This brief, prepared by the Institute of Political Action, was handed, in the name of the Union of Electors, to each member of all the delegations at the preliminary meeting of the Federal-Provincial Conference, in Ottawa, on November 25 and 26, 1957.
Problems of a financial nature while intent upon giving to the people the results which the latter has a right to expect from the management of public affairs, the various governments — local, provincial, federal — are all facing problems which hinder their action. To mention just a few of them:
Inflation — The wheat problem — Unemployment, partial or total, for a growing number of industrial workers, and the difficulty for the young to find employment even when human needs are far from being satisfied. — The housing problems in the cities — The financial impotency of public bodies to discharge adequately the functions for which they have been appointed — The increasing public debts of municipalities and other public bodies — The growing taxation which causes homeowners and farmers to lose their property — The financial incapacity to extend social measures and keep them in line with the cost of living — The financial distress of hospitals and houses of education, etc.
All these problems are of a purely financial nature.
Contractors, manufacturers, farmers, transportation — the producing system of Canada generally — are eagerly looking for orders, whether such orders emanate from the Federal Government; from any Provincial Government, from other public bodies or from individuals.
But, if the productive power is plentiful enough to answer readily all public or private orders for goods and services, not so the financial means to pay for them.
There is no parity between the physical possibilities and the financial availabilities. And this is a source of difficulty for all public bodies as well as for individuals.
The conflicts between Federal and Provincial Governments arise where the scarcity occurs, not in the field of realities, but in the field of finance. If whatever is physically possible were made financially possible, at the time and place where a project is carried on, there would be no ground for a feud, since the production system shows no physical difficulty to fill all orders, wherever they come from.
Nothing compels an organized community, possessed of legislative authority, to restrict the utilization of its enormous producing power to bounds set by financial decisions. Should it not be the other way, and the financial mechanism accorded to the physical possibilities?
Whatever be the accepted nature or form of money or credit instruments, a money system, is, fundamentally, a bookkeeping system. Finance is, or should be, a mere reflection in figures of the physical facts of production and consumption.
A financial system thus geared to economic facts would supply new credits at the rate of new production of all kind, and would recall credits at the rate of consumption of all kind.
This would eliminate the purely financial problems, collectively speaking. Only production problems might arise, but these can be easily dealt with by our modern producing system, if unhampered by financial considerations.
With finance made subservient to physical possibilities, the present taxation set-up could be abrogated, and a new mode of public finance introduced, to work smoothly for all parties, Federal or Provincial.
The same producing system is tapped for all demands, whether public or private, whether federal or provincial. There is then inherently no reason for quarrelling, if the financial system is made to agree with the producing system.
An appropriate financial mechanism — which might very well be the Bank of Canada — would supply the credits necessary to finance all new production, whether public or private, at the rate, time and place where such production is made. And the same financial mechanism would act to recall the credits at the rate of consumption or depreciation of all kinds. This latter operation could be done by a proper adjustment (not pegging) of prices at the retail end, safeguarding against either inflation or deflation.
We therefore respectfully suggest that the members at the Federal-Provincial Conference advise the Federal Government to proceed with the establishment in Canada of a financial mechanism, so ordained that whatever is physically possible should be made financially possible to answer the public and private needs of the population.
Sound principles, which should govern a financial system sufficiently flexible to reflect facts and meet economic conditions as they develop, have been enunciated by C. H. Douglas, under the name of "Economic Democracy", better known afterwards under the appellation of "Social Credit". The name, however, matters little. And while the principles are applicable anywhere, the rules and regulations to apply them must be designed according to the political set-up and the social policy of each country.