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The physical basis of Social Credit

on Saturday, 01 October 2005. Posted in Social Credit

The following article is part of a paper prepared for presentation at our recent September Congress in Rougemont, by Mr. Victor J. Bridger, an excellent teacher to popularize the Social Credit idea. Mr. Bridger attended our Congress in 2004; he could not make it this year, but sent us this excellent article. He has been involved with the Social Credit idea for over 50 years, and is currently the editor of the Australian Social Credit Journal. Part II of this article will be published in our next issue.

by Victor J. Bridger

This paper was prepared from original Social Credit literature for purposes of authenticity. It was also designed to draw attention to the basis in reality of Social Credit proposals. Too many people who become familiar with Social Credit, including those who have been aware of it for years, spend too much time on the question of money, without realizing the importance of the underlying principles. This paper focuses attention on the physical rather than on the monetary aspect.

To commence the explanation on the physical basis of Social Credit, it is interesting to recall some of the incidents involving C. H. Douglas who can be regarded as the founder of the ideas that are encompassed in what is known as Social Credit.

Originally it was referred to as Douglas Credit by many, but he quickly rejected that designation because he acknowledged that he was not the originator of the credit of society. That credit in the form of all the natural resources was provided for man. Whether one wishes to acknowledge that everything that existed before man is attributable to God, or simply to natural phenomena, is not in question. The fact is: all the physical resources necessary for the life of man existed independent of man.

Before he entered into a study of the problems which confronted people in obtaining the benefits of their work and working together, he had noticed certain things operating in the economy which did not appear to make sense to him.

How Douglas found out

In an address to members of the Canadian Club at Ottawa early in 1923, when in Canada by invitation to lay his views before the Canadian Parliamentary Committee on banking and commerce, Douglas gave an outline as to how his ideas began to formulate.

The story began, he said, when he was in India about fifteen years previously (1908) in charge of the Westinghouse interests in the East. He was surveying for the Indian Government a large district which revealed a good deal of water power. In Calcutta and Simla, he asked what was going to be done about this, to which came the reply, "Well, we haven't any money." At that time manufacturers in Great Britain were hard put to get orders, and prices were very low indeed. Major Douglas said he accepted the statement made and, he supposed, pigeonholed the fact and circumstances in his mind.

At that time, he dined frequently with the controller general of India, a man who used to bore him very much by continually talking about something he called credit. "Silver and gold," said his friend, "have nothing to do with it. It all depends on credit." Douglas remarked that had his friend given him a short sharp lesson on Mesopotamia, it would have been as intelligible to him at that time. Nevertheless, that fact also must have stayed at the back of his mind. He proceeded to say that just before the war, he was employed by the Government in the building of a post office underground railway from Paddington to Whitechapel. There were no physical difficulties, but first he received orders to get on with the job, then to slow up and pay off the men. "And as a matter of fact," said Major Douglas amid laughter, "the railway is not finished yet (1923)." "Then came the war," he said, "and I began to notice that you could get money for almost any purpose." And that struck him again as being curious.

On being sent during the war to the Royal Aircraft Establishment at Farnborough to assist in its operation, he decided that it would be necessary to go very carefully into the costing process. His friend, Sir Guy Calthrop, suggested that he should make use of tabulating machines, and so after a time, Major Douglas began to concentrate very carefully on them. One day he noticed, with regard to the figures on the cards emerging from those machines, that wages and salaries at the weekend did not represent the price value of the goods produced in the same period. "You might say that anybody would know that, and I suppose they would," said Major Douglas. But to him it followed that if that were true, it was true every week and in every factory at the same time. Therefore the wage and salary purchasing power each week was insufficient to purchase the goods according to the price each week.

This is a matter which, eighty years later in 2005, still eludes those economists and others who argue that Douglas only looked at the results of one factory, and ignored the whole economy. It appears that the reasoning is that if a problem is made bigger, it will disappear. If one factory produces price values in any one period greater than the wages and salaries paid in the same period, the factory next door must be the same. This must be true of all factories in the world, but there are those who believe this to be incorrect because Douglas did not look at all factories operating in the economy. Their argument is that if he did look at the whole economy and all factories, then he was wrong in his calculations in relation to one factory.

On completion of his work at Farnborough, and confronted with industrial disputes, he found that the best way out of the difficulties with those who were fighting for more wages was to give it to them. "It settled everything," said Major Douglas amid laughter. Then he went to Richborough, one of the new concrete cities built during the war, and was immensely impressed by the fact that in spite of the withdrawal of something like seven million of the best producers to the armed services, plus millions more engaged in the production of immense quantities of materials to be destroyed, leaving behind only the old and the very young, they were able to raise such wonderful new concrete cities, and yet everybody in the country was living at least at as high a standard as before the war.

These facts also became pigeonholed in his mind. Then his attention was attracted to a persistent propaganda that was being conducted to the effect that "we must produce more." And he began to think what would happen when the whole of this intensive production was diverted in peace time. The persistent propaganda gained in volume, to be supplemented by a new cry that they were a poor, poor nation, and only hard work would save them from destruction.

The delusion of super-production

The first article written by C. H. Douglas was The Delusion of Super-Production. In this article he stated:

"It must be borne in mind that manufacturing, or what is commonly called production, is conversion, and just as the conversion of mechanical energy into electricity or heat into mechanical energy, involves a dispersion, which for practical purposes is a loss, so the conversion of manufactured articles can never take place without a similar economic dispersion."

This very important factor was again emphasized by Douglas in his article Social Credit Principles, in which he said:

"That economic production is simply a conversion of one thing into another, and is primarily a matter of energy. It seems highly probable that both energy and production are only limited by our knowledge on how to apply them."

The starting point to understanding Social Credit is the acceptance and understanding of the physical realities with which we are confronted. We have natural resources provided without the intervention of man, and we have the use of energy by man to convert those resources for the benefit of man.

In his book Introduction to Social Credit in the section Physics, Dr. Bryan W. Monahan, one time Chairman of The Social Credit Secretariat, wrote:

"From the purely physical material aspect man is like a machine performing work by the conversion of energy. Food is his fuel, and the primary condition of life will obviously be that the amount of energy obtained from the food shall be sufficient to allow for the expenditure of energy in the searching for, and consumption of, food. We may imagine a state of life in which the energy obtained from the food just balanced the energy expended in the searching for, and consumption of, food, allowing also time for necessary sleep. Life must have begun at slightly above this level, for otherwise, no progress or other activity beyond this would be possible. Now the difference between the energy necessary merely to sustain life and the total energy directly available represents true profit in its most fundamental sense. It forms the basis of the ability of man to pursue other ends than the mere obtaining of food. (When that true profit is used to make more tools, it is regarded as an investment in new capital equipment.)

"An individual which has to devote the whole of its time to obtaining the mere necessities of its existence has the nature of its activities wholly determined by this necessity. But as soon as it has surplus energy above this fundamental requirement, it has a choice as to how it will expend it. There are, of course many ways in which the surplus energy may be expended. One of them, however, is of very special importance, and that is the use of this energy to improve the efficiency of the individual as a machine — to further increase the useful effect produced by a given expenditure of energy."

C. H. Douglas, in his book Economic Democracy, drew attention to the fact that the fundamental currency in which, in the last analysis, an individual can liquidate his or her debts is potential effort over a definite period of time. In other words, the real of the world's currency is effort into time, which he referred to as time-energy units. Without any other form of energy, it is human energy in a certain period of time in which an individual can obtain the necessaries of life.

By liquidating "his or her debts" is a reference to the fact that he or she is drawing against the credit — the natural resources — provided by God or nature. In the same manner, it is by working (using energy) that man can pay his debts in society.

Another way to regard this is to imagine a balance sheet where all money transactions were cancelled out by payments of all debts to creditors. All that would remain would be physical assets. Who would be shown as the creditor — God?

We know that man has been able to utilise his energy to the extent that there is a surplus with which he has been able to put this surplus energy to increasing benefits. The construction of tools, for instance, which allows not only the procurement of basic necessities in less time with less expenditure of human energy, but renders possible processes hitherto impossible. This is the basic physical reality underlying the modern conception of investment. It is the devotion of energy to the increase of efficiency in the consumption of energy, and is intrinsically a multiplier. That is, it multiplies the energy directly available for any given constant expenditure of energy. Notice that it begins in the individual human being, and originally benefits him directly. Tools, and the knowledge of process utilizing the individual's own human energy, alone have resulted in a great expansion in the possible results of effort.

We have now reached a position of understanding the physical basic realities. All natural resources are made available to man to utilize for his own benefit. The physical use of human energy can convert these natural resources to other things which are of increasing benefit. The knowledge of how to do things, make tools and increase the use of human energy, provides a physical profit which can be utilized to further increase benefits. Those benefits include the ability to make more tools, or to spend some time in leisure.

Cultural inheritance

Another factor which enters into the equation is the discovery that by associating with one or more other persons, it was possible to further increase benefits, because it was found that two or more persons working together could achieve something which one person on his own could not achieve. Thus, a further physical profit could be gained, which we refer to as the Increment of Association. The knowledge of how to do things, make tools etc. both of which, the knowledge and tools, are passed on to future generations, we refer to as the Cultural Inheritance.

Dr. Bryan W. Monahan explains, in his Introduction to Social Credit, the real physical aspects in production.

"We have only to think of the changes due to the use of the spade in horticulture. What is also important, of course, is not only the spade, but a knowledge of spade practice and the habits of plants, and this principle can be extended over all the fields of man's activities, past, present, and to come. Tools commonly outlast the life of their makers, and are passed on to a succeeding individual. This we call physical inheritance. There is also the knowledge of how to do things, which includes how to replace the tool when it is worn out. In all its wide ramifications, we call this the cultural inheritance.

"This is again a fundamental conception of immense importance, as real as, and more important than, the longevity of tools, and structures for it not only enable the adequate use of the tool, but ensure the possibility of the tool's replacement as well as simplifying the basis for further possible improvements. We have thus found three basic elements at the very core of our subject. Profit we may define as improved efficiency accruing to the individual; and investment as the application of profit to the increase and enhancement of efficiency. Profit, investment, and inheritance, especially cultural inheritance, are basic elements of economies, and a correct understanding of them, quite apart from any economic, and particularly financial theory, is vital."

Further factors that enormously extend the effectiveness of individual effort are:

(1) The association of individuals to achieve a common objective.

(2) The introduction of solar and nuclear energy in place of human and animal energy as the basis of work done.

(3) The arrangement of automaticity in mechanical and electrical operations.

The increment of association

In examining the first factor, it will be noted that the first result of association is that a given job may be accomplished more quickly and more easily. But not only may two men lift a heavy weight more easily and more quickly than one man, but two men may lift a weight that neither alone could lift.

Within reasonable limits, this result can be extended. There is a benefit from association of all kinds far beyond simple arithmetic progression, and this is what is called the unearned increment of association, which really is true profit. A money system, when used, must be made to conform with this reality. Otherwise, it will eventually break up the association in which it is involved. There is nothing that modern man does that does not rest somewhere on this unearned increment of association, the various forms of which are of great complexity. In addition to primary association there is the association of associations which produces further increments.

A notable example is the telephone system. The telephone itself, the result of complex associations, not only increases in usefulness with the number of users, but increases the efficiency of the whole of industry and human society; and human society is exactly the same thing as human association. So important is the study of association for those who desire to investigate Social Credit seriously that the first chapters of Dr. Tudor Jones textbook Elements of Social Credit are entirely devoted to it. It is important to remember that human society is "an association, the most complex association we know: a vast construct, or complex of separate associations."

Society, from the aspect which concerns this paper, "is a complex of observable phenomena and phenomena are observed results in nature, and all phenomena (all observed results in nature) appear to arise from some mode of association." Every association has a result, and this is its increment of association. We can divide associations into different classes: material, mass, and energy associations, for instance. The cultural heritage which increases the power of human beings in association to do things is the conservation of means of doing things.

The use of solar energy

The second factor which incalculably extends the power of human beings to produce desired results is solar energy, which includes energy stored in the form of wood, coal, oil, and water power derived from the changes in the distribution of water due to the sun's direct heat. It is most important to be very clear that it is energy, and not machines as such, which we are considering here. Machines are only elaborate forms of tools through which energy is transformed and directed. Their importance lies in the great and easily controllable rate at which they can transform and direct energy, compared with the individual human being. At the present day, humanity has at its disposal vastly greater direct sources of machine energy than that of the total man power of the whole earth's population. Thus an important ratio:

Machine time energy units/Human labour time

could be 20/1, 50/1, 100/1, 400/1, ranging from at least fifty, in some cases, many hundreds units, is increasing daily. Add to this atomic power and the still more spectacular possibilities of thermo nuclear, and the magnitude of the picture may perhaps be glimpsed. In fact, human energy is becoming negligible and, as with automation, could for the most part be dispensed with entirely.

Automation is a catalyst

The third factor which the individual now has in his power to increase benefits is the use of automation. Increased technology, computerization, and the division of labour which further multiplies the use of energy all add up to what Douglas referred to as a catalyst.

In fact, human energy is becoming negligible and, as with automation, could for the most part be dispensed with entirely. Its importance lies in quite another direction. The term "catalyst" is used in chemistry to denote a substance, the presence of which either enables a chemical reaction to take place, or to take place much more readily. The rate of production depends on the rate of transformation of energy. A man may control the speed of a giant machine by the mere energy at his finger tips. The multiplying factor of automaticity via amazing electronic devices is even greater still. Certain functions of human thinking can be performed with incredible speed by certain electronic machines which the late Robert Theobald, an English economist, referred to as cybernation, i.e. the use of computers together with electronic robots such as used in motor vehicle manufacturing.

In rocket research, most complex and vital mathematical calculations, that would take more than a year for an individual to complete, can be done in minutes by computers. So far removed is man from mere animal existence that it is all too easy to miss the significance in every day life of the importance of the foregoing considerations. The very division of labour confuses the total picture and conceals the totality. Mankind during his history, but especially during the last one-hundred years or so, has been engaged in the construction of an industrial machine, the result of which has been to transfer the burden of the maintenance of life from the "backs of men to the backs of machines."

In Major Douglas' unsurpassed description, "the industrial machine is a lever, continuously being lengthened by progress, which enables the burden of Atlas to be lifted with ever-increasing ease. As the number of men required to work the lever decreases, so the number of men set free to lengthen it increases." This is simply recognition of the fact that human energy is reducing in comparison to other energy used in the productive process.

This process is of the nature of acceleration, and involves the ever-greater rate of production of things to make things with; the leverage of real capital. But there is a limit to the amount of capital goods that can be utilized usefully, and barring unlimited export into outer space, we are approaching this limit ever more rapidly. It must be emphasized that our capacity to produce capital goods, things to make things with, is far greater than actual capital goods in existence.

The ultimate meaning of true industrial progress is that the amount of human work necessary in order to sustain a very high standard of living steadily decreases. In the words of Major Douglas, "the primary fact on which to be clear is that we can produce at this moment foods and services at a rate very considerably greater than the possible rate of consumption of the world." This then is the physical and realistic basis of leisure and/or the ability to devote time and energy in the production of more capital goods to reduce human energy even further. Quite clearly, only either leisure or employment outside useful production can dispose of the so-called "unemployment problem". All problems of economics and politics are absolutely conditioned by the physical realities described. Short of sabotage or cataclysm, the progress of the situation is inexorable. Anyone perceiving what is involved will see through the confusions which result from the wrong positing of problems. If employment is regarded as the problem, then the result will be increasingly artificial employment.

The folly of full employment

As a result of obvious and deliberate policy, together with the working of a long outmoded economic and financial system, "full employment" is made to appear to be the legitimate object of the economic system. "The modern machine, with its marvellous capacity for utilizing power is capable of releasing man from much of his human labour and for providing for his economic independence so that he can be set free for other ends. Yet people's ideas have changed, been so perverted that they have become slaves of the machine, ever more definitely rivetted to an invisible slavery."

If the only access to food, clothing, and shelter is through money, and the only access to money is through employment, then unemployment means starvation. This sequence is not logical. It is what the Russian psychologist Pavlov called 'conditioning'. It applies to animals just as effectively as to man, the place of employment being taken, for example, by jumping through a hoop. We can well believe that some animals may think the chief end in life is jumping through hoops, even a flaming hoop. In the case of man, the hoop is represented by employment, and the flaming hoop by employment no matter how degrading.

The sequence 'unemployment means starvation' is a convention, just as the sequence of a ringing bell means salivation in a dog is a convention. The Depression was terminated by the employment associated with preparation for war. Preparation for war means the construction or conversion of factories, the manufacture of armaments and arms, the stockpiling of materials, and the employment of a proportion of the population in doing these things. Of itself, clearly it contributes nothing to the standard of living. But it does distribute money, allowing access to whatever standard of living is available through the efforts of those not diverted to the production of munitions.

When a maniac in charge of the world's most powerful military organization is threatening to make war, production of munitions to meet the threat is a necessity. But insofar as war, under modern conditions, involving the mass slaughter of non-combatants, is an incarnation of evil, employment in the production of the means of this slaughter is degrading employment. But it still distributes incomes, virtually the only access to the means of life.

The production and distribution of pornography also distributes incomes; so does the production of essentially useless gadgets. Employment of any kind, useful, neutral, useless or vicious, is paid for in the same way; by means of money. What enhances the standard and quality of life is remunerated indifferently with what degrades life and despoils the earth. We pay, of course, for this indifference. Wasted effort dilutes the value of useful effort; this is the reality underlying the financial phenomenon of inflation.

The proper objective of the economic system is not employment, but the production of goods and services as, when, and where required with the minimum of labour and inconvenience.

In order to see clearly how the institutions of society can be made to minister to the true welfare of man spiritually, materially, individually and socially, we will need to take a careful look at some important discoveries and enunciations contained in Social Credit.

The cost of production is consumption

The first of these is that the "cost of production is consumption." This is a real, natural, and fundamental law of economics; being expressed more fully in the statement that the real cost of production is measured by the consumption incurred in that production. We can say that the true cost of a given programme of production is the consumption of all production over an equivalent period of time. Cost is only the natural penalty or condition paid by human beings in reaping the result of increment of association, one aspect of which is the fruitfulness of the earth. The ratio of food consumed to food produced is always a fraction less than one. This applies to all consumption items. The difference between that fraction and one represents true profit in the most fundamental sense.

Therefore: Food consumed / food produced may be equal to 1/2 or 2/4.

It is difficult for some people to understand the meaning of the statement that cost is the natural penalty paid by human beings, but this should be related to what was said earlier. The fundamental currency in which, in the last analysis, an individual can liquidate his or her debts is potential effort over a definite period of time. The cost in real physical terms represents a penalty; a penalty in the form of potential effort over time. People must expend some energy in a certain period of time to obtain something.

By way of explanation, the following article is an excerpt from The Elements of Social Credit by Dr. Tudor Jones, one time chairman of The Social Credit Secretariat.

"The notion of 'cost' is obscure. One can go back to Imperial Roman times – probably much further - without finding anything but double-meaning in the words used for cost, and rather significantly, the same double-meaning persists today. Thus sumptus meant cost and also expense; impensa (from impendo, I lay out) expense, outlay, cost; praemium, that which is taken first; advantage (which, in the natural world, is not taken first but at the time an association is effected). The word also meant gain, profit (the increment of association), an honourable reward, recompense, a promise and (ironically) punishment. Merces meant wages, hire, pay, fee, salary, reward, interest, rent income. It also meant punishment. Caritas meant costliness, dearness, high price, scarcity of money, and also affection and the dearness of e.g., one's children; while carus signified high-priced, and also dear and beloved.

"There is no natural connection between the high price of (say) tomatoes and natural affection. The rest of the meanings indicate either the plain effects of monetary customs (agreement associations) e.g., the reward for services in negotiable money tokens instead of kind, or they are ironical.

"Legend attaches to the discovery of firemaking the punishment (said to have been for theft) inflicted upon Prometheus, whose liver was eaten in the day-time by birds, regenerating at night. Thus suffering might be regarded as the cost of the fire. Quite another 'cost' of fire is the fuel to stoke it. This, however, only transfers the 'cost' to the fuel. If the 'cost' of the fire is its fuel, what is the 'cost' of the fuel? Did the invention of money render costly what was costless before?"

(To be continued in the next issue)

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