What about the sales tax? Someone might say that if new credits are put into circulation to finance public projects, increasing the rate of consumption over the rate of production, the effect will be that the adjusted price will go up. This would be, in effect, simply a tax following the sale instead of accompanying it. So what is the advantage of this new system?
The existing method of taxation begins by cutting down on your ability to demand, effectively, consumer goods. The Social Credit way stimulates the demand for consumer goods while at the same time making possible the realization of public projects. Thus the productive capacity of the country is stimulated instead of being depressed.
Imagine if you will, a little community. composed of four men who during a given period, have, respectively, 12, 10, 8 and 3 tons of products off which to live. They wish to have a common road: The possessor of the 3 tons of products offers to build this common road in return for 4 tons of products....
Under the existing system of taxation; a levy of 4 tons would be made on what the community is presently producing. For the sake of simplicity, let us assume that the four will be taxed the same amount since the road is for the use of all equally. So each one will be taxed one ton. After the levy is made each will have, respectively, 11, 9, 7 and 2 tons of products. When the road has been built and the 4 tons of taxation delivered to the fourth individual who did the construction, each will have 11, 9, 7, and 6 tons respectively. That is, one ton less for each of the three first individuals, and 3 tons more for the fourth who built the road.
In a community governed by Social Credit principles, the men would simply decide to issue to the road builder a credit of 4 tons on the products of their little community. But they would increase their production in the measure that the road builder made use of this credit. If they were able to increase the amount of their production by 4 tons, then, once the road had been built, and paid for, they would each have, respectively, 12, 10, 8 and 7 tons of products. No one would have suffered a deprivation and the builder would have increased his holdings by 4 tons. In other words, the road was built through increased production.
Obviously this principle has been exemplified by an extremely simple case for the sake of clarifying the idea...
Supposing the little community had been able to increase its total production by 2 tons only. In this case each would have lost only a half ton and not a whole ton as would have happened had they been taxed.
We can conclude then that as long as the total productive capacity of a country is not being utilized, the levying of taxes is an unjustified impoverishment of the population, bringing with it many other evils. The existence of unemployment — unemployment of men, of inventions, of machinery, and the creation of useless or damaging industries simply to have employment for men in order that they may make a living - is clear proof that the whole productive capacity of a country is not being used. Unemployment and taxes, side by side, simply do not make sense.
Furthermore, even if production were at its maximum, the Social Credit method is still the superior one since it does away with all the vast and complicated — and useless - machinery of taxation, which simply costs the country more, and it eliminates all the headaches involved in searching for dollars instead of searching for men, materials and products.
If the real cost of public goods, is thus to be included in the cost which must be paid for public goods, is this not the same as charging the poor equally with the rich to pay such costs? Our system of taxation, which takes more from the rich than the poor, would thus seem to be more in conformity with justice.
The above is a lame objection, and for two reasons:
1. It supposes that the existing taxation system imposes the burden upon the rich and upon the rich alone. But it so happens that the majority of these taxes are incorporated into prices, and everyone, the poor as well as the rich, ultimately pay these taxes at the merchant's counter. Prices, swollen by taxes, are the same for all, for the poor as well as for the millionaires.
2. The objection limps, also, because it regards, one aspect only of the Social Credit system of pricing, while ignoring the social aspect of the system, namely, the dividend. Social Credit has need of both its legs, if it is to walk.
Under a Social Credit regime, there is not only the adjustment of prices, there is not only the probable banishment of taxes, there is likewise the periodic dividend for each individual. And in view of the vast possibilities and operations of the production system, this dividend should and can be sufficient to insure at least the necessities of life.
Since you say that the price to be paid should vary in degree according to the variation of consumption in relation to production, would not an increase in price lower the standard of living for the people, as happens when there is inflation?
When there is question of an increase in price corresponding to an increase in the totality of production, this does not mean an increase in the prices which you are actually paying today.
The base of prices will be much lower than is the existing base of prices. A pair of shoes for which you would pay $12 today, could, under a Social Credit system, cost between $3 and $5, depending upon the relation between goods consumed and goods produced. The price, in effect, would be freed from all the financial charges which today are grafted on to it.
In a Social Credit system, the words increase and decrease, signify nothing more than arithmetical computations. The key word, in considering our standard of living is the word adjustment. Increase and decrease are simply operations to effect the proper adjustment of prices. And what is the result?
Firstly, the adjustment makes it possible for the people to obtain, at all times, the goods which they produce. Secondly, the dividend guarantees to each and everyone, a share in the production. What more could be desired?
We cannot go on desiring what does not exist. If we want marketable goods, then the only thing to do is to produce sufficient of them. Everything is at hand provided there is no obstacle in the distribution system. The adjustment of prices, which is an essential element in the Social Credit financial technique, would be the great regulator of purchasing power. With it, neither inflation or deflation is possible. Whether the purchasing power is distributed by private industry, public works or the dividend, this purchasing power woud be withdrawn from circulation through prices in an adjusted rhythm.
To the end that finance be an exact reflection of real wealth, it is not sufficient that purchasing power should be released in the same rhythm that goods are produced. It is also necessary that purchasing power, so created, should be withdrawn in the rhythm that consumption destroys the goods produced.
This is exactly what Social Credit does through the adjusted price.
Social Credit does not in any way, fix the prices. But it proportions that part of the price to be paid by the consumer according to the relation between total production and total consumption.
Under the existing system, the price is neither regulated nor is it a regulator. There certainly exists a strict accounting for the cost price. But the sales price can vary between the minimum, which is the cost price, and the maximum which is the greatest amount of money which can be gotten out of the purchaser.
Under a Social Credit system, the accounting for the cost price would be maintained. Thus sellers would get back the cost price in order to renew his stocks; plus a percentage of profit in order to make a living. (Profit is to the business man what a salary is to a worker).
The seller has absolutely no reason to increase his price when the buyer has more means of paying, or more purchasing power. Financing the consumer, outside of industry, does not in any way change the cost price of the goods.
Social Credit would make the buyer benefit from a general discount. The seller would be compensated for this discount through the social mechanism of credit.
(To be continued)