Where to find the 107 millions ?
A deficit budget
Mr. Lesage, the premier of Quebec and the province's Minister of Finance, has presented his budget for the coming fiscal year, 1961-62. In it, he foresees revenues of $686,461,000, and expenditures of $793,725,844: That is to say, there will be a deficit of $107,264,844.
Since the expenditures planned for must be made; it goes without saying that at least part of the 107 million, which the various taxes cannot supply, must be found somewhere or other.
Mr. Lesage acts with a certain wisdom when he does not attempt to raise this money by a new round of tax increases. There are already too many taxes. As families stand now, their revenues are much too small for their existing needs.
Where, then, is Mr. Lesage to find the 107 million which he is still lacking, in order to meet the expenditures which the government has committed itself to? He is already, speaking of borrowing 35 millions of dollars. Now this 35 million will not affect taxes this year. That much is sure. But there is absolutely no question but that in the years to come this sum will be pumped out of the citizens through taxes, the 35 millions plus the interest rates charged upon the loan. In other words, borrowing, as in this case, is simply deferred taxation.
The production of the province
The expenditures figuring in the budget, are for services, work, material, products, various types of construction, etc. That is, they are for things which are going to be furnished by the province. The money, for example, which will be paid to contractors who will build bridges, roads or hospitals, will ultimately, in large part find their way into the pockets of employees and the dealers in the various materials used in such constructions. They in turn will spend this money on the public market to buy goods and services available to the consumer. Such goods and services will be supplied - with no little alacrity - by the productive system of the province.
So, it is obvious that the 107 million dollars represents a possible production, production which all the producers of the province in every field of production, will be only to happy to realize. But since Mr. Lesage does not have the 107 million, it goes without saying that the province as a whole is quite incapable of paying for that which, physically, it is entirely capable of producing. Which is a manner of saying that finance is out of touch with reality, And, again, that if the population is obliged to borrow in order to realize this potential production, it will be obliged to go into debt in order to have that which it, itself, produces.
The absurdity of such a system of finance is quite apparent to anyone who is willing to face the truth. It is also equally obvious that the controllers of finance and credit have the government on its knees and the people under their feet.
A like situation exists where the federal government is concerned. Without any doubt, the federal Minister of Finance, Mr. Fleming, will bring down a deficit budget this year.
Now we certainly are not going to criticize the budget because it involves a deficit. But we do criticize a government which stands by with folded arms when taxation is not sufficient to fill the treasury, or which increase taxes every time it wants to undertake some service for the people.
What we do criticize is the turning of the deficit into a debt!
If the deficit were a deficit of real production then there would be no deficit in the budget, for the simple reason that you cannot budget for that which you cannot produce. The best you can do in such a case, is to plan to buy goods and services from abroad, in which case you are only applying the same ridiculous methods of finance, described above, to a foreign country, that is, going into debt to another country.
Produce the means of paying
But what is to be done when the province can produce but not pay for production? The answer is simple and logical: create the means of paying. Produce the money (it does not matter what form it takes) in the same fashion as the people produce things.
It is easier, infinitely easier, to produce figures in the accounting ledger of a financial organization than it is to produce bricks, lumber, steel, wheat, or what have you.
The banks produce and destroy every day those figures which serve as means of payment. They produce them when they grant loans. These figures circulate with the same ease as metal or paper money. And when the borrower repays the loan these figures disappear from circulation.
If the banking system held itself to the rythm of the production and the consumption of real wealth; if it put itself at the service of the capacity to produce needed goods and services, there would be no reason to criticize it. But it does not do so. The evidence is in this, that for the public needs of Quebec alone there is lacking some 170 millions of dollars with which to make payments this year. And how many more millions of dollars are lacking for the needs of schools, and for private needs, which needs the productive system could very easily fill were it not for a lack of this figure-money!
Quebec Credit
Jurisdiction over matters pertaining to the banking system lies completely with Ottawa. But the federal government, which itself is faced with huge deficits and the even more alarming problem of ever-growing unemployment, does nothing to bring the banking system the originator of credit to heel.
Why, then, does not Quebec (or Ontario or Manitoba, or any of the other provinces which find themselves in like desperate straits) take it upon itself to institute a system of monetary accounting, outside any relation with the banking system, which will serve the population instead of penalizing it with enormous debts for producing real wealth.
This was outlined in the feature article which appeared on the front page of the May issue of The Union of Electors.
A system of what we might call, Quebec Credit, would furnish to Mr. Lesage the millions which taxation cannot immediately supply, and the productive capacity of the country is more than sufficient to back up the credit which this institution would supply!
There is no need for a radical break with the methods presently in use for financing long-term works which produce durable goods. If we are prepared to admit a loan, say of 25 millions, repayable by yearly payments over a period of 25 years, why should we not admit the possibility of an advance of 25 millions in figure money, issued by Quebec Credit to be repaid in the same manner over a period of 25 years?
There would be no more inflation in the second case than there would be in the first since each equally places 25 million dollars in circulation! The difference between the two lies in this, that in the case of the first loan we are obliged to repay a total of about 40 millions instead of merely 25 millions. With Quebec Credit we would repay only the 25 millions which were originally issued.
Another differences is that in the existing method of issuing credit with interest charges, a greater void is ultimately created in the circulation of credit than is, in reality, made necessary by the initial loan of 25 million. New loans are made necessary of which part is necessary to honor the previous loans. The result is an ever-growing and perpetual debt which can only be affected by passing it on to industry and from there to the individuals by means of taxation. Which certainly does nothing to correct the situation.
Another difference - under the present banking system the credit of society itself, the credit of the totality of the people based on their productive capacity, is appropriated by the banks and loaned to the people under conditions; to those who in reality contribute to making the country richer. Whereas with Quebec-Credit it is the people who, through this organism, permit an individual or a group of individuals undertaking a project for development or production, whether they be private or public groups; to utilize the basis of this credit for adding to the real wealth of the province. Quebec Credit does not penalize or inflict fines (in the form of interest rates) upon those who thus contribute to the enrichment of the country. It does not withdraw this credit from circulation except when the product realized has disappeared through consumption or use.
Many other benefits could be realized by Quebec Credit; for example, supplementary purchasing power (in the form of a periodic dividend to all) would be made possible for the continued flow of goods to meet the needs of all without exception.
But the least that the Lesage government (or the Frost government or the governments of any of the other ten provinces) could do would be to open its eyes and recognize the incongruity of this situation which permits a deficit of the means to pay in the face of a superabundance of the means to produce. And once having faced up to this impossible and illogical situation, let it decide upon the organization of some such body - as Quebec Credit - which would be the first great victory over the financial dictator ship which presently prevails. It would be the first to profit from such a step and would make a grand contribution to the ultimate welfare of all the people of this land.
"Money, is essentially a mechanism, and can be used or misued like anyother mechanism: and if the population of this or any other country is willing to allow the mechanism of money to be controlled by the few, then so long as inducement by money, is the basis of credit, so long will the few control the many".
C.H. Douglas, Credit, Power and Democracy, Chapter 6.
