of the national debt of $562 billion is made up of interest charges: the original capital borrowed ($39 billion) represents only 7% of the debt. The remaining $523 billion covers what it has cost to borrow that $39 billion!

The most recent example is that of Argentina which, just a few years ago, was considered to be the “model pupil” of the IMF. Because of this trick of compound interest, Argentina cannot even pay the interest charges on its debt, and it is its population that is directly hit. Here is what the news agencies reported last June 6 (2002):

“Argentina's worst economic crisis ever has hit the nation's poor so hard that some have resorted to eating toads, rats and horse meat, the mayor of a poor Buenos Aires suburb said. Armies of beggars tear open garbage bags every evening in the center of the capital city. In the suburbs, cats have disappeared, and many people who collected bottles killed their horses, their instrument of work, and ate them. Now, kids no longer go to school, for it is they who pull carts in place of horses. Half of the 36 million Argentineans live below the poverty line.”

According to the Jubilee 2000 Coalition, for every dollar flowing as aid to poor countries each year, $8 are sent back in debt payments. (See cartoon below.)

It is examples like these that brought Saint Leo to write: “The avarice that claims to do its neighbour a good turn while it deceives him is unjust and insolent... He who, among the other rules of a pious conduct, will not have lent his money at usury, will enjoy eternal rest... whereas he who gets richer to the detriment of others deserves, in return, eternal damnation.” Saint John Chrysostom also wrote: “Nothing is more shameful nor cruel than usury.”

Debts must be cancelled

Any sensible person will realize that it is criminal to require nations to continue to pay interest on debts that have already been paid several times. One can see now why the Church condemns usury (the loaning of money at interest), and calls for the cancellation of debts. When one understands that the money lent by the banks is literally created out of nothing, with a simple stroke of the pen (or entering digits in computers), then it is easy to understand that debts can be cancelled, written off, forgiven, without anyone being penalized.

Pope John Paul II wrote in his encyclical letter Centesimus annus (n. 35.): “It is not right to demand or expect payment when the effect would be the imposition of political choices leading to hunger and despair for entire peoples. It cannot be expected that the debts which have been contracted should be paid at the price of unbearable sacrifices. In such cases it is necessary to find — as in fact is partly happening — ways to lighten, defer, or even cancel the debt, compatible with the fundamental right of peoples to subsistence and progress.”

Once debts are written off, the only way to stop debts building up again, and allow nations to make a fresh, is for each nation to create its own debt-free and interest-free money, and stop borrowing at interest from commercial banks and international institutions, like the International Monetary Fund and the World Bank. If you leave to private bankers the power to create money, debts will build up again. This reminds us of the words of Sir Josiah Stamp, former head of the Bank of England:

“Banking was conceived in iniquity and born in sin... Bankers own the earth. Take it away from them, but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again... Take this great power away from them, and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in... But, if you want to continue to be the slaves of the bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.”

For those who do not understand how money is created by banks, the only way a debt can be cancelled is to have someone, somewhere, pay it back. But we, of the “Michael” Journal, know better. When we say “cancel” the debt, we actually mean it: erase it! We do not ask anyone to pay it, and above all, we certainely do not ask the Government to “print money” to pay the debt.

What we propose is for the Government to stop borrowing at interest money that it could create itself, interest free; this is the only solution that goes at the root of the problem, and which solves it once for all. It would finally put money at the service of the human person.

Systems at the service of man

The systems put at the service of man — this is precisely the capital point of the social doctrine of the Church. Pope John XXIII repeated it in his encyclical Mater et Magistra, in 1961:

“The Church's teaching on social matters has truth as its guide, justice as its end, and love as its driving force... The cardinal point of this teaching is that individual men are necessarily the foundation, cause, and end of all social institutions.”

Social Credit shares the same philosophy. Clifford Hugh Douglas wrote in the first chapter of his first book, Economic Democracy: “Systems are made for men, and not men for systems, and the interest of man, which is self-development, is above all systems.”

All systems must be at the service of man, including the financial and economic systems:

“As a democratic society, see carefully to all that is happening in this powerful world of money! The world of finance is also a human world, our world, submitted to the conscience of all of us; for it too exist ethical principles. So see especially to it that you may bring a contribution to world peace with your economy and your banks, and not a contribution — perhaps in an indirect way — to war and injustice!” (John Paul II, homily at Fluëli, Switzerland, June 14, 1984.)

The aim of economics: the satisfaction of human needs

Therefore, the aim of the economic and financial systems is also, according to the Church, the service of man. The aim of the economic system is the satisfacion of human needs, the production of the goods which man needs (the role of the producing system), and the distribution of these goods so that they may reach the people who need them (this is the role of the financial system). Social Credit proposes a technique that would make the producing and financial systems reach their end.

Pope Pius XI, in his encyclical Quadragesimo Anno, defined the aim of an economic system:

“For then only will the economic and social organism be soundly established and attain its end, when it secures for all and each those goods which the wealth and resources of nature, technical achievement, and the social organization of economic affairs can give.

“These goods must be sufficient to supply all needs and an honest livelihood, and to uplift men to that higher level of prosperity and culture which, provided it be used with prudence, is not only no hindrance but is of singular help to virtue.”

Earthly goods are intended for all

The Pope spoke about “all and each” who are entitled to the use of material goods. He thus repeats this other capital point of the Church's social doctrine: earthly goods are intended for all:

“God intended the earth and all that it contains for the use of every human being and people. Thus, as all men follow justice and unite in charity, created goods should abound for them on a reasonable basis... The right to have a share of earthly goods sufficient for oneself and one's family belongs to everyone.” (Second Vatican Council, Constitution on the Church Gaudium et Spes, n. 69.)

What the Church reproaches the capitalist system with is that not each and every human being living on the globe has access to a mimimum of material goods, allowing a decent life, and that even in the most advanced countries, there are thousands of people who do not eat their fill. It is the principle of the universal destination of goods that is not fulfilled: there is plenty of production; it is the distribution that is defective.

“God gave the earth to the whole human race for the sustenance of all of its members, without excluding or favouring anyone. This is the foundation of the universal destination of the earth's goods... It is a strict duty of justice and truth not to allow fundamental human needs to remain unsatisfied, and not to allow those burdened by such needs to perish.” (John Paul II, encyclical Centesimus annus, nn. 31 and 34.)

The Social Credit dividend

It would be possible for everyone to be a real “capitalist” and to have access to earthly goods with the Social Credit dividend, an unconditional basic income given to every citizen. It would not be financed by taxes, but by new money created by the nation, based on the production of the country. This dividend is based on two things: the inheritance of natural resources, and the inventions from past generations:

Through his work man enters into two inheritances: the inheritance of what is given to the whole of humanity in the resources of nature, and the inheritance of what others have already developed on the basis of those resources, primarily by developing technology, that is to say, by producing a whole collection of increasingly perfect instruments for work.” (John Paul II, encyclical Laborem exercens on human work, September 15, 1981, n. 13.)

The machine: an ally or enemy of man?

In the present system, only those who are employed in production can get an income, which is distributed in the form of wages and salaries. The income is tied to employment. But this is contrary to the facts, since, thanks to new inventions, technology, progress, there is less and less need for human labour, workers, to produce goods: it is computers, robots, that do the job in our place.

Is technology an evil? Should we rise up and destroy the machines because they take our jobs? No, if the work can be done by the machine, that is just great; it will allow man to give his free time over to other activities, free activities, activities of his own choosing. But all of this, provided he is given an income to replace the salary he lost with the installation of the machine, of the robot; otherwise, the machine, which should be the ally of man, will become his enemy, since it deprives him of his income, and prevents him from living:

“Technology has contributed so much to the well-being of humanity; it has done so much to uplift the human condition, to serve humanity, and to facilitate and perfect its work. And yet at times technology cannot decide the full measure of its own allegiance: whether it is for humanity or against it... For this reason my appeal goes to all concerned... to everyone who can make a contribution toward ensuring that the technology which has done so much to build Toronto and all Canada will truly serve every man, woman and child throughout this land and the whole world.” (John Paul II, homily in Toronto, Canada, September 15, 1984.)

Full employment is materialistic

The Social Credit dividend is the only logical solution to the replacement of human labor by machines. For if one wants to persist in keeping everyone, men and women alike, employed in production, even though the production to meet basic needs is already made with less and less human labour on top of that, then new jobs, which are completely useless, must be created. And in order to justify these useless jobs, new artificial needs must be created, through an avalanche of advertisements, so that people will buy products they do not really need. This is what is called “consumerism”.

Likewise, products will be manufactured to last as short a time as possible, with the aim of selling more of them and making more money, which brings about an unnecessary waste of natural resources, and also the destruction of the environment.

A salary to housewives

In its social doctrine, the Church also stresses the importance of recognizing the work of the mothers in the home, by giving them an income. This would be perfectly accomplished by the Social Credit dividend:

“Experience confirms that there must be a social re-evaluation of the mother's role, of the toil connected with it, and of the need that children have for care, love and affection in order that they may develop into responsible, morally and religiously mature and psychologically stable persons. It will redound to the credit of society to make it possible for a mother — without inhibiting her freedom, without psychological or practical discrimination, and without penalizing her as compared with other women — to devote herself to taking care of her children and educating them in accordance with their needs, which vary with age. Having to abandon these tasks in order to take up paid work outside the home is wrong from the point of view of the good of society and of the family when it contradicts or hinders these primary goals of the mission of a mother.” '(John Paul II, encyclical Laborem exercens, n. 19)

“It is an intolerable abuse, and to be abolished at all cost, for mothers, on account of the father's low wage, to be forced to engage in gainful occupations outside the home to the neglect of their proper cares and duties, especially the training of children.” (Pius XI, encyclical Quadragesimo anno, n. 71.)

In October, 1983, the Holy See issued the “Charter of the Rights of the Family”, in which it called for “the remuneration of the work in the home of one of the parents; it should be such that mothers will not be obliged to work outside the home to the detriment of family life and especially of the education of the children. The work of the mother in the home must be recognized and respected because of its value for the family and for society.” (Article 10.)

The duty of every Christian

It is indeed a duty and an obligation for every Christian to work for the establishment of justice and for a better economic system:

“Anyone wishing to renounce the difficult yet noble task of improving the lot of man in his totality, and of all people, with the excuse that the struggle is difficult and that constant effort is required, or simply because of the experience of defeat and the need to begin again, that person would be betraying the will of God the Creator.” (John Paul II, encyclical Sollicitudo rei socialis, n. 30.)

The most fundamental reason every Christian must work for the establishment of a better economic system is that one will judged on what one will have done for our brothers and sisters in need: “Truly, I say to you, as you did it to one of the least of these my brethren, you did it to Me.” (Mt 25:40.)

There are, of course, many ways to help our brothers in need: feeding the hungry, giving drink to the thirsty, sheltering the homeless, visiting the imprisoned and the sick, etc. Some will send donations to charitable organizations, whether to help the poor of our country or of the Third World. But if these donations can relieve a few poor people for a few days or weeks, they nevertheless do not suppress the causes of poverty.

What is much better is to correct the problem at its root, to attack the very causes of poverty, and to re-establish every human being in his rights and dignity of a person created in the image of God, and being entitled to a mimimum of earthly goods:

“More than any other, the individual who is animated by true charity labors skillfully to discover the causes of misery, to find the means to combat it, and to overcome it resolutely.” (Paul VI, encyclical Populorum progressio, n. 75.)

Louis Even had discovered the cause of the misery of the people — the creation and control of money by private banks — and also the means to combat this swindle: the education of the people. That is why he founded the “Michael” Journal. So, all those who thirst for justice should therefore start to study and spread Social Credit, by soliciting subscriptions to the “Michael” Journal!

                                                                                                 Alain Pilote

This article was  published in the May-June-July, 2002 issue of “Michael”, and is also available in the form of an 8-page leaflet (with the articles “What is Social Credit? Practical Christianity!”, by Geoffrey Dobbs, “Social Credit is the application of the Social Doctrine of the Church”, by Bishop Frankowski of Poland, “and two articles of Louis Even, “Money, an instrument of distribution” and “To solve the problem of poverty”).

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