A few questions and the principles of Economic Democraty

Written by Louis Even on Monday, 01 August 2022. Posted in Social Credit

by Louis Even, 1964

When we write about Scottish engineer, Clifford Hugh Douglas, and his book, Social Credit (also known as Economic Democracy, and Douglas Social Credit), be assured we are addressing genuine Social Credit, not the control system developed by the Communist Party of China. Neither are we referring to political parties which called themselves Social Credit.

Questions

We have been teaching about Douglas Social Credit for many years in our French, English, Polish and Spanish editions of the magazine, Michael. Even so, we are asked questions such as the following:

You will deliver a monthly Dividend to each citizen. How will these Dividends be financed since there is no taxation in a Douglas Social Credit economy?

If everybody receives a Dividend, and if this Dividend is sufficient to ensure a decent standard of living, will there be people still willing to work?

As public projects and the Dividend will be financed by newly created money, will this new money increase the volume in circulation and therefore cause runaway inflation? Will it not cause money to lose its value? What will happen with personal savings and pensions?

You say that money is created by the private banking system in every country in the world. When a Douglas Social Credit system is established in a nation, its money will no longer be created by private banks. Will the country still be able to trade with other nations, and will its money be accepted by others?

What will happen to commercial banks in the new Douglas Social Credit system? Will banks be nationalized, or eliminated altogether?

Answers

These questions, and others, have been asked and answered many times in past issues of MICHAEL. However, they are still asked by people who encounter Social Credit for the first time, and people who do not understand the proposed system because their understanding is distorted by the framework of the present financial system.

First, Douglas Social Credit financial principles are incompatible with the present financial system. This does not mean that Social Credit would do away with the existing system in its entirety. It would keep much of it but the system will need to be purged from the addled philosophy and practices that poison it.

The present financial system subordinates the possibilities of production and distribution to finance while Douglas Social Credit subordinates finance to the possibilities of production and to the population's needs.

Consider this example: a town needs a new school. The present financial system asks the question: "Can we find the money to build the school? If so, let's build it; if not, we will have to do without the school."

A Douglas Social Crediter asks the question differently: "Do we have the physical means to build the school? If not, we will obviously have to do without it, but if we do have the physical means (like materials, know-how and labor), we will build it. What about the money? The money will be issued for new production as it is needed."

As for the distribution of goods, the same reasoning applies. There are goods, on the one hand, and needs, on the other. The present financial system asks: "Are those who have needs able to pay for goods? If so, they can obtain them. If not, the goods will remain on store shelves even as needs remain unmet." Douglas Social Credit explains it like this: "Goods are made to fulfill human needs, so people with needs MUST have the required money to acquire the goods."

Re-imagine finance to be in the position of a servant, and then one can understand our system. Those who want the financial system to keep its position of control will fail to grasp the Douglas Social Credit economic principles, however.

Which group is correct? Those who defend the present financial system, who reason and make decisions only according to the amount of money available? Or do Douglas Social Credit advocates have the answer? They reason from the basis of what is physically possible and ensure money is delivered to achieve this end.

Which one respects the fundamental rights of each human being? It happens that human beings have fundamental rights. For example, a newborn child has the right to live, a right which must be recognized and respected until natural death. Which group — the advocates of the present system, or Douglas Social Credit advocates — offers the best chance to exercise this basic right? The right to live necessarily requires access to the necessities of life. Which of these two positions offers each individual the best chances of obtaining life's necessities?

A few principles

The Fathers of the Second Vatican Council wrote, in the Constitution on the Church Gaudium et Spes (n. 69): "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."

Governments, bankers and economists did not create any earthly goods. So it is not their business to establish, approve, or justify rules that ignore or deny the'universal destination of earthly goods'created by our Heavenly Father. God has excluded no one from the right to a share of earthly goods. However, in the current system, purchasing power and paid employment must coexist even while those not working represent a good portion of the population, including children, housewives, the sick and elderly, the unemployed, etc. These people are overlooked presently but would be included in our system.

Pope Pius XII described it clearly on June 1, 1941 in a radio address: "Material goods have been created by God to meet the needs of all men, and must be at the disposal of all of them, as justice and charity require.

"Every man indeed, as a reason-gifted being, has from nature the fundamental right to make use of the material goods of the earth, though it is reserved to human will and the juridical forms of the peoples to regulate, with more detail, the practical realization of that right."

Do the present juridical forms facilitate the practical realization of the right of each and everyone to a share of earthly goods? The Douglas Social Credit financial proposals, through a Dividend guaranteed to each individual, would implement this right in a direct way, excluding no one whether one works in production or not.

The right of all to a share of earthly goods is a right that every man has from nature, as the Pope said. This right is not tied to belonging to any group, since it is an individual right. No conditions or legislation can suppress this right; it is imprescriptible, as Pope Pius XII stated in the same address mentioned above:

"Such an individual right cannot, by any means, be suppressed, even by the exercise of other unquestionable and recognized rights over material goods."

Even the property rights of those who own the means of production cannot contravene the individual right of each person to a share of earthly goods.

Douglas Social Credit recognizes and strengthens private property but it also emphasizes its social role. Our mechanism of distribution, a Dividend distributed to each citizen, allows goods to reach those who need them. No one would be harmed. Even producers, whose main objective is the sale of their goods, would be winners.

Goals and methods

The social and economic sector today suffers because of the confusion between goals and methods. We see goals confused for methods, and vice-versa.

This is the case, for example, of those who think we are created to be employed in economic activities. On the contrary, it is economic activities that exist to serve man, and not the opposite. When advancements are made in the efficient production of material goods to satisfy human needs with a minimum of human labor, it is all the better. There are other human activities that are superior to making a living, and if people have more leisure time to devote to these other activities, we must bless God for having allowed such progress.

Similarly, man does not exist for production, but production for man. It would be folly to persist in over achievement in production if all human needs were satisfied. Such a strategy would waste resources and stimulate wanton materialism by creating bogus needs for producers to fulfill. Our true goal is heaven, not senseless consumption.

A "full-employment" policy is another confusion of goals and methods. The purpose of industry is not to supply jobs, but to supply goods. Employment is part of the equation only as a method, not as a goal. If production can be done with less human labor, while maintaining the flow of goods, it is also a good thing, since man is then free to devote his time to pursuits of his own choosing.

To say that making money is a goal in itself is incorrect. Yet, it is the greatest heresy of the present economic system. One invests capital in what will yield the biggest monetary return rather than in what will satisfy our basic needs. If there is more money to be made in alcohol and poison, investments will go to industries that produce alcohol and poison. Workers abet this confusion by seeking employment where the pay is best even though the things produced are useless or even harmful and even though they then help monopolies grow and expand monopolistic strangleholds.

To harness purchasing power to paid work is also to forget the goal of income. Income supplies purchasing power which, in turn, is a method to allow production to achieve its goal, which is the satisfaction of the needs of all human beings.

When one talks about international trade, how many so-called educated people confuse goals and methods? They lose sight of the purpose of exportation, which is to allow a greater variety of goods for the population of all the countries involved. Those who claim that the economy of a nation is successful if the nation's exports are greater than its imports confuse money and real wealth. Real wealth is actually goods. If more goods leave our country than enter, it represents a literal impoverishment for the nation, since there are less products available for the population.

A few other notions

To be able to understand Douglas Social Credit, one must also admit a few basic notions that are almost totally ignored in the present system.

First, the notion that money, whatever forms it may take — pieces of metal, paper, bank accounts (and now, data in computers) — has a social function, because it is accepted by everyone, not because of its intrinsic value, which would be only the value of metal or paper. Money has a social function because, for each monetary unit — one dollar, for example — one can obtain, up to this sum, any good or service offered on the market, goods issued from any factory, any farmer, produced by anybody, and professional services of any type. Money can therefore mobilize, according to the whim of those who have some, the productive capacity of the nation in any sector.

However, money is not the fruit of spontaneous generation. It begins somewhere and is created somewhere. Even the money that is presently in circulation has to begin somewhere. Every increase in the money supply of the nation begins somewhere. Wherever this money is created, and by whom it is authorized to be created, one question always arises: To whom does money belong when it is created?

To this important question, Douglas Social Credit replies: "Money belongs to society."

What individual, what group, what private institution can, from its own authority, pretend to own all that is produced in the country? Only society, as a whole, has this right. Only society, through the government that represents it, can issue money, the claim on goods.

Everybody knows today that it is not the government that creates money. Anyone who has studied the subject knows that all new money is issued by the banking system in the form of loans.

When a bank creates financial credit for a borrower, it gives him a claim on the percentage of national production that corresponds to the amount of a loan. The bank considers this issue of financial credit as its own property, since it lends it on its own terms. On what authority can the bank give a borrower claims on the work and products of others?

Money, or financial credit, is the property of society as a whole. This is not the case in the present system. On the contrary, it is society today that must pay the bank for the use of its own financial credit, to obtain the permission to use its own productive capacity!

Clifford Hugh Douglas, the founder of the Social Credit school, wrote in Economic Democracy (p. 120):

"There is no doubt that the first step towards dealing with the problem is the recognition of the fact that what is commonly called credit by the banker is administered by him primarily for the purpose of private profit, whereas it is most definitely communal property... The banking system has been allowed to become the administrator of this credit and its financial derivatives with the result that the creative energy of mankind has been subjected to fetters which have no relation whatsoever to the real demands of existence."

Once this is understood, one has every reason to be shocked to see citizens pay twice, and even more, for schools and other public systems made by the work of society as a whole because of interest payments charged by lenders.

The present financial system has been accepted with all its terms, without asking if it achieves the real purpose of a sound system. This purpose should certainly not be to control, rule, or dictate, but to serve; to serve the economic system and supply a practical way to mobilize the productive capacity of the nation, to satisfy the needs of the consumers, and supply a way to distribute goods efficiently to all who need them.

Since it is the consumers themselves who know best their needs, it is they who must dictate to the system of production what to do. They can do it efficiently only if they possess the financial means to express their needs. They express their needs when they choose products, but they can make this choice only as long as they have sufficient purchasing power.

Douglas wrote about this in Credit Power and Democracy:

"The business of a modern and effective financial system is to issue credit to the consumer, up to the limit of the productive capacity of the producer, so that either the consumer's real demand is satisfied, or the producer's capacity is exhausted, whichever happens first."

One notices today that neither case exists. The demand of the consumer is not satisfied, and the producers'capacity is not exhausted; the financial credit issued to workers did not reach that limit. Douglas Social Credit would solve this problem by issuing a Dividend to all.

As for the methods to apply the Social Credit principles, they may vary. The point is that they take into account the principles mentioned above. One must also take into account what already exists, and what we want to achieve, and see to it that the results required be obtained with a minimum of changes and upheavals, having constantly in mind the goals and objectives of these changes.

About the Author

Louis Even

Louis Even

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