In 2002, Frances Hutchinson, who currently chairs the Social Credit Secretariat (formed in 1934 by Clifford Hugh Douglas to promote study and debate on the subject of Social Credit), wrote a booklet, “Social Credit? Some Questions Answered”. Here are some excerpts:
by Frances Hutchinson
Social credit is a fact of economic life. Money represents society’s credit, presently created as debt to be redeemed through paid employment in the market economy. All economic agents who ‘make’ money, whether as bankers, commercial interests or wage and salary earners, remain in debt to society and the natural world for the real goods and services supplied to them by right of their possession of money.
Money takes the form of the legal endorsement of society’s credit. Once this is understood, the next stage is to examine ways in which individuals and groups have sought to retain and regain control over their own work and the intellectual and natural resources inherited from past generations through gaining control over their finances. Freedom from wage and debt slavery is an essential first step to regaining the fundamental conditions of economic democracy.
Although social credit economics has been in the public domain for eighty years, it has been effectively silenced by a mass media and an educational system locked in the illusion of technical ‘progress’ perpetrated by the purveyors of a vast array of consumer products. The necessity to produce in order to consume, to buy all the ‘right’ products so as to keep up with the latest trends, has overtaken virtually all other reasons for existence. Today social relations are overwhelmingly mediated by money, with all political and economic policy decisions being dependent upon the availability of money.
Although money is a socially engineered phenomenon, the people who do the work of society, and who stand to suffer as the natural environment disintegrates, have no control over the money creation processes which dominates their lives... It’s actually the global financial system that’s in charge. Much of the dysfunction in our economic system can be explained by the fact that the ruling financial elite has largely detached itself from anything real. It pursues its own independent agenda, and in the course of doing so is wreaking havoc on human societies everywhere.
1. What is ‘social credit’?
Social credit is the wealth of society, comprising the resources of land, labour, capital goods and equipment, and the skills and knowledge of how to use those resources. Social credit is the real wealth of the community, but is currently controlled by private financial interests. Since the 1920s the popular Social Credit movement has sought to create local economic democracy through promoting study and research into how the money system works. The concept of economic democracy is fundamental to social credit economics. Political democracy, the right to vote, is weakened by the absence of economic democracy, the right to income security for all, independent of a private or state employer.
2. How did the Social Credit movement originate?
Social credit economic theory derives from the writings of Clifford Hugh Douglas (1879-1952). In the development of his ideas, Douglas worked closely with Alfred Richard Orage (1873-1934), editor of the weekly paper, The New Age. Douglas'earliest books, Economic Democracy, Credit-Power and Democracy and The Control and Distribution of Production were first serialised in The New Age. Douglas also wrote Social Credit and The Monopoly of Credit, together with a host of smaller booklets, pamphlets and articles. He gave evidence before the Canadian Bank Enquiry in 1923 and the Macmillan Committee in 1930, on the latter occasion being interviewed by John Maynard Keynes.
3. What is the social credit idea simply stated?
Modern economies in the West have developed technologies capable of producing enough to meet the needs of all the people of the world. Through social credit economics it becomes possible to ensure that all citizens in each country have secure access to the necessities of life without any conditions or obligations being attached to this right. Society owes every human being the right to livelihood, with the time to enjoy the fullness of spiritual, emotional and cultural life.
Through the implementation of social credit economics, consumption and production can be brought into a balanced relationship such that production keeps pace with consumption. Income security can offer sufficiency for all without the necessity to submit to drudgery, or to engage in fraud and corrupt speculative practices. It eliminates the need to produce armaments and consumer goods designed to become obsolete and discarded merely in order to maintain incomes through employment.
4. What is the'Credit Authority'or'National Credit Office'?
Any change in the money-creation process would have to be endorsed in statutory law. Noting the existence (at the time he was writing) of a National Debt Office, Douglas suggested a National Credit Office might provide a means to keep account of the nation's real wealth. By carrying out detailed assessments of the nation's real assets and potential to create wealth, the National Credit Office would calculate the nation's real credit available for allocation to projects and to individuals.
5. What is the'national dividend'and why might it be desirable?
The payment of a national dividend, or basic income to all regardless of past, present or future employment, would enable every citizen to claim a birthright share of the common wealth of the community. It would be paid to all, rich and poor, employed or unemployed, as is presently the case with child benefits. Whatever their circumstances, all would have a basic income security.
It would carry several major advantages. By eliminating means tested benefits, grants, subsidies and various periodical payments, bureaucracy would be vastly reduced, saving much time, frustration and stress. The technologies already exist to produce a sufficiency of goods and services for all with minimal labour inputs. Nevertheless, the financial necessity to'work'for a wage or salary requires a constant stream of production and consumption, no matter how environmentally wasteful, in order that incomes can be generated. Income security would offer the possibility of producing and consuming fewer goods while enjoying greater leisure and greater satisfaction at the chosen forms of work.
A national dividend or basic income would be technically feasible, and could be introduced tomorrow, given the political will. It would not, however, be acceptable under the financial status quo.
6. Where would the money come from?
Although the national dividend would be paid over and above any wages or salaries being earned, it would not be derived from a tax on those incomes, nor would it be drawn from indirect taxation. The present system would be replaced by a new system of accounting, whereby the National Credit Office would calculate increases in the nation's real wealth – its ability to produce goods and services. By endorsing the creation of new finance credit, the National Credit Office would liberate producers and consumers from finance-dominated decisions about their use of resources.
Under the present system, money is created and then lent out for a fee by the banks and financial systems which currently dominate economic policy formation. Complex calculations take place all the time. However, they are based purely on the financial viability of transactions, bearing only a very tenuous relationship with the living world of nature and the community which supports the financial system and all economic relations. As a result, prices are set on grounds of financial viability, based largely on the necessity to recoup past financial costs. The system accounts energy and materials consumed as added wealth or value.
7. Is it possible to adapt the financial system?
Another way of looking at the financing of economic activity is to regard it as a'ticket system'designed to allocate existing wealth to those who need it. The aim is to regulate production according to consumer demand without causing inflation. By regulating the flow of buying power in relation to the flow of actual and potential production, people are enabled to act as economic agents without the need for ever-expanding economic growth punctuated by cyclical booms and slumps caused by the debt-finance system. Instead, finance is advanced for local production through local Producers'Banks.
Nationally, the total buying power available is matched to the total prices of goods ready for sale through calculating costs of consumption of energy and materials, and depreciation, a task undertaken by the National Credit Office. Local Producers'Banks and the monitoring of prices through the'just price'replace the necessity for new investment to be constantly created through debt finance so that wages and salaries can be paid out to consumers in each successive period.
8. What changes would Social Crediters recommend?
The financial system is inherited from the past. Since it evolved to meet the requirements of an early and expanding industrial system, it does not necessarily match with present circumstances. A sensible course of action would be to examine how and why the system operates as it does at present. If financial debt is found to be unduly restrictive in social policy determination, it should be possible to introduce a debt-free money system. Nothing is set in tablets of stone. Relatively simple alterations to the credit-accountancy system could ensure that the task of the banker is limited to bookkeeping of the nation's production and consumption under conditions of economic democracy.
9. What is money, and how is it created?
Money has become central to virtually every form of social interaction throughout the UK and across the world. Nevertheless, although it is so important in society, it has become almost a heresy to ask what money is, and how it operates. In economic theorising the amount of money in the economy is assumed to be fixed. According to orthodox theory, banks do not create money: they merely store savings deposited with them by their customers, lending out those savings to firms in search of investment.
Hence interest is charged by the banks in respect of the loans they make for investment, and interest payments may be made to savers for the money they have saved and deposited. In this scenario, a government can regulate the economy through central bank adjustments to interest rates. However, examination of encyclopaedias and banking literature leads to the conclusion that in real life money is created as debt by the banks, for purposes determined by the local bank manager. Created by the banking system, money is a purely social construct representing access to society's wealth.
10. Is money created by people going to work?
Real wealth is created through work. It takes the form of goods and services which may be used by the maker or exchanged for money. However, work does not create money. A field may be planted up with potatoes and tended during the summer. When the farmer lifts the potatoes s/he will fill the sacks with potatoes, not money. If the sacks of potatoes are exchanged for money, that money must already have been brought into existence by somebody else. The farmer has not created it: that task is undertaken by bankers and financiers.
11. What, then, is money?
Virtually anything can be used as money so long as it is widely and generally accepted in exchange for goods and services in a particular society. Cowrie shells, cattle, cigarettes, beads, stones, feathers, precious metals, paper notes and blips on computer screens have all been used since ancient times in the settlement of exchange. As well as acceptability, durability and suitability for breaking into small measurable units have determined what a particular society has selected as its medium of exchange. Money represents a claim to the wealth of society.
The history of money is a fascinating story in itself, and there are many books on the subject. Round coins made from metals have been around since at least the twelfth century BC, and various forms of card and paper promises to pay have appeared within the last millennium, increasing in frequency since the seventeenth century.
12. What is the common cultural inheritance?
No individual can rightly claim a share of the proceeds of society because of the land, labour or capital they happen to own. This is because all production is social and collective. The basis of a community's wealth lies in a combination of naturally given resources and its common cultural inheritance which flows from the imagination, insight, invention, discoveries and learning built up over past generations, coupled with present collective effort. At best, the effort of an individual might amount to 5% of the total value of the output they create through their work. The other 95% represents the value of the common cultural inheritance without which there would be no output.
One individual may turn out a cog for a machine, using a machine already designed, in a building already built, having eaten bread already produced, and so on. No single item is of value without the total sum of items, designs, science, technologies and skills. The inheritance from the past belongs to the whole community, and cannot rightly be'privatised'by individuals or firms seeking to benefit at the expense of the common good. Furthermore, the common cultural inheritance only yields wealth through the'increment of association'.
13. What is meant by'the increment of association'?
Production is a collective activity. There is no such thing as the solitary hunter providing for all his needs from the cradle to the grave. We are human because we work collectively, rather than on a series of separate desert islands. If we were to attempt to provide all our own food, clothes, fuel, shelter and so on, our standard of living would be poor indeed. The survival of even the most materially simple societies is founded on the'increment of association'whereby tasks are shared and undertaken collectively. All members of society benefit from the cultural knowledge without which possessions, tools and machinery would be worthless. As technology has become more sophisticated, many of the physical labouring tasks such as the'hewing of wood and the drawing of water'have been taken over by machines. However, machines do not receive wages.