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Distribution Economics: Guiding Principles of Social Credit

Written by Louis Even on Wednesday, 01 January 2020. Posted in Social Credit

The previous article notes that “in the forty years between 1934 and 1974, Louis Even wrote an extensive and general survey of Social Credit that would require an entire encyclopedia to reproduce”. Mr. Even stated that the purpose of Social Credit was the distribution of abundance; that it was money in the hands of citizens which was lacking, not products. Following is the text of an article written by him in 1947 which explores the guiding principles of Social Credit economics.

Social Credit states that a truly humane political, economic and social system must seek to establish and maintain the rights of all individuals. Temporal, economic, financial and governmental institutions must serve the individuals and families that comprise society and not vice-versa.

The following paragraphs outline the principles that guide Social Credit economics. It is concerned more specifically with the economics of distribution and, more precisely, with the financial system that is required to support a distributive economy.

Earthly goods were created for all men

Earthly goods were created to meet the temporal needs of the entire human race, i.e. all men, not just some or certain classes of men. This does not mean that all men must be equally prosperous, but that all must have the ability to satisfy their basic needs. The means and methods by which goods are owned, controlled, produced or distributed can be said to be legitimate only if they are ordered toward achieving this goal; they are evil or impaired when they prevent this goal from being attained.

Providence has placed upon the earth, in one form or another, everything necessary to satisfy the normal needs of men, given cooperation and sound social organization.

The goal of economic activity

Economic activity is that which is concerned with adapting the goods of the earth to meet men’s temporal needs. Well-ordered economic activities must place goods within the reach of those who need them. In organized societies, economic systems exist to facilitate this goal.

Societies that are correctly organized exist for the benefit of their members. The very idea of association precludes the exclusion of anyone who belongs to the association. Associations must serve their members; members must not be expected to serve the association.

To provide goods to each and every person

A truly social economic system must therefore ensure that earthly goods meet the temporal needs of EACH and ALL members of society. According to Pope Pius XI,

“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” (Encyclical letter Quadragesimo Anno).

The share made available to each person must be sufficient to meet basic needs. Pius XI continued,

“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” (Ibid.).

To be truly humane, the economic system must not only ensure that goods are made available to each and every person, it must do so while respecting personal freedom. The system will be performing at a peak level when it succeeds in producing and distributing goods with a minimum of encroachment upon individual freedoms. Its highest perfection will be reached when it liberates people from material servitude and allows for the pursuit of a life of culture.

Social Credit advocates that a Dividend be distributed periodically to each citizen from birth to death. The Dividend, based on modern productive capacity and natural entitlement, would allow everyone belonging to an organized society to draw upon their country’s available production.

Changing what needs to be changed

If the present economic system is faulty and fails to provide every person with a proper share of the goods that nature and industry have to offer, then it is the duty of society’s government, responsible for the common good, to change or correct it. After all, systems are made for men and not men for systems.

System change must be accomplished swiftly and with the least infringement on legitimate personal rights. Social Credit would restrict and circumscribe the evil in today’s system, changing only what was necessary and leaving the rest unaltered. To this end, Social Credit has clearly defined the terms ‘production’ and ‘distribution’. It further distinguishes between the ‘physical means’ and the ‘financial means’ necessary to ensure the successful distribution of goods.

No longer a production problem

Modern productive capacity is almost limitless in volume and variety. In peacetime, products are available or can be made readily available in large quantities to respond to consumers’ needs. Today’s economic problems are no longer about production but rather about distribution.

Private property and free enterprise have demonstrated the ability to provide goods and services in abundance. Nothing justifies denouncing or eliminating private property or free enterprise.

The satisfaction of human needs, not profit, must be the goal of production. Nevertheless, profit is a proven incentive. Removing this incentive could reduce productive output and harm consumers through imposed and avoidable privation.

A system capable of maintaining the incentive offered by profit, while guaranteeing the proper distribution of products, would serve both producers’ and consumers’ interests.

Social Credit supports free enterprise and the profit incentive but would keep profits within bounds through a Price Adjustment mechanism. Both the National Dividend and the Adjusted Price would allow an abundance of goods and services to be distributed to every consumer.

Today’s division of labour

In the modern world, no one produces all the goods necessary for their own subsistence, comfort and pleasure. Work is, more and more, partitioned and specialized.

The division and specialization of labour contributes to abundant production but it forces each producer to offer to the rest of the community the many products not required for personal use. Each consumer must obtain from others the goods they require for their various needs. From this fact there is an increased requirement for a means of distribution that is both flexible and functional.

In civilized countries money was instituted as a tool to facilitate the distribution of goods. In the hands of an individual, money is thus a claim to the variety of available products.

Production as the basis for money

The total of consumer credits must be equal to the amount of consumer goods that are available or that could readily be made. In a Social Credit system, money would be based on the products that respond to consumers’ needs rather than on a single entity such as gold, or on the self-interest of profiteers such as the private controllers of money and credit.

Since individuals cannot obtain products unless they have money, and since the goal of production is the satisfaction of the needs of all members of society, it follows that all of society’s members must have a minimum amount of money to buy a minimum amount of goods.

Money is presently distributed through salaries, dividends on capital investments, gifts and inheritances. The money thus distributed does not reach all members of society. Another means must be introduced which will allow each person to obtain a share of the goods available. This is one reason why Social Credit advocates that a periodic Dividend be issued to each person, from birth to death.

Solving conflicts in the workplace

Many of the conflicts that arise in the workplace are because salaries and wages are not sufficient for workers to obtain the goods needed to sustain their own and their families’ lives. Hence, there is a demand for higher wages. Yet, each salary increase results in an increase in the price of products that leads to an even greater insufficiency of purchasing power. Social Credit solves this problem through a National Dividend that increases the purchasing power of each citizen without adding to costs. Additionally, the Adjusted Price mechanism lowers prices without negatively affecting producers.

Production must be oriented to the consumer and everyone’s basic needs must first be met. For this, consumers must have a mechanism to pass on their demands to the system of production. Social Credit provides this mechanism via the National Dividend, which guarantees a regular income to all consumers and thus ensures consumers have effective demand.

Progress displaces labour

Mechanization, the application of science and improved techniques serve to increase the volume of products while decreasing labour’s contribution to production. In other words, more products are manufactured by fewer workers. Another means of distributing purchasing power must be devised to account for machinery’s replacement of labour during the course of production: Social Credit advocates the distribution of a National Dividend to all, whether employed in production, or not.

Modern production is primarily a factor of natural resources, social organization and applied science rather than a function of individuals’ labour. We consider these factors “commonly owned capital”. This very productive common capital must entitle each and every citizen to a Dividend. The Dividend is not a gift but an entitlement. Social Credit recognizes that

“All men, upon entering into the world, could effectively enjoy, in some way, the condition of being an heir of the preceding generations” (Jacques Maritain, Integral Humanism).

As long as production requires human effort, work must be rewarded. While advocating for a universal Dividend distributed to every person, Social Credit recognizes that wages or salaries will be paid to every employed person.

Wages and Dividends must complement each other in a ratio to yield the most favourable result. The incentive to produce must be preserved and goods must reach those who need them. This ratio remains to be practically determined but must allow all members of society, whether gainfully employed or not, to access a sufficient amount of goods to furnish an honest subsistence.

Work: an end or a means?

The goal of agriculture, industry and production, as a whole, is to create products, not to provide employment. Production is at its apex when it creates the most goods with the least effort, thus allowing the population to enjoy freely chosen activities which are neither paid nor materially rewarded. Social Credit rejects full employment and instead insists on full income! Social Credit disentangles income from work. In other words, work is not an end in itself but only a means to create products. If the end, i.e. products, can be attained without work, then work becomes obsolete. The mechanism by which products are claimed is money. After products are manufactured and await distribution, it is money, not work, that must be our focus.

Money, a social instrument

Since money is a claim to the goods and services derived from a nation’s public and private sources of production it must be considered a social instrument. Society, through its government, must rule over the creation, volume and circulation of money and credit. Social Credit would entrust these functions to a National Credit Office, responsible to elected representatives, whose mandate would include the adaptation of finance to the facts of production and consumption.

Governments must refrain from assuming responsibilities that individuals or lesser associations and groupings can accomplish. The systems of production and consumption must enjoy the maximum freedom compatible with properly understood social order and prosperity. Social Credit rejects government interference in production, transportation, sales and/or delivery activities. The National Credit Office would not interfere with production or consumption; rather, it would account for what is produced and consumed. Based on these calculations, it would deduce the amount issued to citizens as a National Dividend and as subsidies for the Price Adjustment on retail goods. Social Credit places finance at the service of production and consumption, not vice-versa.

Social Credit would not interfere in the manner in which individuals spend their money. One could choose to save money and spend it at a later date, for instance. Savings, however, must not cause products to accumulate and result in unemployment as is the case today. Instead, savings would benefit the entire community by allowing access to unsold products through a future decrease in retail prices.

Consumer needs must give production its direction and producers must not be permitted to create bogus needs through advertising. Under Social Credit, all new money will be injected directly into consumption. From the start, what is produced will be decided by consumers.

Money will thus gradually be restored as a tool of service rather than a weapon of domination. It will assume its rightful role as a mechanism of distribution and will cease being the end goal of production.

Teaching aspect of a sound system

Setting the economic system on the correct course by applying the Social Credit proposals will neither eliminate human passions nor their negative consequences. A well-ordered system teaches and supports goodwill and prevents exploitation of others. A disordered system, on the other hand, accentuates passions, smothers goodwill and creates despair. Privation caused because essential goods cannot be accessed lays a foundation for subversive ideas.

In the realm of politics and economics, Social Credit is the most effective weapon to curtail both communism and anarchy because it advocates for the economic security of all members of society while respecting personal freedom.

Money created by society

Social Credit entrusts the social management of money and credit to a National Credit Office that is responsible to the peoples’ representatives in government.

The National Credit Office would keep an account of production and consumption from which it would determine the country’s real capital assets, or Real Credit. These assets would be the basis for Financial Credit.

A nation’s assets are comprised of natural resources, the various means of production and its people.

The production of the different types of capital and consumer goods, an increase in population and imports add to the wealth of a nation.

A nation’s wealth is reduced by the consumption of goods, “wear and tear”, a decrease in population and the export of goods.

The total increase in wealth, minus the total reduction, yields the net enrichment for a given period.

The true enrichment in real wealth must be expressed by an equivalent amount of purchasing power, if production is to reach consumers.

A Dividend to all

Social Credit endorses the periodic distribution of a Dividend to all citizens from birth to death without exceptions or conditions.

The Dividend will be equivalent to the minimum that each citizen can expect to receive as a co-owner of a well-organized society that has an abundant production at its disposal. It is also the most direct way of ensuring that everyone receive their due share of the nation’s production. Modern societies can guarantee both a Dividend to all and wages to the workers

Consider the Dividend to be a return on the “commonly owned capital” which is shared by all members of an organized society. The amount of the Dividend remains to be determined, but in a nation in which production exceeds the population’s needs, it should minimally provide for basic necessities while providing ample reward to those who partake in work.

Price Adjustment (or Compensated Discount)

Social Credit advocates that an equilibrium prevails between the total retail prices of consumer goods and total purchasing power. A discount, or Price Adjustment, would be applied to retail prices. The amount would be determined by the ratio of total purchasing power to total production costs. The statistics for a particular period would be calculated by the National Credit Office and form the basis for a discount for the period that followed.

For example, if during a given month total production, as expressed by retail prices, was $10 billion and if during the same period all purchases totalled $8 billion, the Price Adjustment would be $2 billion, or 20 percent. Consumers would pay a total of $8 billion for $10 billion of products. Production would have succeeded in reaching its goal. Producers would proceed to obtain from the National Credit Office the $2 billion (20%) not received from buyers.

The Price Adjustment mechanism favours consumers but also benefits producers by facilitating the sale of products that could otherwise remain unsold. Reduced prices mean that retailers and producers would sell more goods. In response, the Credit Office would require that profit margins have limits. The net effect would be that production would be encouraged and inflation discouraged.

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