At the end of a previous article, we read Saint John Paul II saying that liberal capitalism was not perfect and needed to be corrected. However, not everything about capitalism should be rejected; in his encyclical Centesimus Annus, Saint John Paul II recognizes the merits of free enterprise, private initiative, and profit.
"It would appear that, on the level of individual nations and of international relations, the free market is the most efficient instrument for utilizing resources and effectively responding to needs. But this is true only for those needs which are 'solvent', insofar as they are endowed with purchasing power, and for those resources which are 'marketable', insofar as they are capable of obtaining a satisfactory price. But there are many human needs which find no place on the market. 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" (n. 34).
The Church does not find fault with capitalism because of private property or free enterprise. Far from wishing the disappearance of private property, the Church wishes it be spread widely and to all. Let everyone have the opportunity to own private property; let each person be a true capitalist!
"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" (Saint John XXIII, Mater et Magistra, nn. 114-115).
Economic Democracy, or Douglas Social Credit, by providing every person a Dividend, acknowledges that every individual is a true capitalist, the owner of a capital and the co-heir of natural resources and technological progress.
This Dividend is justified based on two factors: the inheritance of natural resources and the inventions of past generations. This is exactly what Saint John Paul II wrote in 1981 in his encyclical Laborem Exercens on human labour, n. 13:
"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. In working, man also "enters into the labor of others".
A double heritage, therefore, not only of natural resources, God's gift to all mankind, but also of progress and inventions. In his 1991 encyclical Centesimus Annus, Saint John Paul II wrote (n. 32).
"The present historical period has placed at the disposal of society new goods that were completely unknown until recent times. This calls for a fresh reading of the principle of the universal destination of the goods, the earth, and makes it necessary to extend this principle so that it includes the latest developments brought about by economic and technological progress.
The Church indicts capitalism because not every human being can access the minimum of material goods to allow a decent life. Even in advanced countries, millions are hungry. The principle of the'universal destination of material goods'is not adhered to in the present system. There is plenty of production but distribution is deficient.
Today, the instrument that allows for the distribution of goods and services is money. It is therefore the monetary system that is at fault in capitalism.
The evils of the capitalist system are not due to its endorsement of private property and free enterprise. The evil is from the financial system in place. This financial system dominates instead of serves and thereby vitiates capitalism. Pope Pius XI wrote: "Hence, it is evident that this system [capitalism] is not to be condemned in itself. And surely it is not of its own nature vicious" (Quadragesimo Anno, n. 101). Yet, Pope Pius XI added that it has been vitiated.
The Church does not condemn capitalism's productive system but rather what Saint Paul VI described as "the calamitous system that accompanies it".
"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" (Populorum Progressio, n. 26).
The financial system does not accomplish its function and purpose. It has been diverted from its goal which is to provide goods in order that needs be met. Money should be nothing more than an instrument to distribute goods; a symbol that allows access to products, like a system of accounting.
Money should be an instrument of service, but by appropriating control over its creation, bankers have made it an instrument of domination. People, governments, businesses and corporations cannot survive without money. All must submit to the conditions imposed upon them by the banks to obtain money. This establishes a dictatorship over economic life. Bankers have become the masters of our lives, as Pius XI rightly pointed out in Quadragesimo Anno (n. 106).
"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."
No country can repay its debt in the present system, since all money is created as a debt. Money only goes into circulation as a loan from a bank, bearing interest. Each time a loan is paid back to the bank, this amount of money ceases to exist; it is withdrawn from circulation.
The fundamental flaw in this system is that when banks create new money in the form of loans they ask borrowers to pay back more than the bank originally created. Banks create the principal but not the interest. As it is impossible to pay back money that does not exist, the only remaining solution is to borrow more money in order to pay this interest and thus the accumulation of unpayable debts.
The creation of money as debt by banks is how their will is imposed on society and how banking controls 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" (Saint John Paul II, Sollicitudo Rei Socialis, n. 37).
Since money is in reality a social instrument, Douglas Social Credit proposes that money be issued by society and not by private bankers for their own profit. Pope Pius XI stated in Quadragesimo Anno, n. 114: "For certain kinds of property, it is rightly contended, ought to be reserved to the State since they carry with them a dominating power so great that cannot without danger to the general welfare be entrusted to private individuals."
We have just seen that the Church's magisterium, through various papal statements, calls for a reform of financial and economic systems so that they may be placed at the service of humanity. The Church therefore presents the principles, but does not offer technical solutions, as this is not its role. On the other hand, it is the role of all the faithful, of all people of good will, to apply these principles in a concrete way in society, to work to find concrete solutions and to establish an economic system in accordance with the teaching of the Gospel and the principles of the social doctrine of the Church.
However, to our knowledge, no other solution would apply the social doctrine of the Church so perfectly — and correct capitalism of its financial vice — as the economic democracy of Scottish engineer Clifford Hugh Douglas, also known as Douglas Social Credit.
That is why Louis Even, a devout Catholic who was not lacking in logic when he discovered Economic Democracy, or Douglas Social Credit, did not hesitate for a moment to become the great advocate of this solution. To this end, he founded the MICHAEL magazine, often highlighting in his articles the extent to which Economic Democracy would perfectly apply the social doctrine of the Church, whether it be the right of all to material goods, the end of unpayable debts for countries and individuals, or respect for the environment.
(Note: on this last point, read the article "Economic Democracy Would Put an End to the Waste of Resources" in the May-June-July 2025 issue of MICHAEL, which comments on Pope Francis' encyclical Laudato Si.)
Clifford Hugh Douglas once said that economic democracy could be summed up in two words: applied Christianity. Another person who believed that Social Credit is applied Christianity which would perfectly apply the Church's teaching on social justice is Father Peter Coffey, Doctor of Philosophy and professor at Maynooth College in Ireland. Here is what he wrote to a Canadian Jesuit, Father Richard, in March 1932.
"The difficulties raised by your questions can be met only by the reform of the financial system of capitalism along the lines suggested by Major Douglas and the Social Credit School of credit reform. It is the accepted financing system that is at the root of the evils of capitalism. The accuracy of the analysis carried out by Douglas has never been refuted. I believe that, with their famous price-regulation formula, the Douglas reform proposals are the only reform that will go to the root of the evil."
An economic system will be good or bad depending on whether it applies the principles of justice taught by the Church. Some will say that the Popes have never publicly approved Economic Democracy or Douglas Social Credit. In fact, the Popes will never publicly approve any economic system, as that is not their role. However, they can say that a particular solution is not contrary to the teachings of the Church.
This is what happened in the province of Quebec. When Louis Even began spreading Douglas Social Credit principles in French Canada in 1935, one of the accusations spread by the financiers was that Social Credit was socialism or communism. So, in 1939, the Roman Catholic bishops of Quebec commissioned a committee of nine theologians to examine the Social Credit system in reference to the Social Doctrine of the Church and to give an opinion as to whether it was tainted with socialism or communism. After considerable deliberation, the nine theologians found that there was nothing in the Social Credit doctrine contrary to the teachings of the Church, and that Catholics were free to adhere to it without danger. Here are excerpts from their report:
The Commission first delimited the field of its study.
"The only question under study is the following: Is the Social Credit doctrine, in its basic principles, tainted with Socialism and Communism, doctrines the Church has condemned; and if so, should this doctrine be regarded by Catholics as a doctrine that cannot be admitted and even less be spread?"
The Commission then formulated into propositions the basic principles of Social Credit.
"The aim of the Social Credit monetary doctrine is to give to all and each member of society freedom and economic security which the economic and social organism can secure. To that end, instead of reducing production to the level of purchasing power through the destruction of goods or restrictions on work, Social Credit wants to increase purchasing power to the level of the productive capacity of useful goods."
To which end, it proposes that:
1. The State must take back the control of the issuance and volume of money and credit. It will exercise it through an independent commission possessing the authority required for this purpose.
2. The material resources of the nation, represented by production, constitute the basis of money and credit.
3. At any time, the issue of money and credit must be based on the flow of production, in such a way that a sound balance is constantly kept between production and consumption. This balance is ensured, at least partly, through a discount, the rate of which would necessarily vary with the fluctuations of production.
4. The present economic system, thanks to the many discoveries and inventions that favour it, produces an unexpected abundance of goods, while at the same time reducing the need for human labour, therefore creating permanent unemployment. An important part of the population is thus deprived of any power to purchase goods made for it, and not only for a few individuals or groups. So that all may have a share of the cultural inheritance bequeathed by their forefathers, Social Credit proposes a dividend, of which the amount is determined by the quantity of goods to be consumed. This dividend will be given to every citizen, whether he has other sources of income or not.
Now, we must see if there are any traces of Socialism in the propositions mentioned above.
Concerning Paragraph I (the issuance of money): This proposition does not seem to include any Socialist principle, nor consequently be contrary to the social doctrine of the Church. This affirmation is based on the following passages of the Encyclical Letter Quadragesimo Anno:
For certain kinds of property, it is rightly contended, ought to be reserved to the State since they carry with them a dominating power so great that it cannot without danger to the general welfare be entrusted to private individuals."
And Pope Pius XI goes on: "In the first place, then, it is patent that in our days not alone is wealth accumulated, but immense power and despotic economic domination is concentrated in the hands of a few, and that those few are frequently not the owners, but only the trustees and directors of invested funds, who administer them at their good pleasure.
"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."
To want to change such a situation is therefore not contrary to the Social Doctrine of the Church. Money being, in the Social Credit system, only a means of exchange, of which the issuance is strictly regulated by the statistics of production, private property therefore remains intact; moreover, the allotment of money and credit could even perhaps be less determined by those who control it. To reserve for the community the control of money and credit is therefore not against the social doctrine of the Church.
The Commission therefore answers in the negative to the question: "Is Social Credit tainted with Socialism?" The Commission cannot see how the basic principles of the Social Credit system, as explained above, could be condemned on behalf of the Church and of her social doctrine.
The financiers were not pleased with the theologians' report, and in 1950, a group of influential businessmen asked a bishop, Most Rev. Albertus Martin of Nicolet, Quebec, to go to Rome and obtain from Pope Pius XII a condemnation of Social Credit. Upon returning to Quebec, the Bishop told the businessmen: "To get a condemnation of Social Credit, Rome is not the place to go to. Pius XII said to me: 'Social Credit would create, in the world, a climate that would allow the blossoming of family and Christianity'."
Alain Pilote has been the editor of the English edition of MICHAEL for several years. Twice a year we organize a week of study of the social doctrine of the Church and its application and Mr. Pilote is the instructor during these sessions.
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