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The Vital Question: Who Shall Control?

on Tuesday, 01 November 1955. Posted in Social Credit

The following article, under the heading "Who Shall Control ?" appeared in the October 1st issue of THE SOCIAL CREDITER (Sydney, Australia).

Many people who have a partial grasp of Major Douglas' demonstration of the automatic shortage of purchasing power fail to grasp the implications. Any reader who is not quite conversant with that demonstration should look it up and read it again (e.g. Credit-Power and Democracy 4th Ed. p. 20). The end of the last sentence of the demonstration is: "since A will not purchase A & B, a proportion of the product at least equivalent to B must be distributed by a form of purchasing-power which is not comprised in the descriptions grouped under A." Most critics of Major Douglas fail to comprehend this statement, or overlook it, or ignore it. Douglas does not say that at all times there is a shortage of purchasing power to buy the goods offered for sale to the public; yet time and time again Douglas' demonstration is wrongly paraphrased in this way.

The whole point is that when consumable goods are put on the market for sale to the public, the latter no longer have in their possession the purchasing power issued in producing those goods. That money was spent as earned — savings can be ignored — a week, a month, a year, perhaps a decade before. To be able to buy the goods, the public must get the money elsewhere, i.e. from a source other than the wages, salaries, and profit paid out in producing those goods. In almost every case the supplementary source is more production, wanted or unwanted, useful or injurious. It is this compulsion to produce more, that is so objectionable a feature of the present financial setup. It makes the controlers of money into dictators. It is they who can dictate how much wealth shall reach the public and what the nature of any further production shall be.

Before considering this aspect further, let us consider some examples, recently put forward by a genuine and honest enquirer, who failed to see the implications. He assumes that a tree is felled and dining tables are made of the wood. He continues: "Undoubtedly the money earned in felling the tree will have been spent long before the table in question appears in the shop window; but it must be borne in mind that while the table is on view for sale there will be available for spending among the public money that will have just immediately been earned in felling another tree, the proceeds of which are not at the moment available for sale as a finished article". In other words the tables can not be sold at the rate of natural demand for them; but at the rate at which future tree-felling is financed. More trees must be cut down before existing tables can be sold.

The same enquirer puts forward another example: "If in executing a contract, say, for a thousand suits, a clothier pays out in wages £ 1,000 a week for five successive weeks making a total in all of £5,000, is one to conclude that there is a discrepancy of £4,000 between purchasing power and goods for sale if that £1,000 in weekly wages has circulated between the bank and the public five times? That may be true in one sense; but one has to remember that those suits are expected to last for five weeks until they are replaced by a succeeding batch. Therefore if during that period an average of a fifth of that number of suits is sold each week this amount in cash will be earned each week by the same employees in executing a further contract". He admits the shortage of purchasing power and the compulsion of making more and more suits to allow those already produced to be sold. The suggestion that there is a shortage and asking "what does it matter?" is a type of criticism that has been put forward many times. The very existence of compulsion which gives financial control to men who are interested only in finance is objectionable; but that is not all.

In both examples there is the facile assumption that the only outlay in manufacture is wages. Except in some professions and a few arts and craft, such an assumption is incorrect and most misleading. In practically all industries there are considerable overheads. They all use machinery, say nothing of the factory buildings themselves. All that capital was made in the near or distant past and the purchasing power issued in their production has long since been spent. But charges on account of them still go into costs. The wages, salaries, and drawn profit in any given period must equal the accumulated wages charges plus overheads included in the price of consumable goods if these are to be bought. In other words the gap is temporarily bridged by increasing future gaps. In closing the gap capital goods, e.g. buildings, machinery, are manufactured that, as figures show, are constantly reducing the wages etc. content of costs.

We can admit that the automatic and progressive shortage of purchasing power has in a way been beneficial. Thanks to it this and every other industrialised country was forced to build up the vast capital productive machinery we all see around us. There are however limits to this process. There comes a time, in Great Britain it came about 1910, when the productive capacity is such as to satisfy the demands of the public for necessities and reasonable luxuries. From that moment onwards it becomes essential to finance leisure and no longer only work. It did not happen here or anywhere else and work became work for work's sake, not for the benefit of any results of work. Planned destruction in peace and war had to be introduced so as to distribute purchasing power, so that certain interests could retain financial and therefore political control over the people. The financing of leisure would mean economic independence for more and more and ultimately for all individuals. That this, the only solution of "unemployment", "overproduction", and the many threats that hang over us, was not introduced, is ample evidence of a conspiracy to enslave mankind. Control of money, instead of passing to the people in their capacity of consumers, has remained with a few quite irresponsible and probably anti-Christian men. The financial system, as far as policy is concerned, does not reflect reality. It is a living lie and therefore has failed and goes on failing.

Curiously enough there are people who pretend to be Social Crediters and who quote Douglas in parts, who yet maintain that under a sane system, the "State" or the "Government", or the "Treasury", or some other abstraction should "control money". Perhaps they know not what they say. Perhaps they really cannot distinguish between control of policy and administration; but these people we must disown. Whether their mind is muddled or whether consciously or unconsciously they picture themselves in the seat of control is immaterial. Control of financial policy, if civilisation is to be saved at all, must go to the general public. The administration of that policy must, like all organizations be hierarchical. The public however is an organism. To turn an organism into an organization is to kill it. Major Douglas drew attention to the economic power of control resident in the housewives'purses. In the years before price control was as prevalent as it is now, mainly thanks to rings, cartels and monopolies, the housewife registered a vote in the form of money laid on the counter as to what to buy and where to buy it. Control of money hampers the housewifes. The function of money is to help distribute goods coming on to the market for sale. Money most, to function properly, bear a relation to real demand and to potential production. Real demand comes from the public. Productive capacity is very great indeed and will be vast when automation and atomic energy are in full swing. Neither should be subject to the control of a clique. Beware of men who advocate control money!


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