The Use of Social Credit
By Major C. H. DOUGLAS
Douglas - The Man --- Backwards
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
"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
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
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
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
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
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
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
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
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
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
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)
"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
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
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
"How does one resolve the conflict between the production
syndrome and the conservation of the environment and natural
"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
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
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"
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
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
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
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
"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
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
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
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
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
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
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
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.
Economics Administration Consumer Integral Hierarchy
Contracting Control of Accounting Out Production Mechanisms
Social stability by the integration of means and ends.
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
His scheme he called Social Credit, "the Policy of a
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
Electronic text: ©MooCow Publications, Numurkah, Victoria. 06/07/00
LOOKING BACKWARDS TO DOUGLAS
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
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
He believed that science and technology could expand
production almost infinitely, but that the way these new
processes were financed constrained and distorted potential
Thus, although productivity increased, poverty and toil were not abolished. New
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
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
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
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
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
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
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.
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
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
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
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
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.