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Total Purchasing Power And Not Total Employment

on Sunday, 01 March 1959. Posted in Social Credit

Unemployment

For several years now, especially since credit restrictions cut the ground-out from under production and diminished purchasing power especially among those who were let out on to the streets by less well-financed companies, unemployment has been a constant and growing, aggravation.

"This evil, says Cardinal Leger in his letter on the subject, afflicts a great number of workers, plunges families into misery and places in jeopardy our very social stability."

Certainly, one cannot remain indifferent in the face of such a threat.

There are 80,000 unemployed in Montreal. There are fathers with dependents to feed, clothe and lodge. There are young people who find themselves butting their heads against this hard wall at the very outset of their adult lives, And 80,000 unemployed means at least 240,000 people who are suffering the harships entailed in unemployment. And these privations exist not because of a lack of products but because the unemployed have not the means to pay. Consequently the goods have no way of getting onto their tables.

"Public wealth, says Cardinal Leger with good reasoning, comes not so much from a great abundance of goods, but rather from a just sharing of goods. A people which does not benefit from the just sharing out of material riches, even if it exists in abundance, would be a poor people living in a rich land.

The flaw in finance

The fault then is not with production but with our system of distribution. And since distribution is defective, production of necessity finds itself hampered and slowed down. This is so, not because production does not want to produce, but because of the impossibility to sell all its products when it comes to consumers goods, and because of a lack of finance when it comes to works of development (capital goods). In both cases the trouble begins with a lack of money. The great flaw is in finance.

To come back to our unemployed: "Those workers who have exhausted their unemploywent insurance benefits finds themselves in a most serious situation, says the Cardinal's letter.Those who manage to find work, but not enough to make them eligible for unemployment insurance, find themselves in the same situation when the work is finished.

But such a situation is the result of purely human regulations. And if these regulations cause families to suffer in the face of the goods to relieve these sufferings, then the rules should be changed. Why not make them agree with the reality? Why cut off unemployment insurance benefits when there still remains an abundance of goods to be consumed? Is it reasonable to cut off the last bit of purchasing power of those who have been on a regime of austerity for weeks under the impression that thus, unemploywent will be relieved? You wont give employment to men by cutting down on the flow of products.

It comes down to this: either there remain funds for unemployment insurance or such funds have been exhausted. If they are there why withhold them from the people who need them? If exhausted and yet there remain quantities of goods to be consumed then evidently the financial system is out of step with the productive system. And if such is the case then it is idiotic to propose all sorts of measures except that which will adapt the financial system to the reality of production and the needs of the consumer.

Regardless of how you look at it, whenever there is unemployment, the problem really isn't one of unemployment: the real problem is with finance, with money.

Here is the origin of that scourge which has struck directly hundreds of thousands of Canadian citizens and which is a scource of worry to as many thousands more who live in fear of loosing their means of livelihood; for their lot does not depend upon conditions or decisions over which they have any control. This is certainly an intolerable state of affairs and one which calls for a drastic change. This is what the Cardinal said in his letter:

"Furthermore a large number of workers who are employed live in constant fear of losing their work. A situation which causes misery to so many families and gives rise to such insecurity, should drive us to a serious examination of the economic system under which we live.".

We need not examine very long to find the same stumbling block whichever way we turn; the obstacle is always financial, and purely financial.

You have to be something of a mechanic in order to repair the motor of your car when it is not working. But you don't have to be a mechanic to know whether or not it is working. Nor do you have to be an expert in electronics to know that your radio is not perfoming as it should.

Likewise, you do not have to be an expert in economics to see that production goes forward when it is financed and stops when it is not; that there are plenty of products on the store shelves and that if people don't take them away it's because they have no money.

If this isn't a problem of finance, and of finance alone, then what is it? To blame the producer or the consumer would be to accuse the thermometer of causing heat waves and cold waves.

Demand for total employment absurd

Many political men, especially among the opposition, and many union leaders and sociologists come out publicly in their denunciation of unemployment and in making proposals to remedy the situation. Unfortunately, most of these proposals ignore the basic realities of the situation. They begin by demanding total employment — everyone must have work! The government, these individuals say, must practice a policy of total employment.

Well, the government may try as hard as it can to realize a policy of total employment, but it will never succeed for several reasons. How can employment be maintained when the produce of employment can never be paid for by the money distributed by employment? The salary or wages of the employee can never equal the price of the product.

True, there are products of work, which are not sold on the market, such as public constructions and the munitions of war. But if these things are not for sale to the consumer they have to be paid for by taxpayers — so it comes to the same thing. You pay sooner or later, and the later you pay the larger is the payment, much greater than the amount of money distributed by the project during the course of its manufacture.

That's the way it works in the system. The system itself makes it impossible to liquidate the price of the product, even with all the purchasing power that has been distributed in the production. So how much less possible is it when purchasing power is held back or turned into investment. Invested money ceases to be purchasing power even before it has been able to liquidate an equivalent amount of the cost of the product. It is true that this money is eventually redistributed, but only in creating a new price which will reappear in production, an even larger price because of the interest demand made by the invested capital. This money cannot liquidate two prices when it serves only once as purchasing power.

Forty years ago Douglas brought out into the light this mathematical impossibility. He stated the deduction that "all new production should be financed not by savings but by new credits." But through savings if thereby a sum of new credits can be issued in dividends to the public to fill the void in global purchasing power in the face of global production,

But our economists, even with an endless string of letters after their names, still try to make 2 + 2 = 5.

The end of economic activity

Industry does not exist to furnish employment but to supply us with products. When it has done this it has fulfilled its role. And industry attains its peak of perfection when it produces the most with the minimum expenditure of time and energy. This is what progress aims at. And if we do not temper with progress men will enventually be liberated from the sole function of producing in order to devote himself to pursuits more in keeping with his nature.

But the more the end of this process is perverted, the more we run around in circles ending up always in chaos.

The end of a sound social and economic organism has been well defined by Pope Pius XI:

"To procure for its members all the goods which the resources of industry and nature and a sound economic organisation can procure for them."

The end of the economic system then isn't to provide employment for men, but to provide for their temporal needs, and eventually to permit them to achieve a certain degree of leisure and to attain a certain culture, as Pope Pius XI expressed it:

"The end of the economy is to assure the permanent satisfaction of needs through goods and services which will permit an elevation of the moral, cultural and religious level."

The Cardinal in his letter has this to say:

"Economic activity has for its end to use the riches of creation to benefit all persons living in society. In other words, the economy ought to exist for men and not man for economy. Production, in spite of its capital importance, should not be an end in itself."

Total purchasing power

So, rather than demanding total employment, we should demand total purchasing power. That is to say, a purchasing power relative to the production offered and not linked to employment. That is, a purchasing power which reaches all the members of society in order that the economy may attain the end so well expressed in the quotations above.

Furthermore, since production goes ahead even without an increase in employment, this purchasing power should be had by some other channel than that of wages. Social Credit has that way — and it is well-known today. Produce would flow, there would be employment again, as much as would be necessary to meet the demands and needs of society for services and goods.

Our efforts must be directed towards finance. This is where the weakness in our economy lies. Social Credit has the remedy for this weakness. We shall return to this subject again.

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