Mr. Henry Raynel, of New Zealand, has been acquainted with the Social Credit philosophy for over 50 years, and upon our request, came to our Congress in Rougemont last September to give lectures on Social Credit. Part I and II (the ownership of money, the flow and cancellation of money) were published in our previous issues. Here is the third and final part:
by Henry Raynel
The “gap” is our main subject in this presentation. C.H. Douglas is our authority. I hope my presentation will encourage you to read C.H. Douglas’s work as Louis Even did.
Douglas’s The Monopoly of Credit, Chapter 4, pages 27 to 52 entitled “The Gap Between Prices And Purchasing Power” deals with this subject very clearly and precisely, yet with considerable detail.
This C.H. Douglas Social-Credit analysis is the fundamental difference between the many variations of so-called capitalist democracies, democratic socialism, and Social Credit. C.H. Douglas has provided the key to open the door to a new alternative economics for every individual to have access — as a birthright entitlement — to nature’s natural abundance of wealth.
Social Credit proposes two specific economic modernization fundamentals:
• First, society must be the owner and manager of society’s money supply as discussed earlier, and
• S econd, the incomes and pricing system must be modernized to cope with the age of machines replacing human energy.
It worries me to know that thousands of Social Credit supporters are working for various groups actually maintaining orthodox economics when, with a better understanding by studying the work of our founder of Social Credit, they could be in a team helping the Louis Even Institute usher in the new economics of Social Credit.
First, I must reinforce and summarize what all the varieties orthodox economies are based on:
• either Government taxation together with privately owned and managed debt banking,
• or Government taxation together with Government ownership and management of banking.
Both are economic/financial dictatorships. The second involving the socialist marriage of money ownership and management with politics and Government which is at very worst a political/financial dictatorship.
The former contains sufficient sham but very valuable democracy to enable Government to respond to democratic initiative-policy demands from a grass-roots political campaign movement.
Social Credit wants none of the various orthodox varieties of neither.
Social Credit proposes for society to establish an independent state monetary authority to manage society’s money supply equitably for every individual in society.
Good understanding of this difference is vitally important, especially for the leaders of our Douglas Social Credit Movement.
May we now discuss what is the specific economic defect analyzed by Douglas and shown by the Social Credit A + B Theorem.
The Social Credit A + B Theorem illustrates the defect
in business pricing
• The present pricing “system” compels all businesses to charge all cost into prices.
• This causes total prices to be substantially higher than the total incomes.
• Total incomes paid out are wages, salaries, and dividends (profits).
• Total incomes represent total wages and salaries for employees, and total salaries, dividends or profits for employers.
• Employers and employees are both the salt-of-the-earth workers.
We all need courage, tolerance, and patience to discuss in a group, especially a group as big as this, this defect in society’s business pricing-and-incomes payment system.
• The true cost to produce anything is the amount of energy applied to nature’s free raw materials — reflected as cost expressed in terms of money prices.
• For example: if the financial cost of energy needed to produce a loaf of bread is $l, then the shop price is $l.
• All production is simply applying energy to nature’s raw materials to produce anything and everything that individuals need to use.
May I comment here that even if business money was available with a very low interest or service cost, the present pricing fault would still prevail. Present people’s despair and poverty would still prevail.
To illustrate this point, even though interest rates in Japan have been persistently very low all last century, low money cost has not cured their economic pricing defect. In the USA, interest rates have been reasonably low over the past considerable long period of years. These are the world’s two biggest economies, and low interest cost has not cured their economic affairs. There could be better examples.
Perhaps I could offer the extreme example by pointing out that if the banking service industry were to give their services absolutely free, the “gap” between incomes and prices would still be very serious and still remain. The banking industry does provide a very important service to society, therefore all employed are entitled to income. Please watch carefully and observe this fact as we precede through our discussions, and I thank you in advance.
Today for any business to be viable, the owners, whether the business is small, medium, or large, are obliged, in fact, absolutely must include all financial production costs into the total selling price. The main financial cost is all the financial cost other than wages, salaries, and dividends.
All businesses have two sets of costs. There will be:
• “A” costs (or payments): wages, salaries, and dividends paid to employees and shareholders of the business.
• “B” payments (all the other costs) for every other cost: raw materials, the building, light, power, cartage, bank charges, Government charges, and any other charges must be included in the selling price.
Business must add both A + B costs into the selling price. Hence, present business pricing generates prices faster than it generates incomes. There is a “gap” between total incomes and total prices.
The gap between prices and incomes
Orthodox business pricing requires all costs to be added into prices. This results in total retail prices being generated faster than total wages, salaries, and dividends.
Every business, every industry in the nation, is simultaneously producing our goods and services, and is generating prices faster than incomes.
We can look at the A + B Theorem in another practical deductive way and still relate to things as they are. If we take the audited returns of any business, we will find that the business never distributes sufficient money to individuals to pay the price value of its output. C.H. Douglas analyzed about 200 companies.
If you are in business, have a good study of your own figures. Not one of us people in business pays out total incomes equal to our total costs. There is always a “gap”.
I want to illustrate and discuss with you that the fundamental pricing fault is caused by society’s money flowing through industry being cancelled to pay for the B costs.
• Briefly and factually, money is created for production, and is cancelled on consumption.
• The money quantity coming out of the production pipeline for consumer incomes is substantially less than the amount entering the production pipeline and accounting into the selling price. As an arbitrary figure,
100 units of money goes into the pipeline of production, and only 50 ends up in the hands of consumers at the end of the production cycle, the shop counter. Consumers cannot purchase 100 units of price costs with 50 units of income.
Please study the illustrations of the two money-flow cycles... The traditional illustration (see our previous issue) illustrates the debt-money flow. The modernized illustration (see next page) illustrates the modernized society-owned money flow.
The traditional illustrates the present system — the portion of finance flowing through industry representing the B costs: costs for machinery, plant and equipment buildings, freight and cartage, telephones, electricity, etc., which are all being paid for by the various business people with cheques or other forms of payment that are deposited in bank accounts where it is cancelled.
In other words, a significant portion of the money flow needed by consumers to buy production is cancelled early as money flows through machine production. As machines replace the workers, the “gap” widens.
Both A costs and B costs are added into the selling price. But incomes distributed are factually and mathematically substantially less than the total prices. Hence there is a “gap” between total incomes and total prices.
An inductive way of looking at it is as follows: More and more productions are being done with less and less people. In his address entitled “Social Credit Principles”, C.H. Douglas said:
“The second feature of equal importance is that considerably less than the available number of individuals, working with modern tools and processes, can produce everything that the total population of the world, as individuals, can use and consume, and that this situation is progressive, that is to say that year by year a smaller number of individuals can usefully be employed in economic production.” The “gap” is getting wider !
The modernized illustration (see opposite): Douglas, in his Monopoly of Credit states that the proportion of the product at least equivalent to B must be distributed by a form of purchasing power, which is not comprised in the description of A.
The modernized illustration shows how the use of a society-owned-and-managed money system can be mathematically assessed and allocated as supplementary income to all consumers to contribute to filling the price-income “gap”. An important part of the money allocation is to the Government Treasury which will be sufficient for all Government spending. Hence taxation can be eliminated.
You could ask: “How can, or will this, continue ? ” I do not think anyone can answer that. Hopefully, our organization can pressure change sooner rather than later. Change will come as soon as the grass-roots will of the people demands change. If not, humanity will continue through a very dark period of history with conditions getting worse year after year. The international banking oligarchy will not give up their power and limitless wealth without democratic political pressure.
Democracy must be rehabilitated
C.H. Douglas said in his address, The Nature of Democracy:
“It has frequently been alleged of the Social Credit Movement that it mixes politics with economics. If the forgoing phases of the Movement be accepted as legitimate, such a combination is necessary and inevitable.
“No fundamental changes in mechanism can become a part of the daily routine of this or any other country except with the aid, passive or active, of the sanctions of Government ultimately residing in the armed forces of the Crown.
“The theory of the British Constitution, which is a democracy, is that the armed forces of the Crown exist to ensure that the will of the people should prevail. Note the use of the word `will’ which does not mean `intelligence’. No conventions or laws can stand up for any length of time against the will of the people, and anybody who is acquainted with the theory of international law will know what I mean when I refer to the ‘right of eminent domain’ which is simply that if any law or convention is operating in defiance of the will of the people, it will inevitably be modified.”
I do not believe the World Financial Oligarchy, the Bank of International Settlements (B.I.S.) and their many subsidiaries have any intention of giving up the power they have over world economics and politics, over every government, and consequently over the lives of every individual human being.
Major C.H. Douglas’s writings clearly show that financial dictatorship can only be overthrown by the rehabilitation of political democracy.
May I humbly request that you please excuse me for touching on the tremendous importance of Social Credit education ? Perhaps I have no right to discuss education. You could understand more about the importance of education as the main way to encourage and lead enthusiastically than I do.
As a duty to the Social Credit Movement, I must state that I am absolutely certain that we who propose leading the Social Credit army need as complete an understanding of C.H. Douglas’s Social Credit as possible, and we must endeavour to have as many of our present and future leadership as possible to be as well versed in C.H. Douglas’s Social Credit as Louis Even was.