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The Use of Social Credit

By Major C. H. DOUGLAS

Douglas - The Man --- Backwards to Douglas

The main objective in republishing the following article which appeared in The Rotarian in 1935, is to provide a standard of reference by which readers may judge the likelihood of a policy of rising prices, increased exports, and immense bureaucratic and administrative wastes and costs culminating in anything but the catastrophe which its analysis suggests. - Editor. An economist is in some sense a professing doctor - sometimes, perhaps, a witch doctor - of the Body Politic. If I were asked to define the difference between a witch doctor and a modern physician, I should say that fundamentally a witch doctor accepts the diagnosis of his patient as the description of the disease from which he suffers, and the modern physician does not. Since the patient, though suffering from heart disease, quite possibly states that a "Devil" has bewitched his breathing, the Witch Doctor resorts to spells, frequently of an alphabetical nature, while exhorting his victim to exertions which a physician would condemn. Much the same distinction may be drawn in regard to the diagnosis and treatment of trade depression. The idea that unemployment is a defect of the economic system and that the present distresses of society flow from it, and can only he cured by its elimination, is both unscientific and incorrect.
The sound economist observes that the best scientific engineering, organising and administrative brains are continuously endeavouring to achieve a given amount of work with a diminishing amount of human labour, and, that therefore, an increase of leisure is both certain and from their point of view, highly desirable.
When he hears that the prime requisite for a restoration of prosperity is a restoration of confidence, he examines the nature of confidence, and finds that it grows from the experience that an intelligent line of action will always lead to a desired result, and he concludes, therefore, that confidence follows experience, and does not precede it. When he observes that the modern production system produces more than is sold although there are still numbers of the population of modern producing countries in drastic poverty, he does not conclude that the output of the production system should he reduced in order that it may correspond with the amount that can be bought, but he says that the amount that can he bought should be increased. Proposals for the use of Social Credit as a remedy for the present ills are not primarily concerned with the production side of business. Probably the greatest body of expert knowledge in the world is concentrated in the production system in one form or another and this body of opinion may be left to continue its undoubted success in the past.
But when we come to consider the distribution of the product, we are met with a less satisfactory situation. The phrase of "Poverty amidst plenty" has become enshrined amongst the cliches of the English language. Social Credit in consequence is primarily concerned with the distribution and not with the administration or technique of production. Its problem is poverty, not plenty, and poverty consists of lack of money the essence of money being credit - the belief that money will do what it is supposed to do. Economic production is interlocked with the distribution of money through the agency of wages, salary and dividend. The existing financial system stands or falls by the perfectly simple proposition that the production of every article distributes enough money to the general public to buy that article. The orthodox economist says it does, the Social Engineer says it does not. The Socialist complaint against so-called capitalism is that money has been distributed inequitably, that is to say, that some people, the "Capitalists", get too much and some, the "Workers", get too little. Hence the Socialist is permanently committed to a policy of "soak the rich". It is a primary tenet of Social Credit theory that though this unequitable distribution may exist, it is a secondary consideration to the fact that not enough money is distributed to buy the goods that are for sale, and that in consequence redistribution is not an economic remedy, whilst being a political irritant of a high order. The first point which may raise in our minds a legitimate as to whether the orthodox economist is quite right in regard to this matter is that the business of making money, and the business of making goods or growing food, have no ascertainable to each other. Of course, the manufacturer, the trader or even the farmer, sometimes talks about "making money". They never make money. They merely scramble for the money which is provided for them in varying quantities and under varying conditions by the bankers, with or without the assistance of the State. It is a little difficult to pin the banker down as to his own conception as to his position in the community. If he is accused of providing an unsuitable amount of money, and thus causing business depressions, or, to a less degree, frantic booms, he retorts that he is merely a businessman and knows nothing about economics, a claim which he can generally substantiate. If, on the other hand, he is accused of missing a business opportunity which he does not wish to pursue, he is a little apt to retire behind a high moral obligation to the community. The point on which he is quite firm is that the initiative of decreasing or increasing the amount of money in circulation is his prerogative, and that if production or consumption are out of step with it, that is just too bad. Now the tact that the banker can increase or decrease the amount of money in circulation with results which, though they may be satisfactory to himself are somewhat tragic to the community, has tended to obscure the fact that we have no record anywhere of a satisfactory distribution of consumable goods to the extent that they can be produced, except in a time of expanding capital production. To put the matter in its shortest possible form, we have no evidence that in modern times the price-system is and every evidence to show that it is not. The theory of this proposition is somewhat complex and highly controversial, but the inductive proofs of it are endless. One of the more obvious is contained in the constant rise of debt, stated by the Technocracy Group rate to be of the fourth power of Time, one hundred taken as a unit. Another equally conclusive indication of the immense excess of price values over purchasing power may be derived from examining assessments for Death Duties in Great Britain and elsewhere, in which it will invariably be found that an estate alleged to be worth, let us say £100,000 and taxed in money upon that sum, consist only to the extent of two or three per cent in purchasing power, the remainder of the estate being assets of one kind or another which have price values attached to them, and require purchasing power to buy them. It is significant that in England eight years are allowed in which to pay Death Duties. It should he noticed that this confusion between assets having a price value placed upon them and purchasing power which is required to meet those price values (as if these, instead of being exactly opposite in nature, were similar) is one of the commonest sources of confusion in discussions of the money problem. Now just as a man is taxed upon his assets and has to pay the tax in money which is purchasing power, although those assets do not grow money, just so do the price values of industrial assets enter into the price of the goods which are sold. And the first objective of Social Credit is to provide sufficient money to meet these charges which occur in ultimate products as the result of the existence of industrial assets. One of the methods by which it is proposed to do this is to take the charge for industrial assets out of prices and pay it direct to the owner of the assets. Instead of taxing him in money for the possession of industrial assets we should, on behalf of the consumer, pay him for the use of them.
That is not essential to the theory, but it is a quite possible way of dealing with the situation. The real beneficiary it should he noted, is the consumer who gets lower prices. While a scientific regulation of the price level so that goods can be taken off the market by the available purchasing power as fast as they are produced is an essential component of a scientific money system, it does not deal with the second aspect of the problem, which fundamentally is related to the change over from manual production to power production. Probably over 80 per cent. of the total number of issues of purchasing power distributed in our existing financial system, is distributed through the agency of wages and salaries and it is obvious that this assumes that 80 per cent. at least, of the population will be maintained on a wage or salary basis. But there is no ground for the common assumption that such a percentage can, or will be maintained in normal times, and every ground for assuming that it will decrease continuously. On the other hand, the dividend system is independent of employment, and depends fundamentally, only on production.
If we can arrange that while the wage and salary pay roll becomes continually less, the dividend pay roll becomes continually greater and more widely distributed, we have dealt with the second half of the problem. There are two ways of looking at these aspects of the matter. The first is moral or ethical, and is probably the less important, since we are less sure of our ground.
Due very largely to a mistaken and mischievous Puritanism, probably having a common origin with Marxism, there is a widespread idea that no one should obtain a living without working for it, and it is noticeable that those who do, in fact, obtain a very handsome living without working for it, are most vigorous in their determination that there shall be the minimum extension of the principle. The moral or ethical justification for a National Dividend however rests on the same basis (a sound basis) on which those fortunate persons who do obtain a living without working for it, ground their claim, that is to say, on the possession of property. The property that is common to the individuals who make up a nation is that which has its origin in the association of individuals to a common end. It is partly tangible, but is to a great degree intangible, in the forms of scientific knowledge, character and habits. The extent to which this national heritage can be made to pay a dividend in money to the general population from whom it arises, merely depends on the simple proposition that the money, if spent, shall be effective in acquiring goods without raising prices. To raise prices would reduce the purchasing power, not only of the fresh money, but of that which preceded it. If this provision can be met, that is to say, if there is undrawn upon productive capacity coupled with control of the general price level, then the mechanism of a National Dividend becomes fairly simple. In its simplest form, it is the issue of bonds to the general population, similar in character to those which are issued to them in return for bank-created money during a period of national emergency such as war. The exact condition's under which the bonds are issued is not an economic, but rather a political problem. Many factors enter into it, and it will, in all probability, be solved in various ways as the differing psychologies of peoples and their Government may direct.
In combination with the regulation of the Price Level, it affords a complete flexible method of insuring that what is physically possible is financially possible. Its inauguration in a modern industrial State means the disappearance of poverty in the old sense of the word, from the population of that State. The monopoly of credit at present held by financial interests, that is to say, banking institutions and their affiliations is obviously so valuable that it would be too optimistic to suppose that it will be relinquished without a struggle. The primary weapon used in this war is misrepresentation. The socialisation of credit, so far from being an attack upon private property, is probably the only method by which private property can once again become reasonably secure. It is the alternative to ever-increasing taxation. It is a method by which everyone may become richer without anyone becoming poorer.
It is, so far as I am aware, the only method by which the pernicious doctrine of "a favourable balance of trade" can be exploded.
In consequence, it is the primary requisite to the removal of the fundamental causes of war.
You are, however, unlikely to arrive at any conclusions of this character by reading criticisms of the theory, which originate from orthodox financial circles. In spite of the difficulty of obtaining a wide public presentation of the theory, however, the progress which has been made by it, more particularly in the past two or three years, is remarkable. There is no portion of the English speaking world in which it is not discussed, or in which spontaneously, bodies for its propagation and realisation have not been formed. The Canadian Province of Alberta has the honour of having elected on August 22nd, the first Social Credit Government, but I shall be surprised if it retains this isolated position for long. New Zealand Australia (and, in particular, Tasmania), South Africa are all moving rapidly in this direction, more or less in the order named.

Whilst in the United States other remedial measures have engaged public attention, steady education upon the subject has been proceeding. So far as anything is certain in this world, Banking dominance of credit, commerce and industry is certainly doomed together with poverty amidst plenty.

C. H. DOUGLAS

Douglas The man and the vision - Song of Federation - C H Douglas - Costing Problem - Colossal Ignorance -
Reactions to Douglas
- Interest widens - Professor Walter Murdoch -
Individual verses the State
- Communications Control - Post Script

The man and the vision. MAY 1979
D0UGLAS The man and the vision.It takes but the most cursory glance at history to understand that the affairs of men have been marked by definite periods of growth and decay, reaching at times remarkable summits of achievement, descending at others to the most depraved depths, even to the stage of collapse.
The remains of twenty civilisations, embellished by all the signs of technical achievement, and scarred with the bloody wounds of decay, are but an awful reminder of the frailty of what we too often regard as the incorruptible attributes of our own society. It would, however, be false to assume that the path of history is an undeviating one, and that our civilisation is bound to a path from which no other civilisation has escaped, for, interspersed with the growth and decay pattern which we see at first, is all the evidence of historical incidents in which the broad pattern was halted, or reversed, by the indomitable efforts of a few, and at times a single individual. It is this alone which lends to the study of history its importance and its interest. Where the growth and decay pattern as inevitable as a first glance might lead us to suppose, history would lose its meaning, save to remind us of the awful inevitability of tomorrow, an inevitability which it would probably be more comforting to ignore. SIGNS OF DECAY Nevertheless, there is a sense of finality about this moment in our history that is sensed by a growing number of our people. Heaven knows, there is every reason why that sense of finality should be with us.
The advanced signs of decay are all around us. We feel as though we are in the knacker's yard of our civilisation.
It is perhaps, a tribute to that indefinable quality called initiative that a few men saw this moment some time ago.
It has often been remarked that the beginning of this century saw our civilisation, personified in the British Empire "on which the sun would never set" at its peak.
Yet to a few brave spirits the signs of decay were already so marked as to make this present moment inevitable.
The turn of the century saw Federation in Australia.
One great Australian, "Banjo" Patterson, the poet, hoped desperately that in our young country a new Britannia might be reborn. Although Patterson is long since dead, perhaps we may yet justify his hope.
The man who wrote "Clancy of the Overflow", and "The Man From Ironbark " deserves a greater acknowledgment for this, one of the least remembered of his poems:
SONG OF THE FEDERATION A.B. PATTERSON
As the nations sat together, grimly waiting -
The fierce and ancient nations battle scarred
Grown grey in their lusting and their hating,
Ever armed and ever ready keeping guard,
Thorough the tumult of their war like preparation
And the half stilled clamour of the drums
Came a voice crying, "Lo, a new made nation,
To her place in the sisterhood she comes!"
And she came. She was beautiful as morning,
With the bloom of the roses on her mouth,
Like a young queen lavishly adorning
Her charms with the splendour of the South. And the fierce old nations, looking on her, Said
"Nay, surely she were quickly overthrown
Hath she strength for the burden laid upon her,
Hath she power to protect and guard her own?"
Then she spoke, and her voice was clear and ringing
In the ears of the nations old and grey, Saying,
"Hark, and ye shall hear my children singing
Their war song in countries far away.
They are strangers to the tumult of the battle,
They are few, but their hearts are very strong,
'Twas but yesterday they called unto the cattle,
But they now sing Australia's marching song.
To a degree, the young queen of the South had escaped some of the ravages which had wracked Europe towards the end of the last century.
The advent of the Industrial Revolution had pitted the machine against man instead of placing it in its rightful place as a tool to be used in man's service.
The resultant human misery and exploitation provided an environment which fostered the seeds of tyranny.
Marx refined a philosophy that the discerning could see would ultimately reduce all men to the same abject conditions.
The decadent Fabians gathered in the parlours of Bloomsbury, where they plotted treason, the overthrowing of the Monarchy and Magna Carta, through "sovietisation by stealth".
From much of this degradation Australia escaped; our problems were pioneering problems, which we tackled manfully and successfully, and Patterson's description was right, we were a clean, young and refreshing nation, come to join a world already marked by lust and hate.
And so we trod the threshold of what has surely been the most tragic and awful century in the whole history of mankind.
Our technological brilliance has enabled us to endure an intensity of conflict and tragedy, which no previous civilisation could have withstood.
Two wars which engulfed the world, the Depression, interspersed with brief periods which, for want of a better word, we have called "peace", are symptoms of this tragedy needing no elaboration.
Behind all the fighting, exploitation and degradation lies one of the most remorseless drives ever launched in human history to assume complete power and mastery over the lives and aspirations of all men, and to vest it in the hands of an incredibly small body of people.
The philosophy that motivates this body is ultimately religious.
The techniques by which this assumption of power is to be achieved embrace all the fields of human endeavour, political, economic, social, cultural and spiritual.
The ultimate sanction is control of finance.
This sets the stage for "The Unfinished Saga of the Twentieth Century".
As Shakespeare said:
"All the world's a stage, and all the men and women merely players; and one man in his time plays many parts". . . C.H. DOUGLAS Onto this stage, then, some fifty years ago, there emerged one of the most unassuming, and yet one of the most extraordinary figures of history, a precise, reserved, terribly English Scotsman, Clifford Hugh Douglas. My task is to tell you something of the man, and his vision, leaving the more technical definition of his proposals to the speakers who follow.
What was he like, the man Douglas, whose life, history and following is so completely erased from the records and the Encyclopaedias of our present day?
Was he but the momentary gleam which the blind moth is when it leaves the darkness and flies into the candle, there to singe its wings and blunder into the darkness again, or, star like, would Douglas endure? Born on January 20th, 1879, Douglas gained an honours degree in Mathematics at Cambridge, before studying engineering. His engineering capabilities must have been considerable, and he finally became a member of the Institute of Mechanical Engineers, a member of the Institute of Mining Engineers, and a member of the Institute of Electrical Engineers.
He was, however, no idle theorist, and before the First World War was in charge of the Westinghouse interests in the East.
It was in this capacity in India that Douglas made a nodding acquaintance with the question of finance, although, as he said later, the significance of the question was completely lost on him.
Two instances were later to bend his mind on the subject.
One project on which he was engaged for a while concerned a survey of a large district with a good deal of water power.
The survey was made at the instance of the Government of India, and it was found that there was a good deal of water power.
Douglas went back to Calcutta and Simla and asked what was going to be done. They said:
"Well, we have not got any money."
At the same time manufacturers in Great Britain were hard put to it for orders, and prices for machinery were very low indeed.
Douglas said that he accepted the statement made, and he supposed, pigeon holed the fact in his mind.
Round about the same time, he dined frequently with a gentleman who was the Controller General in India, who used to bore Douglas continually by discussing something he called 'credit'.
This gentleman used to tell of his experiences in India and Britain, with Treasury officials who persisted in melting down and recoining rupees, having regard to what they called the "quantity theory of money."
Silver and Gold have nothing to do with the situation, it nearly entirely depends on credit", his friend used to say.
Douglas subsequently remarked that had his friend given him a short, sharp lecture on Mesopotamia, it would have been at that time just as intelligible.
Just before the War Douglas was employed by the British Government in connection with a railway for the Post Office from Paddington to White Chapel. There was no physical difficulty with the enterprise at all. He used to get orders to get on with the job: he used to get orders to slow up with the job and pay off the men. "And as a matter of fact", he said later, "the railway is not finished yet". "
" Then the War came and I began to notice that you could get money for any purpose".
And that struck Douglas as being curious.
COSTING PROBLEM Some time after that he was sent by the Government to the Royal Aircraft Works at Farnborough to sort out a costing muddle into which that Institution had got.
To sort out the mess, he had to go very carefully into the costing system.
A friend of his, Sir Guy Calthrop, had suggested to him to get some tabulating machines, which he did, and after a time he began to live with those things, he said, and even to dream of rivers of cards emanating from those machines.
One day it struck him with regard to the figures on those cards, that the wages and the salaries did not represent at the weekend, the value or the prices of those goods produced.
"You say anybody would know that, and I suppose they would," said the Major.
But it followed to him that if that was true, and then it was also true in every factory in every week at the same time.
Therefore, it was true that the amount of purchasing power, or wages and salaries, during that week was not sufficient to buy the product according to the price at that week.
Douglas said that he was confirmed in this by talking with his chief accountant, who told him that the Treasury notes drawn out of the bank each week at Aldershot seemed to come back again. Some of them became quite old friends.
When, after that, he was immersed in industrial disputes he found that the easiest solution of the difficulty with those who were fighting for more wages was to give it to them.
"It settled everything", added the Major, amid laughter!
Afterwards, Douglas went to Richborough, one of the concrete cities built during the War. And he was immensely impressed with the fact that, despite the withdrawal of something like seven millions of the best producers in the country, who were sent away to fight, leaving behind the older people, the women and girls, yet they had been able to raise such wonderful concrete cities.
Also, there were being poured out immense quantities of material to be destroyed, in wartime production.
Yet everyone in the country was living at least at as high a standard as before the War.
Then his attention was attracted to a huge propaganda campaign that was being conducted to the effect that
"we must produce more",
And Douglas began to wonder what would happen when the massive war machine was dissembled, and the capacity diverted into peace time production.
Afterwards, this propaganda was increased further, and it was supplemented by a new cry that Britain was a poor, poor country, and only hard work would save it from destruction.
It was at this point that Douglas wrote his first article
"The Delusion of Super Production"
which was followed during the next twenty years by a steady stream of some of the most provocative, analytical and challenging writing that can be found in the history of English literature.
In 1920 his first major work "Economic Democracy" was published.
The effect was instantaneous.
A furore of interest cutting right through social and political barriers escalated continuously through, until the Depression, which started in 1929, projected Douglas and his writings to the forefront of popular attention, not only in Britain, but throughout the Western World. COLOSSAL IGNORANCE Those who, like Dr. Colin Clarke, have attempted in confined to a few fringe elements represented by such unlikely characters as Sir Oswald Moseley, the British Fascist, have only belittled themselves by a childish exhibition of colossal ignorance.
Indeed, Dr. Clarke's description of Douglas as "a fat, red faced man" whose subject and presentation were very muddled, will, I am convinced, return to haunt a man who has a not undeserved reputation for objectivity, and even at times, commonsense.
It represents such an abysmal descent into the juvenile realm of 'name calling' as to reflect very seriously on Dr. Clarke's reputation and profession.
Compare Dr. Clarke's remarks, for example, with those of Maurice Colbourne, the noted English writer and dramatist:
"To look at Douglas, he might be a gentleman farmer. His steady eyes, and ruddy cheeks, and jovial personality are those of a squire. A delightful host, his hospitality is of a kind rare in these hurtled times, a hospitality in which one basks at ease from the first. And his conversation matches his wine.
Not that it is sparkling, for this suggests brilliant conversation for conversation's sake, but, like good wine, it has a bouquet about it.
Living in the country, Douglas is an adept at doing things for himself, with his own hands. A keen fisherman, he also sails his own yacht single handed in the Channel off the coast of France.
Then he laid down his own hard tennis court, and, just to keep his hand in, constructed an engine, for, by profession Douglas is a civil engineer. He has what is one of the best swept minds functioning today.
It penetrates too, without effort or conceit, beneath the fashions and foibles of the times to the permanent things." Or another view by Mr. A.R. Orage, the editor of "The New English Weekly" a well respected journal:
"The subject itself, even in the hands of a master, is not exactly easy; and, in fact, it compares in economics with, let us say, time and space in physics.
By the same token, Douglas is the Einstein of Economics; and, in my judgement, as little likely to be comprehended practically."
"In other words, a good deal of sweat is necessary to understand Douglas, and with our absurd modern habit of assuming that any theory, clearly stated, must be immediately intelligible to the meanest and laziest intellect, very few will be the minds to devote the necessary time and labour to the matter."
"I was in all respects exceptionally favourably placed to make a fairly quick response. I had time, and from long, long experience of literary geniuses, almost illimitable patience. I was vitally interested in the subject having not only exhausted every other, but been convinced that the key to my difficulties lay in it; and above all, Douglas himself was actively interested in my instruction."
"He said many things in our first talk that blinded me with light; and thereafter I lost no opportunity of talking with him, listening to him talk, reading new and old works on finance, with all the zest of an enthusiastic pupil. Even with these advantages, it was a slowish business, and my reflections on the stupidity of the present day student of Douglas are generously tempered by the recollection of my own. It was a full year from beginning to study his ideas before I arrived at a complete understanding.
Then all my time and labour were justified. Certainly there is no lack of light on the subject today, but only the usual poverty of eyes and understanding."
REACTIONS TO DOUGLAS Or another view of Douglas, by Professor Irvine, Professor of Economics at Sydney University.
When Professor Irvine wrote this article in 1934, he was describing a small group, comprising himself and some of his colleagues in the field of economics, and their reactions on reading Douglas for the first time.
At a meeting of the British Association, held in Sydney, I had read a paper on the 'Influence and Distribution on Production'. It shocked the 'sound' but rather stodgy president of the section, Professor Gonner, but met with the cordial approval of Sydney Ball, of Oxford. The gist of the paper was that the distribution of wealth (ie. of claims to it or purchasing power) was becoming more unequal, and this fact was sabotaging production, and might in the end lead to a breakdown of the whole system.
Later, in "The Veil of Money" I had ventured to call in question some of the postulates of money and banking, much to the alarm of the members of the N.S.W. Actuarial Society, before whom the paper was read
"Economic Democracy"
though to some extent confirming one's own gropings, opened up new and very alluring vistas.
Most of us were impressed by the profound truth of Major Douglas's analysis of the world's economic situation. We had to admit that there was a growing disparity between productive power and the ability of consumers to buy the output.
Hitherto we had either denied the fact, or paid little attention to it.
We did not agree, however, with Douglas's explanation.
It seemed to most of us that the A + B theorem was of dubious validity. Anyhow, was it necessary?
Could not the disparity be explained by the growing inequality in the distribution of wealth?
Our general position resembled that of the Scottish lad to whose family of thirteen an addition had just taken place.
The Minister found him in tears and asked what was the matter, and the lad told him he was afraid there would not be enough food to go round.
"Never mind, my little chap" said the Minister
"The Lord never sends a mouth into the world but he sends meat to fill it".
"Ay", replied the boy, "But he sends all the meat to your house, and all the mouths to ours!" Up to a point, that had been our explanation. The people who needed meat most could not buy it, and those who could buy needed only a part of it.
A few of our band, however, and these were the brainiest, after a year or so of wrestling with the Douglas arguments, became convinced of their truth.
The years 1919-1922 were very stimulating and vital years.
Many of the students during those years were returned soldiers who had gone through the horrors of war, and had thought deeply upon the causes of such foul orgies of destruction.
It was these men who best understood and appreciated "Economic Democracy "
To them it was a revelation "blinding them with light" as Orage puts it in his own case.
One of them is now a distinguished Professor of Economics and a specialist in banking and finance.
After 14 years he said recently he had not been able to find the flaw in Douglas. Not even two years at Cambridge had been able to shake his faith.
Others are "lying low" and some have made their peace with the "big battalions".
I myself was for long unable to overcome my initial doubts. I was still undecided when, in 1922-23 I had the privilege of meeting Douglas. I was, however, convinced that this man had started something which would bring about a revolutionary change in the whole of our economic thinking.
Shortly after arriving in London I wrote to him, and was promptly asked to tea at Fig Tree Court, the Temple.
The curious thing about this meeting is that I cannot recall a word of our conversation. I am not even sure that we mentioned the Douglas theories. The only thing that stands out is the beauty and historic interest of the Temple, perhaps the most entrancing in London ... and the rather stockily built Scotsman, blue-eyed, ruddy of complexion, courteous and friendly without fuss, quietly master of himself and yet regardful of your comfort, the sort of man you could be at home with, whether for talk, or the companionship of silence.
They had told me that Douglas was an open-air man.
He was an ardent follower of Izaak Walton. His eyes were steady and at times you would say:
"here is a man who loves contemplating apart."
At other times he was the alert practical man, quick to grasp the essentials of a situation and to deal with it effectively.
No dreamer this, no fanatic, no wild visionary. Someone has called him a "great synthetic philosopher."
Perhaps the future will think of him as a great thinker and "de-mesmeriser" who had the unusual gift of being able to wake men to a sense of reality.
But his mind is too scientific, too wedded to solid fact, too practical and constructive to suffer being enchained for long in metaphysical subtleties.
To imply that such a man is an ignorant visionary is just sheer impudence. Douglas, it is well to remember, had a Cambridge training, the value of which even an Oxford man will admit.
Then for many years he was occupied with engineering and industrial problems. He knows the facts better than any book-keeper, better than any banker and economist; and what is much more important, he knows how to interpret them in terms of reality.
I feel sure that the future will justify Orage's statement:
"His knowledge of economics was extraordinary; and from our very first conversation everything he said concerning finance in its relation to industry and indeed to industrial civilisation as a whole gave me the impression of a master mind perfectly informed upon its special subject."
"After years of the closest association with him, my first impression has only been intensified.
In the scores of interviews we have had with bankers, professors of economics, politicians and businessmen, I never saw him so much as at a moment's loss of complete mastery of his subject." INTEREST WIDENS This was the prelude to a worldwide interest that reached an extraordinary intensity when the Depression substituted active discussion for the political apathy which attends more prosperous periods.
Dr. Colin Clarke wrote in his recent criticism:
"Douglas' ideas really began to exert influence when they were taken up in the mid twenties by two active politicians Moseley and Strachey, who disseminated them in a naive book entitled "Revolution by Reason".
With respect to Dr. Clarke, this is so much tripe.
On the contrary, both the Fabians and the Guild Socialists repudiated Douglas' proposals, not for the technical reasons which one might suppose, but for the philosophical end towards which they were directed.
Sydney Webb, an early doyen of the Fabian Society, did indeed concede that there was no technical flaw in Douglas' proposals, but that "he did not like Douglas' purpose".
In 1934, Sydney Webb wrote the preface to "The Financiers and the Nation" by the Rt. Hon. Thomas Johnston PC, a former Lord Privy Seal. Webb eulogised Johnston's book as a "great public service".
It was but another diatribe on the merits of nationalisation.
Johnston, however, paid tribute to Douglas (p.146)
"What is impressing hundreds of thousands of people in the world is the Douglas proposal for a national dividend whereby the increased productivity of man and machine can be readily distributed to consumers, and not, as today, permitted (first) to glut markets, and (second, and because of the glutted market) to limit production and throw the producers unemployed and among the non-(or limited) consumers ...
"If the claims of Major Douglas, to have worked out a technique whereby such a distribution of national dividend can be made without an inflation of the price level are justified, then he has undoubtedly performed a service to the whole community which entitles him to rank with Watt and Lister.
True, the Douglas proposals do nothing to socialise ownership of the land and industrial capital ... but if they provide, as their author claims they do, a workable method of distributing the produce of a machine age, then no government, whether Capitalist or Socialist, in the twentieth century can afford to ignore them."
Moseley never, at any time accepted Social Credit, a fact which has been confirmed in recent enquires since Dr. Clarke's criticism was published.
PROFESSOR WALTER MURDOCH A widespread and responsible agreement with Douglas' proposals was expressed by a considerable body of prominent observers who Dr. Clarke found it convenient not to mention.
Men like Professor Walter Murdoch, after whom Murdoch University in Western Australia is named, Lord Beaverbrook, of the Beaverbrook Press, The Marquis of Tavistock, Mr. Inigo Jones, Bishop Moyes of Armidale, New South Wales, the author Beverley Nichols, Dr. Henrick Van Loon, the well-known historian, The Very Rev. W.R. Matthews, Dean of Exeter, and a host of sound thinkers who by no stretch of imagination could be called ill-informed or emotional, found a basis for a new vision in direct contrast to the problems of War, want and poverty which have certainly not been assuaged since then. In 1934 Douglas lectured throughout the Western World, gaining a reception and a hearing which has not been as faithfully recorded as it might have been. A few aspects of his Australian trip are symptomatic of his reception elsewhere in the world. He arrived in Perth on January 16th, 1934, and was met on the wharf by an enormous crowd consisting of people from all over the State, many of whom had travelled hundreds of miles.
At a Civic Reception in the Town Hall at Fremantle, the Mayor, Alderman Gibson was in the chair, and on the platform was the State Minister for Public Works, the Hon. A. McCallum, and the State President of the Social Credit movement, Mr. C.F. North, M.L.A. Mr. McCallum associated the State Government with the Reception, as did other members of Parliament and leaders of Primary Industry organisations.
A packed meeting at the Perth Town Hall was also broadcast by radio, many mills and factories closing down so that workers could listen in.
On January 25th, over 12,000 people assembled to hear Douglas in the Sydney Stadium and the broadcast of that address was heard by over a million people. Despite this response, the mass media maintained almost uniform hostility, and any genuine criticism was replaced by personal vilification and distortion.
At no time were Douglas' proposals ever set out through the media. Nevertheless the numbers of active discussion groups in Sydney alone numbered well over 100, meeting weekly; many composed of University students and academics.
In Auckland the Town Hall was packed to hear Douglas at a meeting presided over by Mr. H.G.R. Mason, M.P. for Auckland.
Time does not permit any further elaboration on the reception which C.H. Douglas received in New Zealand, the United States, Canada and the British Isles, as well as a number of Scandinavian and European countries.
But, as Douglas subsequently wrote, the distortions to which his proposals were subjected contrasted so markedly with the enthusiasm of those ordinary people who had no particular axe to grind, that it became obvious that the real conflict which engulfed society was a political one, from which economic disruption was resulting.
This was confirmed for Douglas at the conclusion of his tour through the United States, when he was asked to lunch with one of the financial magnates of Wall Street.
His proposals were listened to politely, and their validity acknowledged. But he was also told just as politely that his proposals were doomed to defeat at the hands of a supranational political force, diametrically opposed philosophically to Douglas, which aimed over a period of time to remove self government from the people, using political and economic coercion in the process.
The same force has been recently exposed by the eminent American historian Dr. Carrol Quigley in his book
"Tragedy and Hope",
and its existence is beyond all question.
INDIVIDUAL VERSUS STATE So one can conclude that a struggle exists today, as it has all this century, between a concept of self-government and individual responsibility, based of necessity on the decentralisation of power, and its antitheses, the centralisation of more and more power into fewer and fewer hands, with a resultant removal of sovereignty from the individual over his own life and affairs.
What then were Douglas' proposals?
Before going any further, it is essential to stress that those who believe that Social Credit is merely a monetary reform scheme could not be further from the truth; of his extensive writings only a very small part is devoted to the technical aspects of the financial system.
As he himself stressed, no constructive argument on the subject of money or production can take place unless there is at least agreement on the end result we are seeking.
Such questions as "What is the purpose of a productive system?"
"What is the relevance of full employment in a technological age?"
"How does one resolve the conflict between the production syndrome and the conservation of the environment and natural resources?"
"Are systems for men, or men for systems?"
"What is the physical cost of production?"
"What is the purpose of a financial system?"
"To what end are we striving?"
were all dealt with extensively by Douglas before the examination of what are in essence administrative problems.
For this reason I do not propose, nor have I the time to deal with his technical propositions. If, however, we are to share in the vision which Douglas painted, let us at this momentous point in our history beware of three traps into which advocates of freedom, and adherents of Social Credit have at times fallen.
There is, first of all, a tendency which seems peculiar to the English, to believe that the elaboration of a set of proposals, depending on a dispassionate and fairminded audience, is all that is necessary.
Truth is wrapped in a vacuum.
This tendency would have us ignore the advocate of evil, and I often detect among a certain section of Social Crediters an antipathy to any action which opposes or attacks communism or socialism or collectivism.
Douglas rejected this approach by a fearless exposure of the enemies of freedom, and he summed it up in one sentence:
"What use is logic if you haven't got the guns?"
As a corollary is that other English pedantry which judges every proposal more by the grammar in which it is expressed than by its merits.
Totalitarianism is all right if it is couched in sophisticated phrases, and the unforgivable sin is to end a sentence with a preposition!
There is secondly, a tendency to believe that "anti-communism" or "anti-socialism" is an adequate end in itself.
The feature of the non-communist world is large numbers of people who are fearful of the powers of evil, but are powerless because they know of no alternative.
Many pray, it is true, but they pray without understanding.
There is finally, the tragedy of the "monetary reformers" who have attached to Douglas' financial proposals an importance that has relegated his philosophy to a second place.
Such people have rendered Social Credit a grave disservice, a fact which has been exploited by its opponents.
They have turned means into ends, which is perhaps the unforgivable sin.
One of those in the audience today, a newcomer to the ranks of Social Credit, told me of the difference between what he called "symbols" and "ikons".
A symbol was a perversion of the ikon.
Thus, for example, a house is a symbol, a home is an ikon, and we all know of that house where the floor is so spotless and the furniture so cherished that comfort and companionship are discarded.
The physical act of sex is a symbol, love is an ikon, and we all understand the results of an elevation of physical intimacy into an end in society without the spiritual principles of compassion, love and loyalty.
I was very struck by the wisdom of his examples. But the supreme elucidator on the difference between symbols and ikons was Douglas, under his treatment of means and ends.
The true Christian and the true Social Crediter is one who has clarified this before anything else.
In her book "The ABC of Social Credit" Miss E.S. Holter says:
DESCRIBING SOCIAL CREDIT
"Social Credit is not solely an economic solution to the present crisis; it has a profounder philosophical basis, rooted in human nature itself. Its vital aim is not merely to establish economic security without destroying individual initiative.
It is interested in economic security for the very purpose of establishing individual freedom in order that man may develop according to his own initiative and capacity. The possibilities implicit in our age of plenty go much further than the problem of distribution or any other economic consideration.
The struggle for physical maintenance becomes incidental. Man is at last freed to devote himself to those intellectual, emotional and creative pursuits that alone can make life something more than mere vegetation."
The expression of individuality is essential to the happiness of man.
Douglas himself wrote:
"There is too great a tendency to assume that the question of credit is the only subject on which we hold views of practical importance. So far from that being the case, the principles of organisation which are discussed in the earlier part of Economic Democracy are vital to an effective understanding of the problem."
Freedom is a word on everybody's lips, not least the Marxist.
A perversion of reality is to believe that the real struggle is between the individual and authority, described usually as the establishment.
This is a mistake that I think is made in Gary Allen's latest book "None Dare Call It Conspiracy" on Page 29, when he compares two charts. The first chart shows the current idea of describing Communism at the left wing end, and Fascism on the right wing end. Gary Allen makes the point that the perversion lies in believing that Fascism and Communism are different ends.
In a second chart, which he suggests is more realistic, he places all Totalitarian ideas on the left, and Anarchy on the right, with limited constitutional government somewhere between.
I believe that Douglas would have drawn that chart differently, for he distinguished, as Jesus of Nazareth did, that unlawful Power and lawful Authority were at opposite ends: and that Authority, based on the rightness of the Logos, or the Word, was the essential prerequisite for the maximum freedom for each sheep in the flock.
An illuminating story told of Douglas, by Mrs. Elizabeth Dobbs concerns one of an early group of Social Crediters who left a meeting because of a disagreement. "He needn't think he's indispensable," said one of the group. "On the contrary" said Douglas quietly, "Everyone is indispensable".
This made a profound impression on me when I heard it, and made me very conscious of the times when I, and others in the League, have left someone out because they didn't seem to fit in too well, through perhaps a particular habit or attitude.
Our concern must be for each person, even our enemy, as Christ himself taught us.
Douglas saw more clearly than anyone else how important each individual was, as he expressed in writing,
"Systems were made for men and not men for systems, and the interest of man which is self development is above all systems."
The following extract from Dr. Monahan's booklet "Social Credit in 1962" is worth quoting:
"The situation is one with which the world is very familiar; the situation which has dominated all history.
It is the endless struggle between the tyrant and the people.
Fundamentally, the tyrant is a man who endeavours to organise as much of mankind as he can reach into a mob which can be handled by sub-tyrants ? what we now call "Bosses"; and used for his personal aggrandisement (Vide George Orwell, 1984)". What distinguishes the present from earlier manifestations of this struggle is firstly that it is on a more magnificent scale than was ever possible before; secondly that the tyrants have concealed themselves and their conspiracy; and thirdly that the antithesis of mob-existence; freedom of the individual; is far more a practical possibility now than has ever previously been the case.
COMMUNICATIONS CONTROL The vast scale of possible tyranny is the result of the modern development of communications, under which heading we include control of publicity through Press and wireless; a situation epitomised in the phrase "control of finance and control of news are concentric".
Not only communications, however, but power is on a world scale, as can easily be grasped by considering the possibilities open to a squadron equipped with H bombs or, as far as popular credence is concerned, an orbiting satellite capable of ejecting a devastating missile at any selected area or point of the globe.
In this connection it is of some interest to note that President Kennedy has stated that the agreement of the U.S.S.R. to co-operate with the USA in exploring the problems of outer space may well be a turning point in history (vide infra).
Douglas has defined Social Credit more than once. The first time he defined it as "the policy of a philosophy"
This definition, which at first sight conveys little, is of tremendous importance.
A policy is a course of action designed to secure a particular result.
Now Douglas has never claimed that Social Credit is something wholly new; and, in fact, Social Credit bears to the present world situation the same relation as a new strategy bears to an old battle.
In this case, the tyrant, and the will-to-freedom of the individual.
The philosophy, of which Social Credit is the policy, includes belief in the self-development and self-determination of the individual man. It is exactly opposed to the philosophy of collectivism, of which Socialism is the policy.
The will-to-dominate leads to the organisations of mankind into ever larger and fewer units. We call it collectivism, or totalitarianism, or Socialism. One of its expressions is Internationalism.
Douglas has expressed the situation beautifully:
"Internationalism with its corollary a World State ... is one end of the scale and self-determination of the individual is the other. The smaller the genuine political unit, the nearer you are getting to self-determination of the individual".
Collectivism, in all its expressions, means the subordination of individuality to the group.
Social Credit, on the other hand, is the policy that aims at emancipating individuality. It aims at placing the achievements of modern industry at the service of the individual, in order to set him more and more free from the necessity of being organised for some collective purpose.
Technically, that aim can be accomplished with the greatest ease. This policy is the antithesis of the policy of "full-employment", which, at the moment, is the major expression of the will of the few to dominate the world.
"Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your Heavenly Father feedeth them. Are ye not much better than they? ... And why take yet thought for raiment? Consider the lilies of the field how they grow; they toil not, neither do they spin: ... Wherefore, if God so clothe the grass of the field, which today is, and tomorrow is cast into the oven shall He not much more clothe you, 0 ye of little faith?" Early in 1951, Douglas, to counteract the tendency of the Social Credit movement, as of all movements which have a philosophical basis, to develop its perspective disproportionately, drew up a scheme embodying a definition of Social Credit by specification in answer to the question:
WHAT IS SOCIAL CREDIT?
This specification follows: - Social credit assumes that Society is primarily metaphysical, and must have regard to the organic relationships of its prototype.
PHILOSOPHY POLICY
Economics Administration Consumer Integral Hierarchy Contracting Control of Accounting Out Production Mechanisms
OBJECTIVE:
Social stability by the integration of means and ends.
INCOMPATIBLES:
Collectivism, Dialectic Materialism and Totalitarianism. Judaeo-Masonic Philosophy and Policy.
Ballot-box democracy embodies all of these. "Christianity" Douglas said, "is either an interesting set of opinions, or it is the warp and woof of the Universe" . Starting from the point that the true and rightful end for man is expressed through and in the Christian faith as in no other, Douglas showed the steps necessary to "make the word flesh" or to translate the Christian faith into practical effect in society.
His scheme he called Social Credit, "the Policy of a Philosophy"
It is the only hope of an emergence through the darkness of our present times into the age of freedom, and the emancipation of individuality. It will be no Social Utopia, but an environment in which each person can spend a life building a Utopia of his own.
He understood completely the nature of the struggle which is now intensifying, as described so brilliantly in his chapter "The Critical Moment" in the book Social Credit.
He put new colours on the great picture which exploded into a decaying world 2,000 years ago, when the Word became flesh through Christ Jesus. He showed how a few can shift mountains.
We have to take hold of our shovels and start shifting.
I would like to conclude by quoting some verses in 1934, called The Douglas VisionThese things shall be!
A loftier race Than e'er the world hath known shall rise.
With flame of freedom in their souls
And light of knowledge in their eyes.
They shall be gentle, brave and strong
To spill no drop of blood, but dare
All that may plant man's lordship firm
On earth, and fire, and sea, and air.
Nation with nation, land with land,
Unarmed shall live as comrades free;
In every heart and brain shall throb
The pulse of one fraternity.
New arts shall bloom, of loftier mould,
And mightier music thrill the skies.
And every life shall be a song,
When all the earth is Paradise.
J.A. Symonds. POST SCRIPT 1977 The current situation serves only to exemplify Douglas's predictions made over 50 years ago.
The feverish increases in productivity; an attempt to "work" our way out of trouble are leading to the cut-throat bid for world markets which if writing unabated, will inevitably lead to War.
At the time often Australian ships lie idly in Yokohama, because the Japanese refuse to pay the original contract price in view of the fall in the world price of sugar.
Australia now subsidises a growing number of food items on to the world market, while an increasing number of Australian consumers go hungry. So do Australia's competitors.
Yet, threading through the growing chaos in the world is the mute promise, and hope of the Douglas vision; which could take us through to a golden renaissance.
At the thanksgiving service at St. Paul's, London, for Her Majesty the Queen's Jubilee, the first lesson, significantly from the 4th Chapter of Micah, contained the words once featured on "The Fig Tree", the brilliant Social Credit journal:
"But they shall sit every man under his vine and under his fig tree: And none shall make them afraid" That is the Douglas vision.


Electronic text: ©MooCow Publications, Numurkah, Victoria. 06/07/00

LOOKING BACKWARDS TO DOUGLAS - 1980


The truth of prophecy can only be confirmed by subsequent events. The predictions of C.H. Douglas, so graphically portrayed elsewhere in this issue by Viviane Forrester and The Ecologist, were only slightly less self-evident twenty years ago. We are reprinting an article from The New Times, (April 1980), with the editorial introduction as it was in that issue:

THE RE-DISCOVERY OF DOUGLAS CONTINUES Douglas the realist expressed the view that events would be the major factor in the eventual establishment of a Social Credit society. The massive industrial reconstruction programme following the Second World War partially masked the basic flaw in the finance-economic system. But the progressive inflation, increasing centralisation, environmental and social problems have created a crisis situation in which increasing numbers are beginning to consider what Douglas had to say. The British journal, "New Society", is not the type of journal in which the ideas of Douglas, who described himself temperamentally as a non-party Tory, could he considered sympathetically. But in the issue of January 24, 1980, two contributors, Bill Jordan and Mark Drakeford write under the title, "Major Douglas, Money and the New Technology", arguing that "The neglected apostle of Social Credit has a message for the 1980s." The fact that the two authors fail to grasp that Douglas's understanding of political realities and international politics was just as penetrating as his understanding of finance-economic realities, and that their description of Douglas, the man, is based upon faulty information, does not obscure a valuable assessment of Douglas's "prophetic vision." Major C. H. Douglas, the founder of the Social Credit Movement has been almost forgotten. Yet his radical critique of social and economic institutions made a considerable impact in the 1920s and early 1930s. He offered an explanation for interwar economic disasters. which was eventually superseded by Keynes's much more sophisticated analysis. Keynes seemed to prove that the faults in the system were far less basic than Douglas suggested; but Keynes in turn had been eclipsed. With the return to fashion of the economic orthodoxies of the 1920s, it is worth considering why Douglas rejected both monetarist ideas and Keynes's revision of them. On the eve of the micro-electronic "revolution" it is also worth a second look at Douglas's prophetic vision of the social and economic problems associated with advanced technology. A private and retiring person
Douglas was a private and retiring person, who released very little information about himself. When he died in 1952 - his last years were spent in rather embittered isolation - his only daughter followed his instructions not to provide any details about her father's life. Such biographical material as has been published consists of others' statements about him that he did not trouble to deny. He wrote few letters, and was secretive even with close colleagues and supporters. First book at 40
Of Scottish descent, he trained as an engineer and accountant, and seems to have pursued an active career in India and South America, as well as in Britain, working on a series of engineering projects, including railways and aircraft construction. It was not until 1920 (when he was over 40) that his first book, Economic Democracy, was published. Just before this, however, his ideas had been enthusiastically taken up by the influential editor of the magazine, New Age, A. R. Orage, who published a spate of his articles, alongside those of leading intellectuals like G. D. H. Cole, Havelock Ellis, Shaw and Wells.
He travelled all over the world, lecturing about Social Credit and appearing before government financial inquiries. When he visited Perth, in Australia, all the factories closed for the day to enable workers to listen to his radio broacast. He wrote in an awkward, eliptical style, and his ideas cannot be easily fitted into any intellectual tradition. His other main works were Credit-Power and Democracy (1922), Social (Credit (1924) and The Monopoly of Credit (1931). He was highly critical of a large number of social institutions, but he traced the deficiencies in most of them to a single fault in the financial system. This was that the rate at which the costs of producing goods increased was always and necessarily greater than the rate at which incomes were distributed.
He believed that science and technology could expand production almost infinitely, but that the way these new processes were financed constrained and distorted potential progress.
Thus, although productivity increased, poverty and toil were not abolished. New income distribution
Douglas had a vision of an automated society in which all individuals could enjoy freedom and leisure, but he insisted that this could never be achieved unless his new way of distributing incomes to consumers was adopted. Without these changes, he predicted an increase in "servility" - to centralised authority, to monotonous and meaningless work, and to the stigmatising terms of the dole. The technical problem which Douglas identified is illustrated in an extreme form today in projects like North Sea oil and Concorde. The development costs of these enterprises have been vast, and enormous loans were needed to finance their technology. All these cumulative costs in the years before the products appeared have had to be passed on to consumers. Many of these costs were distributed as incomes to people working on the development stages, but by the time the product reached the market, these incomes had long since been spent.
An inherent gap
Hence the prices of goods always reflect a trail of past costs, while the incomes associated with these costs have already been taken out of the market by prices in an earlier cycle. Of course, there are always new injections of credit being introduced to finance new projects, and these ensure that the system does not grind to a halt. But there is an inherent (and as technology advances, ever-increasing) gap between purchasing power and prices which can only be filled by creating new money in a way which creates new costs. In other words, the solution only exacerbates the problem, by contributing to a rise in costs (and hence prices) which will always tend to be faster than the rise in incomes. This inflation in turn can only be curbed in an orthodox manner by slowing down the growth of new production, and by reducing the flow of new money - causing recession and unemployment.Dividends
Douglas suggested that the only cure was gradually to increase incomes without increasing costs. by introducing universal dividends to all citizens in measure with increases in output. As technology conferred the benefits of non-manual production, these dividends would gradually replace wages and salaries as the main source of incomes for all citizens. He called this system Social Credit. Detractors called it "funny money".
Nationalisation of credit
In the 1920s. Douglas offered an explanation for unemployment and under-consumption at a time when orthodox economists could only insist that wages and prices must be too high, and should be allowed to fall. The first world war had shown that output could be greatly increased, but only by permission of the bankers whose loan credit financed it, and whose power had been vastly increased by the war. Thus when deflationary policies prevailed, as in the 1920s, not only did output stop expanding, but the lack of new money in the system prevented existing products being bought.
Douglas's solution was a "nationalisation of credit and offsetting producers' costs as the mechanisation of industry progressed, as well as paying dividends to boost consumption.
The classical economists had insisted that there was an automatic equation between the money available to buy goods and the quantity of goods for sale. For instance. J. S. Mill wrote: "What constitutes the means of payment for commodities is simply commodities. Each person's means of paying for the productions of other people consists of those which he himself possesses. Could we suddenly double the productive power of the country, we should double the supply of commodities in every market; but we should, by the same stroke, double the purchasing power." So every aggregate supply created its own aggregate demand, and similar laws tended to make demand for labour expand up to full employment. if the wage market operated freely.
Keynes's attack on these orthodoxies acknowledged Douglas as one of the few writers who had previously challenged them.
At the start of his General Theory Of Employment, Interest and Money in 1936, Keynes wrote: "The idea that we can safely neglect the aggregate demand function is fundamental to Ricardian economics, which underlie what we have been taught for more than a century . . . The great puzzle of Effective Demand . . . could only live on furtively, below the surface, in the underworlds of Karl Marx. Silvio Gesell or Major Douglas." The trouble with Keynes
But, unlike Douglas. Keynes argued that the flaw in the system which could lead to insufficient demand could be corrected by increasing the supply of money entering the business cycle through conventional channels. Government could boost production and increase purchasing power in conditions of unemployment by monetary and fiscal policy - through central banking operations to influence interest rates, through reducing taxation and through increasing public spending. Thus continuous economic growth and full employment were possible. Continuous inflation
As Douglas predicted, these Keynesian remedies have contributed to 40 years of continuous inflation, as increases in the supply of money have all entered the system as new costs. Furthermore, the failures of Keynes's policies have opened the door for a return to the very principles he seemed to have refuted. F. A. Hayek, the economic guru of the new Conservative government, was a sharp contemporary critic of Keynes, and has consistently predicted the collapse of his system for official monetary interventions.
Distorted argument
Hayek argued that the depression in the 1920s and 1930s reflected a maldistribution of production between various industries. By making money too readily available. Keynesian policies prolonged this distortion; they created a sector of the economy that could only survive by still further injections of credit. They put the government in the position of having to go on and on expanding the supply of money in order to secure employment in unprofitable industry, and also to settle irresponsible wage claims. By removing from industry the responsibility to be profitable and from the unions the responsibility for causing unemployment, these policies have created twin sources of inflationary pressures which are cumulative. Cost-push inflation
Hayek places an enormous emphasis on the expansion of the money supply as a cause of inflation; he even states that there can be no such thing as cost-push inflation. "What is called cost-push inflation is merely the effect of increases in the quantity of money which governments feel forced to provide in order to prevent unemployment resulting from a rise in wages (or other costs) which preceded it." He argues that we can only correct the inflationary legacy of Keynesian policy at the price of heavy unemployment until labour gravitates to profitable industry, and wages settle at realistic (and in some cases lower) levels.
Tile parallels between the pronouncements of Tory Government spokesmen on economics and the policies of governments in the 1920s are by now commonplace, but nonetheless striking. Their sole optimism lies in the forces of the market, and in the notion that in time labour can be redeployed into the most efficient avenues for production. Implicit in this is a faith that new technology can, and will, provide both prosperity and full employment in the long run, and that the only way to achieve economic growth is to make all workers more productive. Machines replacing men
This optimism is directly at odds with the second part of Douglas's analysis of modern society, to which we will now turn. Douglas insisted that machines were not merely making men more productive; they were actually replacing them in the productive process. Thus, unless a new system for distributing incomes was adopted, full employment could only be achieved at the price of enormous inequalities of wages, and by "creating" work, or preserving it artificially. He foresaw that neither the political left nor the right would be able to frame social policies to cope with the dilemmas this would produce. He challenged the ethic that wages from work are the only morally acceptable source of income for living, and pointed to the fear of freedom that underpinned it.
He prophesied both the defensive tactics of trade unions in face of advanced technology, and the machinations of governments faced with large-scale long-term unemployment. His notion of social dividends was as much a measure towards social justice and human dignity as towards economic progress. Only an income independent of work could guarantee citizens a decent standard of living on unstigmatised terms, even in the most technologically advanced society. Indeed the more technology progressed, the more this measure was necessary.
Prediction delayed
The problems that Douglas predicted did not arrive as suddenly and disastrously as his original forecast. There are several reasons why they are only now emerging in the form he described. First rearmament and the second world war put an end to the recession of the 1930s. Secondly, as the economy expanded during and after the war, the new technology of Douglas's era created new jobs of its own. Thirdly, Keynesian policies did, as Hayek says, bolster employment in traditional industries. Fourthly, enormous increases in public spending on health, social security and housing since the war have contributed to a major shift of employment from the private into the public sector, and within the private sector itself.
Administrative, clerical and service-type employment have increased far faster than productive employment. Yet in spite of all these factors, structural unemploy-ment has become a feature of the economy, and all predictions point at it increasing in the next decade.
Most significantly of all. it seems that the new "technological revolution", based on micro-electronics, is far more likely to give rise to the phenomena that Douglas predicted during the introduction of electrical power and the motor engine. This is because the new technology threatens precisely the kinds of employment that have expanded most during the postwar years.
Micro-electronics
In a recent article about the development of micro-electronic circuits based on silicon, Peter Laurie wrote that by the end of the century "the cost of these chips will be negligible compared with the boxes they come in and the software that runs them." The micro-electronics industries themselves are not labour-intensive, and there is no reason to suppose that the new industries they give rise to will develop in places where traditional employ-ment declines. They are already tending to grow up in countries where labour is cheapest, like Brazil and Taiwan. In a declining economy like ours, it is even less likely that new industries based on micro-electronics will provide new sources of employment. Robot technology
In manufacturing industry generally. "robot technology" is likely to lead to a further automation of low-skill jobs, and even to the replacement of some skilled workers. But the effects of this process will probably be mitigated by trade unions experienced in defending their members' interests. It is in the service industries and in office and administrative work that new technology's impact will be dramatic.The new industrial revolution
The cost-effectiveness of means of storing and using information based on the word processor and electronic communication within and between offices is already clearly visible. David Cockroft, until recently head of research for the largest white-collar trade union of private-sector employees, APEX, was quoted recently as saying, "A typist in central London probably costs £6,000 to £7,000 per annum in salary, employment costs. social insurance, etcetera. for an employer. and the evidence which I have seen indicates that if you use it properly, you can replace a typist by installing a word processor which costs £4,000; then you can save the cost of a word processor in twelve months." Ian Barrow and Ray Curnow have just published the research they have been doing since 1976 on the likely effects of micro-electronics on employment. (This research was commissioned by the Department of Industry, who declined in 1978 to publish its findings.) Curnow writes, "The information occupations are thought to amount to 65 per cent of the working population, so that even moderate improvements in productivity could bring about unemployment in the region of 10-20 per cent . . . The overall consequences are comparable with the industrial revolution." Elite employed
Douglas predicted a society in which an elite of employed technicians earned high wages, while an ever-increasing mass of the unemployed were stigmatised by dependency on conditional poor relief. War, the Beveridge plan, and Keynesian policies, all delayed this state of affairs; Conservative economic and social policies will accelerate the trends set in motion by the new technology. Tories endorse shorter hours
The notion that a diminishing amount of necessary work might be shared out among a workforce doing shorter hours was accidentally endorsed by a Tory government in the winter of 1974 (output did not fall significantly during the period of the three-day week), but is now rejected by employers and by most of the trade union leadership. Schemes of state-subsidised work creation are being cut back. Reliance on selective and discretionary benefits for the mass of medium-term and long-term unemployed, and for single parents, reflects the long-standing Tory philosophy that those who do not earn enough to support their families are at best dangerously in need of control and supervision, and at worst a burden and a threat, to be rationed, checked and punished. Never effectively challenged
This philosophy has never been effectively challenged by the Labour Party. The Beveridge reforms were inextricably linked with Keynesian optimism about the possibility of uninterrupted long-term economic growth and full employment. As this optimism has faded, universalism in social policy has given way under Labour to a brand of paternalistic welfare imperialism which provokes (and deserves) the reaction it gets- Thatcherism in the spirit of the 1834 Poor Law.

Leisure, dignity and freedom
Whatever the shortcomings of his economic analysis and remedies, Douglas offered a vision of a technological society in which machines conferred the benefits of leisure, dignity and freedom on all men and women. He was against centralised power, against large organisations, against the ethic of work for work's sake, against treating money as a commodity or using it to goad or punish people into wage slavery. He believed that his system of dividends and price subsidies could avoid recession and inflation. could aid a rationally organised economy, could gradually replace the tyranny of the factory and the dole, and provide a decent and secure life for all.
Unfortunately, Douglas was politically unsophisticated. When his ideas were not taken up at once by financiers and the political parties, he quickly became disillusioned, and drifted gradually but steadily into a crude conspiracy theory. The only political group that gained power with his ideas (in Alberta. Canada, of all places) was unable to put them into practice, and degenerated into rightwing populism. None of his followers had solid political support, and some had dubious connections. Yet the accuracy of his foresight earns his ideas consideration. If the discredited economic orthodoxies and social philosophies of Conservatives of the 1920s can suddenly be heeded with respect, progressives could do worse than look to Douglas for inspiration in a gloomy era.

Published by the Australian League of Rights, Box 1052. G.P.O. Melbourne 3001.