Social Credit operates with realities. It refuses to be hypnotized by ‘the halo’ with which finance has been surrounded.
The economic realities are, on one hand, production (not only the existing production, but the production immediately possible; the capacity for production) and on the other hand, human needs.
Social Credit gives priority to the realities over the financial representations that are not realities. The financial representations must faithfully conform to the realities. Social Credit accomplishes this feat.
Real Credit and Financial Credit
This is why Social Credit distinguishes between two terms: Real Credit, the reality, and Financial Credit, the representation.
The word ‘credit’ comes from the Latin word ‘credere’ and carries the idea of confidence. Even in everyday language, when we give credit to someone are we not saying we have confidence in that person?
Social Credit states that the Real Credit of a nation is what inspires confidence in that nation; confidence that one can live there without too much difficulty. The Real Credit of a country is its productive capacity, which is described as the ability to produce and deliver goods to meet the needs of the population.
Social Credit expects that Financial Credit will exactly represent Real Credit. It is therefore the productive capacity that must determine and drive the movement of finance. It is absolutely not correct that finance either commands, paralyzes or limits the capacity for production.
This is why Social Credit demands the establishment of an Office of Credit which would keep an account of national (or provincial) credit. Any production, whether of consumer goods or capital goods, would be recorded as an increase in wealth. All consumption (including destruction and depreciation) would be entered as a decrease in wealth. The change in the nation’s or province’s wealth would be calculated by a simple calculation: Production - (minus) Consumption = Net Wealth.
There are exceptional cases in which a country lives at the expense of another. Generally, however, production surpasses consumption and nations become more prosperous over time. It is therefore illogical to say that a nation is ‘going into debt’. Public debts are an absurdity.
When a country is increasingly prosperous, its citizens must certainly benefit. Social Credit recognizes this when it advocates a Dividend to all instead of debts and taxes to everyone.
Money without Inflation
The present financial system is vulnerable to inflation. Inflation means that prices increase.
As money is only created when a loan is issued, thereby creating a debt, it is essential that ways be found to extract from the purchasing public more money than was initially put into circulation, in order to repay the original debt plus the interest on the debt. Taxes are added to prices which serve to diminish purchasing power. Prices are increased all the way down in the productive process because not only the money to pay for manufactured goods must be recouped, but also the interest on loans must be conjured.
Social Credit would suppress this cancer, this ‘tumor on prices’, since production results in an increase in wealth, and not in an increase in indebtedness.
Prices paid by purchasers would be lowered. The basis for this feature is that the community must only pay for what is consumed; not for all that is produced.
For example, if the consumption of the entire population was only equal to three-quarters of that which was produced, purchasers would only pay three-quarters of the accounting prices. The National Credit Office would take responsibility for financially compensating producers so that their entire price was paid.
This means that the amounts included in prices, but which have not reached the hands of the public, or have been placed either in savings or investment rather than toward the purchase of the production, would be replaced or compensated by the National Credit Office to the benefit of consumers. This system would prevent the accumulation of products in the face of a population’s unmet needs. Additionally, the mechanism would reduce prices and therefore eliminate any inflationary pressure.
A Dividend to Everyone
The periodic Dividend distributed to each person in the nation is a central Social Credit feature. It, too, conforms with economic realities.
The abundance of modern production is increasingly the result of applied science, inventions and improvements in production techniques. These factors constitute a community good: a heritage increased and transmitted from one generation to the next. Modern production is less and less the result of the labour of one individual.
Expecting to distribute the ample production by way of the wages of human labour is therefore contrary to the facts. It is impossible. The money distributed as recompense for work will never buy the products whose prices contain other elements.
Seeking salary increases when labour input decreases (as in modern day production) changes the meaning of the word, ‘salary’. In these cases, salary increases include what should rightly be distributed as the Dividend (as the Dividend represents the fruits of progress rather than labour). The fallout is that the portion of the salary increase that should have been calculated as a Dividend is downloaded into prices, when its distribution as a Dividend would not have had this result.
Social Credit would distribute the Dividend to each person directly without a cost to industry. It would truly raise purchasing power.
In addition to recognizing the productive community capital we described earlier, the Social Dividend would at the same time satisfy papal teaching. Pope Pius XII stated: “Earth and its riches were created for all men.” This teaching is ignored by the present financial system with its method of distributing purchasing power.
Social Credit would thus apportion the gifts of nature and the goods of industry to the benefit of ‘all men’. Instead, the present system leaves the task to the taxation system, which is rife with graft and does not cure the disease.
From birth to death, the Dividend would represent a ‘fair share’ which would be distributed to each and every person. This share would be sufficient to at least ensure what is necessary for life.