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What is due to everyone is a dividend

Written by Alain Pilote on Tuesday, 01 May 2018. Posted in The Social Dividend

Justice is the will to render each one his due

In his "Summa Theologica", St. Thomas Aquinas defines justice as the constant and perpetual will to render each one his due. For example, what is due to God, according to the Catechism, is to adore Him as our Creator and Saviour, through the virtue of religion. What is due to every human being, as taught by MICHAEL, is a social dividend, since we are all coheirs of natural resources and progress handed down from one generation to the next. This explains why, when talking about the poor, we use the expression "the deprived", since they are deprived of this common heritage, are denied access to it. The following article explains why a social dividend should be given to all:

Louis Even (1885-1974) became the promoter, first in French Canada, of the financial proposals first formulated in 1918 by Scottish engineer Clifford Hugh Douglas (1879-1952), and known as Economic Democracy (as per the first book he wrote on the topic), also known as Social Credit. Louis Even founded a periodical in French in 1939 (Vers Demain), in English in 1953 (Michael), and also a group of devoted people who would spread the Social Credit idea, the Pilgrims of Saint Michael.

The implementation of Douglas' principles would allow the financial system to play its role efficiently, which is the satisfaction of human needs. Not only would the production of useful goods be financed, but also their consumption, so that goods and needs would be brought together in a concrete manner.

Louis Even's genius consisted in popularizing the notions of an engineer so that common people might understand them in light of the social doctrine of the Catholic Church and St. Thomas Aquinas' philosophy.

One of the three principles of Economic Democracy, the dividend, is the topic of this article: a guaranteed income given to all, from cradle to grave, without condition, whether employed or not. Not an egalitarian regime since those who work would still receive their salary while everyone, including the workers, would receive a dividend. The expression used by St. Thomas Aquinas is "suum cuique", to give each one his due.

But this dividend can be applied only when joined to two other principles of Economic Democracy:

1. Newly created money belongs to society, not to privately owned companies (chartered banks), and must be issued by an institution created by the State, a National Credit Office. In reality, money draws its value from the country's productive capacity, from the fact that there exists natural resources and workers willing to exploit these resources. Louis Even writes:

"Money must come into existence at the rate products are made and at the rate that distribution requires. But to whom does this new money belong? It belongs to the citizens. It belongs not to the government, which is not the owner of the country, but only the safekeeper of the common good, nor does it belong to the accountants of the National Credit Office.

"This newly-distributed money is not a salary but an injection of money into the public so that they may call upon work to be made; call upon goods that are waiting to be made. At no time must this newly created money be construed as belonging to one individual or a private group of individuals. There is no other means, in all justice, to place this new money into circulation other than by distributing an equal part to each citizen. Furthermore, it will make money more efficient by distributing it throughout the country".

2. The other principle of Economic Democracy, the compensated discount, will prevent a rise in prices and limit inflation.

Why an income to all, and why call it a dividend?

When one talks about someone who gets dividends, one generally thinks about he who owns shares in a company, thus receiving a share in the profits of that company. Well, one can truly say that every citizen in the country, every member of society, is a co-capitalist, owner of a real capital that is immensely productive.

It has been said previously that money, or financial credit, is, from its very birth, the property of all of society. This is so because financial credit is based upon real credit, upon the country's productive capacity. This productive capacity is owed in part to human labour, owed to the competence of those who take part in production. But it is owed mainly, and more and more, to other elements of production that belong to all.

First, there are natural resources which are not the product of any man or group of men: they are a gift from God, a gift that must be placed at the service of all. There are also all the inventions, made, developed and transmitted from one generation to the next. This is by far the most important factor of production today. No man can claim to be the sole owner of progress. No one can claim exclusive property rights over this progress which is the fruit of many generations.

No doubt that some men of today are needed to put to use this progress — and they are entitled to a reward: this they get through their wages and salaries. But a capitalist, even though he does not take part personally in the industry in which he invested his capital, is entitled to a share of the benefits because of the capital he invested.

Well, the greatest share of real capital in modern production is, most certainly, the sum of discoveries, of cumulated inventions, that allow us to obtain more goods with less work. And since all human beings are equally entitled to this immense capital that is ever increasing, all are entitled to a share of the fruits of production.

One can add as a third factor the division of labour, the fact that each person does not need to produce by himself or herself all the goods they use: it is not all of the people who are required to make shoes, clothes, cars, electric appliances, etc. This is what Douglas calls the "increment of association", the fact that production increases because people live in society, forming an association with their fellow citizens. This division of labour can also be considered as part of progress, the second factor.

The employee is entitled to both this dividend and to his wages. The unemployed person has no wage or salary, but is entitled to this dividend. This dividend is said to be a social dividend because it is an income derived from a social capital.

Two inheritances

Karl Marx claimed that work created all wealth, and Adam Smith argued that capital, money invested in an enterprise, also contributes to production. However, both were unaware of what C.H. Douglas would later call the "cultural inheritance", the legacy of natural resources and inventions that are responsible for more than 90% of today's production in developed countries.

We have just said that the Social Credit dividend is based on two things: the inheritance of natural resources and the inheritance of inventions from previous generations. This is exactly what Pope St. John Paul II wrote in 1981 in his encyclical letter Laborem Exercens (On human work):

"Through his work man enters into two inheritances: the inheritance of what is given to the whole of humanity in the resources of nature, and the inheritance of what others have already developed on the basis of those resources, primarily by developing technology, that is to say, by producing a whole collection of increasingly perfect instruments for work. In working, man also "enters into the labour of others." (n. 13.)

Filling the gap in the purchasing power

Another reason to give a dividend to all is of mathematical nature: the present financial system creates a chronic shortage of purchasing power.

Today, goods are offered for sale at a given price. People who have money buy these goods by handing over the amount of money asked for. This method allows people who have money to choose the products they wish to buy.

Social Credit, or Economic Democracy, would not, in any way, change this method of distributing goods. This method is both flexible and practical — provided, of course, that individuals who have needs also have the purchasing power required to buy the goods with which their needs can be satisfied.

Purchasing power in the hands of those who have needs. This is precisely where the present system is flawed, and it is this defect that Social Credit would correct.

When production is financed properly, production runs smoothly. While production takes place, the money that was used to finance it is distributed.

This money that is distributed as wages, profits and industrial dividends constitutes purchasing power for those who receive it. But bear in mind that:

1. Industry does not distribute purchasing power at the same rate that it generates prices.

2. Production does not distribute purchasing power to everyone. It distributes it only to those who are employed in production.

Even if banks were to charge no interest on the money they lend, there would remain a lack of purchasing power since the amount of money that is distributed as wages cannot buy the total production. There is more to prices than salaries.

Economists maintain that production automatically finances consumption; that is to say, the wages and salaries distributed to the consumers during production are sufficient to buy all the available goods and services. But facts prove otherwise. Scottish engineer Clifford Hugh Douglas was the first to demonstrate this chronic shortage of purchasing power, and bring a solution to scientifically fill this gap with. He explains this gap with what has been called the "A + B theorem":

A cannot buy A + B

The producer must include all production costs in his prices if he is to stay in business. The wages and salaries distributed to the employees, the "A payments" account for a fraction of production costs. There are other costs that are not distributed as wages and salaries that must nevertheless be included into prices, such as the payments for raw materials, taxes, bank charges, the maintenance and replacement of machinery. Douglas calls these payments to other organizations "B payments".

The retail price of products must include all costs: wages (A) and other payments (B). So, the retail price of the products must be at least A + B. It becomes obvious that the wages (A) cannot buy the sum of all the costs (A + B). There is therefore a chronic shortage of purchasing power in the present system.

When a finished product goes on the market, it comes with a price attached to it. But part of the money related to this price might have been distributed perhaps six months or a year earlier. Another part of the money will be distributed only once the good is sold and the merchant receives his profit. Another part might perhaps be distributed some ten years from now when worn machinery — which wear is included as an expense in the price— is replaced by new machinery, etc.

Some people may receive money and not spend it. This money is included in the prices but it is not part of the purchasing power of those who need to buy the goods. The repayment of bank loans over many years and the present fiscal system increases the gap between prices and purchasing power; hence the accumulation of goods, the rise in unemployment and all that ensues.

Some people may argue that the businesses that received "B" payments (those that supplied the raw material, machinery, etc.) have paid out wages to their own employees, and part of these "B" payments thus become "A" payments. This changes nothing to what was already said: this is simply a wage distributed in another period of production, and this "A" cost cannot be distributed without entering into a price, which price cannot be less than A + B. The gap remains.

If you try to increase wages and salaries in an attempt to catch up to prices, the wage increases will automatically go into prices, prices will go up, and nothing will come of it. (Just like the cartoon below with the donkey running after the turnip.) To allow for all production to be bought, an additional income is needed coming from a source other than wages and salaries, an income at least equivalent to B.

This is what the Social Credit dividend would be used for, a dividend which would be distributed every month to every citizen in the country. This dividend would be financed with new money created by the nation, and not through taxation. Otherwise, it would be money that came from salaries.

Without this other source of income (the dividend), there should be, in theory, a growing mountain of unsold goods. But if goods manage to get sold, some way, somehow, it is because we are faced with a growing mountain of debt! Since people do not have enough money, retailers must encourage their customers to use credit in order to sell their goods. Buy now, pay later... in 36 instalments!

Progress replaces the need for human labour

Another defect with the present system is that production does not distribute purchasing power to everyone. It distributes it only to those who are employed in production. And the more production is made by machinery, the less human labour it requires. Production increases, while employment needs decrease. So, there is a conflict between progress which eliminates the need for human labour, and the rule which says that purchasing power will only be distributed to the employed.

Yet, everybody has the right to live. And everybody is entitled to the basic necessities of life. Earthly goods were created by God for all men, and not only for those who can find work.

That is why Social Credit would do what the present system does not do. Without eliminating the reward for work, it would distribute to every individual a periodic income, called a "social dividend" — an income tied to the individual and not to employment.

Earthly goods were created for all

This is the most direct and concrete means of guaranteeing to every human being the exercise of his fundamental right to a share in the goods of the earth. Every person possesses this right — not as an employee in production, but simply as a human being.

This principle of the universal destination of earthly goods has been mentioned several times by the Magisterium of the Catholic Church over recent years, including in one document of the Second Vatican Council, Gaudium et Spes (paragraph 69) and the social encyclical letters of Popes Paul VI, John Paul II, and Benedict XVI. In the Compendium of the Social Doctrine of the Church, the universal destination of earthly goods is part of the second of the four main principles of the social teaching of the Church, namely, the common good. (The three other principles are the primacy of the human person, subsidiarity, and solidarity.)

For now, we will quote only one pope on this issue, Pius XII, who said, as part of a radio message he gave on Pentecost Sunday, on June 1, 1941 (on the occasion of the 50th anniversary of Pope Leo XIII's encyclical letter Rerum Novarum):

"Material goods have been created by God to meet the needs of all men, and must be at the disposal of all of them, as justice and charity require.

"Every man indeed, as a reason gifted being, has, from nature, the fundamental right to make use of the material goods of the earth, though it is reserved to human will and the juridical forms of the peoples to regulate, with more detail, the practical realization of that right.

"Such an individual right cannot, by any means, be suppressed, even by the exercise of other unquestionable and recognized rights over natural goods."

The Pope added that it is up to the nations, through their laws and regulations, to choose the methods that will allow each man to exercise his right to a share of the earthly goods. The Social Credit dividend to all would achieve this. No formula, thus far offered, can be as efficient, not even our present social security laws.

Today, it is not production that is lacking but distribution which is defective. One must therefore have recourse to "distributive justice", to distribution through a dividend. Pope Benedict XVI wrote in his encyclical letter Caritas in Veritate:

"The social doctrine of the Church has unceasingly highlighted the importance of distributive justice and social justice for the market economy (n. 35)… Economic life undoubtedly requires contracts (wages given in exchange of work, for example) in order to regulate relations of exchange between goods of equivalent value. But it also needs just laws and forms of redistribution governed by politics, and what is more, it needs works redolent of the spirit of gift." (n. 37.)

In Caritas in Veritate, Benedict XVI insists on the economy of gratuitousness for people and institutions alike, an economy in which many goods and services can be obtained for free. Everything cannot be calculated in wages and salaries, but much good can be done by volunteer work. In a Social Credit system, citizens having their economic security guaranteed through a dividend, mutual aid and volunteer work would blossom naturally. God Himself showers us with free production, with natural resources and food given in plenty. The Social Credit dividend would be the reflection of God's generosity.

In the same way production frees itself from the use of human hands, the purchasing power expressed by money must reach consumers by a channel other than payment for work. Replacing man by machinery in production should signify an enrichment for man. Man would be freed from purely material worries. This would give man more time to perform other human functions beyond the mere economic function. If, on the contrary, such a substitution leads to privation, it is simply because we refuse to adapt the financial system to progress, and we tie any income only to those who have a paid job.

Is technology the ally or enemy of man?

Is technology an evil? Should we rise up and destroy machinery because it takes our jobs? No, if work can be done by machines, so be it. This will allow man to invest his leisure time in other activities, free activities, activities of his own choosing, provided he is given an income to replace the salary he lost when the machine was installed. Otherwise, the machine, instead of being an ally, will become man's enemy since it deprives him of his income and prevents him from earning a living.

In 1850, when manufacturing as we know it today was barely beginning, man did 20% of the work, animals 50%, and machines accounted for only 30% of the work. By 1900, man was doing only 15%, animals 30%, and machines 55% of the work. By 1950, man was doing only 6% of the work while machines did the remaining 94%. The animals had been freed!

And there was more to come since we entered into the computer age. A third industrial revolution began with the introduction of transistors, and later that of the silicon chip. Microprocessors can now accomplish more than a million operations per second. How many workers can thus be replaced in factories equipped with this technology?

Such factories already do exist. Places like the Nissan Zama plant in Japan that produces 1,300 cars a day with the help of only 67 workers — that is more than 13 cars a day per man. Some factories are entirely automated, such as the Fiat motor factory in Italy which is under the control of some twenty robots that do all the work.

In 1964, a report, "Social Chaos in Automation", was presented to the President of the United States, signed by 32 experts including Mr. Gunnar Myrdal, a Swedish-born economist, and Dr. Linus Pauling, winner of the Nobel Prize. This report said that "the U.S., and eventually the rest of the world, would soon be involved in a 'revolution' which promises unlimited output… by systems of machines which will require little cooperation from human beings. Consequently, action must be taken to ensure incomes for all men, whether or not they engage in what is commonly reckoned as work."

In his book The End of Work (1995), U.S. author Jeremy Rifkin quotes a recent Swiss study which said that "in thirty years from now, less than 2% of the present workforce will be enough to produce the totality of the goods that people need." Three out of every four workers — from retail clerks to surgeons — will eventually be replaced by computer-guided machines.

If the rule that limits the distribution of income to those who are employed is not changed, society is heading for chaos. It would be plain ludicrous to tax 2% of workers to support 98% of unemployed people. We most definitely need a source of income that is not tied to employment. The case is clearly made for a Social Credit dividend.

Environmental implications

If we are to blindly insist on keeping every man and woman employed in production, even though the production to meet basic needs is made with less and less human labour, then new jobs, completely useless jobs, must be created. And in order to justify these useless jobs, new artificial needs must be created, through an avalanche of publicity, so that people will buy products they do not really need. This is called "consumerism".

Likewise, products will be manufactured to last as short a time as possible, with the intent of selling more of them to make more money, which brings about an unnecessary waste of natural resources and the destruction of the environment. Jobs will also be maintained that require no creative effort, jobs that require mechanical effort only, jobs that could easily be done by machine only, jobs where the employee has no chance of developing his personality. But, however mind destroying this job might be, it is the condition by which the worker can obtain money, obtain a licence to live.

Thus for the above worker and for most wage earners, the meaning of their job boils down to this: they go to work to get the money to buy the food to get the strength to go to work to get the money to buy the food to get the strength to go to work... and so on, until they retire, if they do not die before. Here is a life emptied of its meaning, where nothing differentiates man from an animal.

Free activities

What differentiates man from an animal is precisely that man does not have material needs only. He has cultural and spiritual needs also. As Jesus said in the Gospel: "Not on bread alone does man live, but in every word that proceeds from the mouth of God" (Matthew 4, 4). Wishing for a man to spend all of his time in providing for his material needs is of a materialistic philosophy, since it denies that man also has a spiritual dimension and spiritual needs.

But, then, if man is not employed in a paid job, what will he do with his spare time? He will spend it on free activities, activities of his own choosing. It is precisely in his leisure time that man can really develop his personality, develop the talents that God gave him, and use them wisely.

Moreover, it is during their leisure time that a man and a woman can take care of their religious, social, and family duties: raising their family, practising their Faith (to know, love, and serve God), and helping their neighbor. Raising children is the most important job in the world. Yet, since the mother who stays at home to raise her children receives no salary, she is thought by many to be idle, to be unemployed.

To be freed from the necessity to work at providing the necessities of life does not mean becoming lazy. It simply means that the individual could choose to participate in the type of activity that appeals to him most. Under a Social Credit system, there would be an outburst of creative activity. The greatest inventions and the greatest works of art were created during leisure time. As C. H. Douglas remarked:

"Most people prefer to be employed, but on things they like rather than on the things they don't like to be employed upon. The proposals of Social Credit are in no sense intended to produce a nation of idlers... Social Credit would allow people to allocate themselves to those jobs to which they are suited. A job you do well is a job you like, and a job you like is a job you do well."

About the Author

Alain Pilote

Alain Pilote

Alain Pilote has been the editor of the English edition of MICHAEL for several years. Twice a year we organize a week of study of the social doctrine of the Church and its application and Mr. Pilote is the instructor during these sessions.


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