The economic problem of our ancestors, who had but human labour at their disposal, animal strength, and a few simple tools, was to produce enough to sustain themselves. Real poverty, scarcity, was a constant threat. In the twentieth century, with a developed continent, with the forces of nature and of applied science at our disposal, the immediate problem is to find the way to distribute an abundant production. The presence of realized abundance, or easily realizable abundance, should confer to all Canadians the following political rights in the economic domain:
1) Life – The right for each individual of being able to obtain the necessities of life (food, clothing, lodging) without having to resort to public charity.
2) Freedom - The right for each individual to choose the kind of occupation which he is best suited for, instead of being compelled to accept any work that he can find.
3) Pursuit of happiness - The right for each individual to leisure, with his personal initiative to material, aesthetic, intellectual, or spiritual activities.
The possibility to guarantee these rights rests on the undeniable possibility today of producing all the necessary things to its fulfillment while using but a fraction of available human labour.
What is Social Credit?
Social Credit is a Movement whose goal is to allow the public consumer to benefit from the full production capacity of useful goods.
Unemployment, of which people suffer from today, is not the result of the saturation of consumers' needs, nor of the exhaustion of the productive resources, but only from the non-distribution of products and services.
The production goes forward, but in accordance with the orders it receives. The orders are conditioned by the purchasing power of the consumer. This purchasing power depends on the money in the hands of consumers who have needs to satisfy.
Social Credit presents a studied, polished and protected plan to make up, at all times, the gap between the prices of products offered to consumers and the money between the hands of the consumers who want these finished products for themselves. This is a system, therefore, which does not admit inflation nor deflation, but which automatically and mathematically upholds an equilibrium between production and purchasing power. It subdues money, and puts it at the service of man. It compels it to fulfill its function: the selling of production, the satisfaction of the consumer, as far as the natural and industrial resources permit.
As well as this equilibrium, Social Credit also includes, in its proposals, the doing away with poverty, and the social guarantee of the individual's economic security.
No one will deny that Canada is able to easily produce enough goods so as to provide an honest subsistence to each and everyone. The physical possibilities exist; only the financial possibilities are lacking. So it is finance that does not serve the Canadians, and this is where one must find a remedy. As Henry Ford remarks, the products are there, but the dollars to buy the products are lacking. The producers of goods fulfill their role, but the producers of dollars wrongly carry out theirs. There is an admirable technique in production, but there is none in the monetary system. The monetary system always, says the great American industrialist, is outdated, ineffective, and it is high time to change it.
Money is not the wealth; it is only a claim on wealth. The wealth comes from human or mechanical labour applied to the natural resources. Wealth is not lacking in Canada, but it could be much more abundant since there is much non-utilized human and mechanical labour. The money comes from manufacturers of money, and because there is a shortage of it, or because it is not where it should be, the claims on wealth are lacking. The wealth does not sell, production stops, and poverty reigns amidst plenty.
Money is composed of metallic pieces, of bank notes and of credits or bank deposits put into circulation by cheques. Today, cheques respond for more than 95 percent of business transactions. Cheques simply shift credits in bank ledgers.
The deposits in the banks therefore form the substantial part of money in circulation. These deposits originate through the credits granted by the banks, under the form of loans, discounts, overdrafts, or bond purchases. The banks are the creators of money. But they destroy this money by the recalling of loans and the reduction of overdrafts. If the manufacturing goes faster than the destruction, the money in circulation increases; if the destruction goes faster than the manufacturing, the money supply decreases. There is no equilibrium between production and money because the banks do not aim for equilibrium, but their particular profit.
Moreover, advances are made to production, but the flow of money from production to consumption does not go as fast as the invoice of prices, which goes at the rate of production.
It is impossible for anyone, whether he be well intentioned, to manage the present monetary system in accordance with the public's needs and the production capacity to satisfy these needs.
The nationalization of banks would not correct anything by itself. The changing of the controller is insufficient; one must change the policy which governs control. In other words, it is necessary that control pursues another end, that it looks for a constant equilibrium between prices and purchasing power.
The National Credit Office
Money cannot be controlled socially, in accordance with the facts of production and consumption of the country, but on a national level, in accordance with a national accountancy. It is therefore a complete necessity to have a national monetary body, like we have a judicial body to administer justice.
The private banks can continue their operations in view of profits, in return for services rendered, but must not any more have the right to increase or reduce the money supply. This function must exclusively be a matter for the national monetary body, the National Credit Office.
The National Credit Office would list the facts of production and of consumption, and act in such a way as to issue money for all of the production to sell, as long as it responds to needs. It would enjoy the power to reach this end, which it is responsible for in front of the nation.
The proposed technique to reach the double end of Social Credit - equilibrium of prices and of purchasing power, and the doing away with poverty – consists of two methods of distributing new money: the compensated discount and the dividend.
The compensated discount
The compensated discount is aiming to put prices and purchasing power in equilibrium by creating and distributing money without inflation. The money from the compensated discount would finance a reduction of the price in favour of the consumer.
If the available production is $12 billion, and the purchasing power which faces it is only $9 billion, the National Credit Office decrees a 25 percent reduction on all prices, a discount on all products at the time of the sale to the ultimate consumer. That is to reduce prices to the level of the purchasing power. The discount is compensated to the retailer, that is to say, the Credit Office provides him the money that he sacrificed by the discount. This money is created by the Credit Office exactly in the same manner as today's bank money. This new money in reality favours the consumer, but provided that he buys; it goes to the retailer, provided that the sale was made. This is money which sells production by lowering prices, and which satisfies everyone: the buyer, the retailer, and the producer who is only too pleased to sell his production.
The national dividend
The national dividend, as its name implies, is the distribution of a dividend, of a sum of money representing a surplus or the revenue from a capital, to all members of society – therefore to each man, woman, and child in Canada.
This dividend is based on the existence of the cultural heritage, or social capital, belonging to everybody, this capital consisting in the discoveries and inventions of science. The part this capital is playing in production is greater and greater, while the part of human labour is smaller and smaller. Labour has to be rewarded, but also the capital, even the social capital. We are all heirs of the accumulations of past generations. We are all capitalists, and we all have a right to at least a sufficient dividend to shield us from poverty.
In order to understand the possibility of the application of the monetary system advocated by Social Credit, one must not lose sight of the fact that the world has entered into the era of abundance; that, if there are paupers, it is not because there are rich people, but because abundance is not distributed. Therefore, there is no need whatsoever to take away from the rich to give to the poor; we just have to put some technique into the monetary system, and not to content ourselves with saying that money is made for man, but to establish a system that necessarily puts it at the service of man, of all men.