Major C. H. Douglas (1879–1952) - Springer Major C. H. Douglas (1879–1952) J. E. KingAffiliated withUniversity of Lancaster Abstract As we have seen, it is a frequent complaint of economic heretics that they are ignored by the practitioners of ‘normal economic science’, who rarely engage dissidents on their own or any other terrain. Heretics ask embarrassing questions, investigate problems which are not generally accepted as legitimate, and provide answers which rely upon unusual concepts, unfamiliar reasoning and inadmissible evidence. In short, they operate outside and cut across the paradigm which guides orthodox analysis.1 Karl Marx’s persistent complaint concerning the reception of his work was not the harshness of the criticism but its absence, which forced Friedrich Engels to tout for reviews and then (in desperation) to write his own.2 Page %P Notes 2. K. Marx and F. Engels, Letters on ‘Capital’ (London: New Park Publications, 1983), pp. 119–23, 149–51; W. O.

Henderson, The Life of Friedrich Engels (London: Cass, 1976), I, pp. 403–4. 3. K. Wallis, ‘The Introduction and Critical Reception of Marxist Thought in Britain, 1850–1900’, Historical Journal 20, 1977, pp. 417–59. CrossRef 4. What little there is can be found in J. L. Finlay, Social Credit: The English Origins (Montreal and London: McGill-Queens University Press, 1972), pp. 88–96; see also the obituary in The Times, 1 October 1952. 5. J. A. Irving, The Social Credit Movement in Alberta (Toronto: University of Toronto Press, 1959); C. H. Douglas, The Alberta Experiment (London: Eyre & Spottiswoode, 1937). 6. M. B. Reckitt, As It Happened: an Autobiography (London: Dent, 1941), p. 171. 7. P.

Mairet, A. R. Orage: A Memoir (New York: University Books, 1966); Reckitt, As It Happened, chs IX–X; Finlay, Social Credit, chs 8–9. 8. W. E. Mann, Sect, Cult and Church in Alberta (Toronto: University of Toronto Press, 1955), pp. 153–8; Finlay, Social Credit, ch. 10; Hewlett Johnson, Searching for Light: An Autobiography (London: Joseph, 1968), pp. 136–9; H. Kenner, The Pound Era (London: Faber, 1975), pp. 301–17, 407–13, 430–1, 463–4; E. Davis, Vision Fugitive: Ezra Pound and Economics (Lawrence, Kansas: University Press of Kansas, 1968); R. Kojecky, T.S. Eliot’s Social Criticism (London: Faber, 1971), pp.

21–2, 79–85, 220. 9. G. Walker, Economic Journal 46, 1936, pp. 129–30, CrossRef reviewing E. F. Nash, Machines and Purchasing Power (London: Routledge, 1935). 10. C. B. MacPherson, Democracy in Alberta: Social Credit and the Party System (Toronto and London: University of Toronto Press, 1972), p. 108. This book offers an excellent account of Social Credit as a political philosophy, but (like Finlay, Social Credit) is weaker on Douglas as an economic theorist. 11. C. H. Douglas, Credit-Power and Democracy (London: Cecil Palmer, 1920), p. 22 (stress deleted). 12. C. H. Douglas, Economic Democracy (London: Cecil Palmer, 1919, second edn 1921), pp. 7, 23–5, 27, 36, 47. 13. Ibid., pp.

68, 71, 86–7, 92. 14. J. Dorfman, The Economic Mind in American Civilization, Volume III, 1865–1918 (New York: Viking Press, 1959), pp. 437–42; E. Cannan, ‘Capital and the Heritage of Improvement’, Economica n.s. 1, 1934, pp. 381–92; CrossRef C. E. Ayres, ‘Ideological Responsibility’, in W. J. Samuels (ed.), The Methodology of Economic Thought (New Brunswick, U.S.A.: Transaction Books, 1980) pp. 15–22; J. Lehr, ‘K. Marx, Das Kapital, Kritik der Politischen Ökonomie’, Vierteljahrschrift für Volkswirtschaft 23, 1886, pp. 108–9. 15. Ibid., pp. 114–19, 126–9, 135–6, 139–40. 19. C. H.

Douglas, Social Credit (London: Cecil Palmer, 1924); MacPherson, Democracy, pp. 112. 20. C. H. Douglas, The Monopoly of Credit (London: Eyre & Spottiswoode, 1931; second edn 1937), pp. 125–52, especially pp. 145–7. 21. Ibid., pp. 28–35. There are, however, two reasons for doubting whether Douglas was ever a true underconsumptionist. First, money and credit play a much more significant role in his analysis than is generally true of underconsumptionists. The second difference is more fundamental: underconsumption theories typically refer to an economy in which excessive net savings are productively invested. For Douglas aggregate purchasing power would be deficient even if net investment were zero. (I owe both these points to M. P. Schneider.) 22. Ibid., pp. 45–6, 50, 74, 94–5, 98–100. 23. By G.

Biddulph: Economic Journal 42, 1932, pp. 268–70. CrossRef 25. R. F. Harrod, The Life of John Maynard Keynes (London: Macmillan, 1951), pp. 139–40. 26. F. P. Ramsey, ‘A Mathematical Theory of Saving’, Economic Journal 38, 1928, pp. 543–59; CrossRef see K. Martin, ‘Introduction’, in W. R. Hiskett and J. A. Franklin, Searchlight on Social Credit (London: P. S. King, 1939), p. vii. 27. F. P. Ramsey, ‘The Douglas Proposals’, Cambridge Magazine 11, 1922, pp. 74–6. 29. There is a short uninformative reference to Douglas in W. C. Mitchell, Business Cycles: The Problem and Its Setting (New York: National Bureau of Economic Research, 1927), p. 41n. 30. MacPherson, Democracy, pp.

120–1; cf. R. Miliband, ‘The Politics of Robert Owen’, Journal of the History of Ideas 15, 1954, pp. 233–45. CrossRef 31. N. Mackenzie (ed.), The Letters of Sidney and Beatrice Webb. Volume III: Pilgrimage1912–1947 (Cambridge and London: Cambridge University Press/London School of Economics, 1978), p. 127. 32. The Labour Party, Labour and Social Credit: A Report on the Proposals of Major Douglas and the ‘New Age’ (London: The Labour Party, 1922); Finlay, Social Credit, pp. 198–201. 33. C. H. Douglas, The Labour Party and Social Credit (London: Cecil Palmer, 1922), p. 29. 34. J. A. Hobson, ‘The Douglas Theory’, Socialist Review, February 1922, pp. 70–7; see also C. H. Douglas, ‘The Douglas Theory: A Reply to Mr. J. A.

Hobson’, ibid., April 1922, pp. 194–9; and Hobson, ‘A Rejoinder to Major Douglas’, ibid., April 1922, pp. 194–9. The first edition of Hobson’s Economics of Unemployment (1922) contained a critical-chapter on Douglas which was, apparently, dropped from the second (1931) edition: J. Allett, New Liberalism: The Political Economy of J. A. Hobson (Toronto: University of Toronto Press, 1981), p. 111n. 36. M. H. Dobb, ‘Does the World Need More Money? A Reply to Major Douglas’, Communist Review, May 1922, pp. 29–41; Dobb, ‘“Social Credit” and the Petit-Bourgeoisie’, Labour Monthly 15, 1933, pp. 552–7. On Austrian analysis see section IV below. In the early 1930s ‘Fascist’ was a very widespread all-purpose term of abuse in Communist circles. 37.

The transcript of Douglas’s examination is reprinted in W. R. Hiskett, Social Credits or Socialism: An Analysis of the Douglas Credit Scheme (London: Gollancz, 1935), pp. 33–78. 38. L. Robbins, ‘Consumption and the Trade Cycle’, Economica 12, 1932, pp. 413–20. Robbins had in fact been led to the study of economics as a reaction against Douglas’s popularity among socialists in the early 1920s: CrossRef L. Robbins, Autobiography of an Economist (London: Macmillan, 1971), pp. 65–7. CrossRef 40. F. A. von Hayek, Monetary Theory and the Trade Cycle (London: Cape, 1933); Prices and Production (London: Routledge, 1931; second edn 1935); cf. L. Robbins, The Great Depression (London: Macmillan, 1934). 41. F. A.

von Hayek, ‘The “Paradox of Saving”’, Economica 32, 1931, p. 138, citing D. H. Robertson, ‘The Monetary Doctrine of Messrs. Foster and Catchings’, Quarterly Journal of Economics 43, 1929, pp. 473–99. CrossRef 42. E. F. M. Durbin, Purchasing Power and Trade Depression: A Critique of Underconsumptionism (London: Cape, 1933), pp. 44, 52 (original stress removed). For a detailed account of Durbin’s work and influence, see Elizabeth Durbin, New Jerusalems: the Labour Party and the Economics of Democratic Socialism (London: Routledge & Kegan Paul, 1985), especially ch. 7. 44. E. F. M. Durbin, Socialist Credit Policy (London: Gollancz, 1933, second edn 1936). 45. H. T. N. Gaitskell, ‘Four Monetary Heretics’, in G. D. H.

Cole (ed.), What Everybody Wants to Know About Money (London: Gollancz, 1933), pp. 346–413. 46. Labour Party, Socialism and Social Credit (London: The Labour Party, 1935); Hiskett, Social Credits; above, section III. 47. M. A. Abrams, Money and a Changing Civilisation (London: John Lane, 1934). 48. E. Roll, About Money (London: Faber, 1934). 49. J. Strachey, The Nature of Capitalist Crisis (London: Gollancz, 1935), pp. 22–39. A decade earlier, as the co-author of Oswald Mosley’s ‘Birmingham Proposals’, Strachey had committed himself to the socialisation of credit as the principal means for radical social change: J. Strachey, Revolution By Reason: An Outline of the Financial Proposals Submitted to the Labour Movement by Mr. Oswald Mosley (London: Leonard Parsons, 1925). 51. N. A.

Holdaway, ‘Social Credit and Surplus Value’, Adelphi, March 1933, pp. 411–17. 52. J. Lewis, Douglas Fallacies: A Critique of Social Credit (London: Chapman & Hall, 1935), pp. 2–3, 5–6, 24–5, 36–42, 44, 57. 53. Ibid., pp. 13–16, 123–7. 55. G. D. H. Cole, Money, Its Present and Future (London: Cassell, 1944), pp. 288–96, 316–17; the ‘socialist measures’ involved central planning of production, distribution and prices. 57. R. G. Hawtrey, Economic Destiny (London: Longmans, Green, 1944), p. 333. 59. R. G. Hawtrey, ‘Monetary Analysis and the Investment Market’, Economic Journal 44, 1934, p. 646. 60. R. G.

Hawtrey, Capital and Employment (London: Longmans, Green, 1937), pp. vii, 8. (The chapter on Social Credit was omitted from the second, 1952 edition.) 61. Ibid., pp. 292, 296–9; Hawtrey here cites Douglas, Credit-Power, pp. 21–33. His argument was anticipated by Dobb, ‘Does the World Need More Money?’, p. 38. 63. J. M. Keynes, A Treatise on Money, II, Volume VI of The Collected Writings of John Maynard Keynes (London: Macmillan/Royal Economic Society, 1971), pp. 189–200. 65. The Relation Between the Economics of C. H. Douglas and Those of Rudolf Steiner Major C. H. Douglas The debate which was recently broadcast from the London station between Major C. H. Douglas and Professor Dennis Robinson is a mark of the greatly increased interest which the world has begun to take in the economic theories of Major Douglas and in the “Social Credit” movement which is associated with his name.

Many members of the Anthroposophical Society in Great Britain are vaguely aware of some sort of relation between the economics of Douglas and those of Rudolf Steiner. Douglas is, for instance, one of the few English writers who have quoted from the Threefold Commonwealth in their works. He has addressed a Group of the Society at the London Headquarters. Moreover, several members of the Anthroposophical Society in Great Britain have been personally interested in Social Credit for many years. It may therefore be a good thing that somebody should try and indicate what the relation is, if any, and such an attempt will be made in the present article. Naturally the writer makes no sort of claim to speak ex cathedra; he speaks merely as a student of both writers who has made certain observations and reached certain conclusions and he is, of course, personally responsible for what he says. Steiner's Economics Course is built up on his conception of the nature of man himself, in whom there is an essential polarity between Nature on the one hand and Spirit on the others. In this it resembles his book, The Threefold Commonwealth.

But whereas the book shows how this essential polarity is striving to work itself out in the whole structure of human society, the Economics Course deals more exclusively with the economic circuit, that is, with the production and exchange of commodities. It is concerned, in the main, with one third part, only, of the whole Threefold Commonwealth. But the essential polarity, and the trinity which arises out of it, are (as in all true organisms) manifest no less in the part that in the whole of the social structure. And so in the very first lecture of the Course, Dr. Steiner puts forth the exceedingly fruitful conception of the “economic spectrum,” drawing an analogy between nature and the infra-red rays at the one end of the economic process and between Spirit and the ultra-violet rays at the other. The purely economic process lies between the two and is the product of their interaction. In subsequent lectures Steiner described this process in greater detail, showing how human Spirit, operating on Nature, produces goods and commodities and at the same time gives rise to economic values, which are or ought to be destroyed or cancelled as the commodities themselves meet with consumption or decay and so vanish again into Nature.

One of the principal methods by which Spirit thus transforms Nature and the method which is most characteristic of an industrial civilisation is the process known as the division of labour. With the division of labour, as its semi-spiritual counterpart, capital comes into being. Capital may assume the form of real assets, such as machinery, buildings and the like; but it may also be exchanged into the form of money. [1] Money — materially speaking — is a commodity, but there is something which distinguishes it from all other commodities and that is, the universally accepted fiction that it does not wear out. The tokens of which it is composed wear out, but not (such is the accepted fiction) the face-value. That is deemed to be eternal. Now it is characteristic of a commodity that it can be collected and stored, but on the other hand (and this is equally characteristic) it will not continue for ever to be a commodity. Moth and worm will take care that in due course the commodity relapses into Nature. But an idea, a thing merely ‘deemed,’ though it is exempt from the ravages of physical decay, cannot be stored. For it does not exist in space and time at all.

An idea is neither young nor old, neither here nor there; it is merely true or untrue. There is thus something self-contradictory in the very nature of money as it is conceived today. Nature and Spirit, inharmoniously combined, are perpetually striving asunder within it. Now as long as the money is passing freely from hand to hand and operating merely as a medium of exchange; as long as the money is being used as purchase-money — the evil effects of this self-contradiction are constantly being corrected. For on each purchase for consumption there is a destruction of economic values. But as soon as money begins to be stored, that is to say, as soon as it begins to take, by investment, the form of ‘capital,’ the self-contradiction begins to be effective and needs to be consciously controlled. For out of this self-contradictory element in the nature of money there arises the all-important principle which Steiner has called the tendency of capital to preserve itself. If the rate at which economic values are being created is out of proportion to the rate at which they are being destroyed, great masses of unassimilated capital collect and work havoc in the economic system, by blocking the circulation and exchange of commodities.

The result is industrial stagnation — a state of affairs which is, alas, too familiar to require description. Now an idea such as this of the tendency of capital to preverse itself is fairly easily apprehended as a bare notion. To comprehend it, so that one has a clear idea of its application to the events of every day is a different matter. In the first place, the question arises: What is capital? For answer one cannot do better than turn to the work of Major Douglas. Take, for instance, the example which Douglas gave in his evidence before the recent Macmillan Committee on Finance and Industry, of the way in which capital charges under our present financial system are incorrectly accounted into the prices of commodities. It needs following rther carefully. A has 1,000 pounds and he decides to spend this 1,000 pounds on building a house. He hires 100 workmen to build the house for him and pays them 10 pounds each in wages for the work. (It may be assumed, without affecting the argument, that the whole of the 1,000 pounds goes in nothing but wages.) At the end of this period the situation is as follows.

— A has a house and no money. The 100 workmen have 1,000 pounds. The workmen now decide to club together and buy back from A the house which they have built for him. A agrees to sell it for 1,000 pounds. Thus A is now out of the picture and the situation is (for, to simplify the illustration, it is assumed that the workmen had other means of subsistence while they were working at building the house) that the workmen have a house but no money. No money? No purchase-money. Suppose that the workmen form a limited company for the purpose of using the house as a factory. The factory produces goods and puts them on the market. Now what considerations will determine the minimum price which these factory-owners or shareholders, as they now are, will be able to accept for their goods?

[2] (This minimum price will be what is today called the cost of production.) [3] Douglas points out that the 100 factory-owners would not themselves say, either that they had obtained a factory by working for it, or that they had “spent” 1,000 pounds on a factory (and therefore had “no money” left). They would say that they had “invested” 1,000 pounds. There is a world of difference between the meanings of these two words. If I spend 1,000 pounds on having a good time, if, that is, I exchange my 1,000 pounds for consumable goods, I agree at the end that the 1,000 pounds is no longer mine.

But if I “invest” 1,000 pounds on buying a factory or if I lend 1,000 pounds to the owner of a factory (which amounts to pretty much the same thing), I expect ten years later to be able to come to the factory and say, ‘Give me my 1,000 pounds back in cash.’ It makes no difference whether I do this by selling the factory or by calling in a loan. Supposing that the factory will wear out in ten years! Then it follows that in the prices which are charged for the goods which the factory makes during that ten years, there must be included, not merely the wages paid to the labourers in the factory and the cost of raw materials, but also the 1,000 pounds which must be saved to pay me out at the end of the ten years. Here, to begin with, is a very good example of the way in which the tendency of capital to preserve itself affects the ordinary affairs of life. For it affects the prices at which the goods can be sold. Whether justifiably or unjustifiably is not at the moment in point.

It is at least clear that if the investors of the 1,000 pounds had been willing to agree that, after the ten years which it took the factory to wear out, their 1,000 pounds capital should no longer exist, then it would not have been necessary to include a book entry of 1,000 pounds in their costs of production, that is, in the minimum price at which they could sell their goods. Once you have made clear in your mind this fundamental distinction between spending and lending, between purchase for consumption and purchase for investment, you are a long step in the direction of understanding what Steiner has to say about money in his Economics Course. Money spent on consumable goods is money exchanged, but if I lend or invest 1,000 pounds, then, although the very case itself may be paid out by my borrower next week as wages and so pass on from hand to hand, yet there will remain in my possession a kind of shadow or simulacrum of the money. This is my financial capital.

This is what Steiner calls ‘Leihgeld,’ loan-money, or, as I prefer to translate it, ‘invested money.’ So much for the nature of capital and its tendency to preserve itself. When we go on to consider the effects of this tendency, whether with Rudolf Steiner or with Major Douglas, we are led to the question: What is meant by the word ‘wages’? In the example of the house and the workmen given above it was said that wages were paid to the men ‘for the work.’ But in fact these money-payments called wages may be considered in three different ways. They may be considered either (1) as the price paid to the vendors of a (supposed) commodity called ‘labour’ or (2) as a distribution as producer to itself as consumer to enable it to consume its own product, or (3) as the price paid to producers for the commodities or commodity-values which they have created. The first way is the ordinary way of conceiving wages today. In the industrial system, as it has so far developed, labour has come to be regarded as a commodity. The second way is the way in which wages are conceived in the writings of Major Douglas.

The very nature of the conception marks the transition of economic theory from a period in which the nations of the world were naturally and more or less correctly conceived of as rival traders to the present period, in which the only real economic unit is the whole world. [4] The third way of conceiving wages is Rudolf Steiner's way. To return to the effects produced on prices by the tendency of capital to preserve itself; let us consider these first of all in the light of the first conception of wages. What considerations will determine the minimum price which the shareholders, or factory-owners, will be ale to accept for the goods which their factory turns out, so long as wages are conceived and calculated as if they were the price of a commodity called ‘labour’? Remember that, out of the original 1,000 pounds the workmen have now no money (that is to say, no purchase-money) left. They will therefore have to borrow the wherewithal to pay their labourers. This minimum price will therefore consist of at least three items: (i) the cost of the labour (wages) (ii) the cost of the raw material (iii) 1,000 pounds capital to be saved.

This is the result of calculating costs on the basis that wages are the price paid for a commodity called labour. We notice at once that wages are only one out of three items by which the cost (and therefore the minimum selling price) of the goods manufactured is determined. But wages are also, in fact, the principal means by which purchasing power is distributed to would-be consumers. It follows that, unless either (a) the goods produced are sold at less than cost or (b) distribution of purchasing power is made concurrently from some other source or (3) ‘wages’ are calculated on an altogether different basis, then during the period in question an insufficient quantity of purchasing power will have been distributed to enable the community to purchase what it has produced. This is in effect what Douglas has been saying for fifteen years to an audience, slowly at first but now very rapidly, increasing in numbers.

The practice of accounting capital charges into the prices of commodities, taken in conjunction with the fact that wages are the principal means by which purchasing power is distributed to the members of a modern industrial community, these two things together result, he says, and must result in a state of affairs under which there is never enough money in circulation to buy more than a fraction of the goods which the community is equipped to produce. Thus, one may say that the effect of the first of the three different ways of conceiving wages is — the situation in which we now find ourselves — universal poverty amid universal plenty. The effect of the second way of conceiving wages is, or may be, to enable one to understand this situation and to see where we have gone wrog. But as is well known, Douglas is not content with merely pointing out what is wrong. He has distinct and positive proposals for putting it right again. He proposes to counteract the preposterous effects of a faulty costing system by providing for both (a) the sale of commodities at less than cost price and (b) the distribution of purchasing power from another source.

He still thinks of wages as forming part of the cost of an article (and therefore of its minimum price), but he will take care that the consumer has enough money in his pocket to meet the whole minimum price. And it is particularly interesting to observe how he will do this. The history of banking is the progressive realisation of the pathetic effort of capital to achieve immunity from the law that all things which are capable of ownership are subject to depreciation, that is to ‘preserve itself.’ From gold, which can be stolen and clipped, to banknotes (whose face-value may be preserved to their owner by proper precautions even after the paper itself has been filched from him or burnt); and from notes to book credits, the changes have worked on imperceptibly until today the huge masses of capital which threaten to choke the world to impotence exists almost entirely in insubstantial and even negative forms. Today the central banks of the world ar the owners of the great bulk of the world's capital. But this capital is not (save to a small extent) manifested in vaults full of gold or stacks of notes.

In so far as it is invested, it takes the form of debts, owed by the rest of the community to the banking system; in so far as it is uninvested, it takes the form of the banks' monopoly of the right to credit currency and credit and to distribute these to the community as if they were loans for themselves. If Douglas's proposals were adopted, this monopoly right to create financial credit would be taken from the banks and vested in the State as representing the community. And the credit, which the State was thus empowered to create would be used — for what? — to enable goods to be sold at less than cost. It would thus be used to cancel the third item which, we have seen, goes to determine the minimum price, that is, the capital charges. In other words his proposals would have the effect of breaking up the huge masses of capital which have been accumulating since the beginning of the industrial era. There would thus be a destruction of capital accompanied by a new creation of purchase-money. Under our present system individual or private owners of financial capital, that is, of invested money, have the right to demand from the community in exchange for it as equivalent amount of existing purchase-money.

The Douglas proposals would substitute for this (in the case of the huge masses of capital accompanied by a creation of purchasing power. This would be done by the political organisation of the State. Rudolf Steiner also makes provision for the break-up of obstructive masses of capital. But the operation should, he says, be controlled by the ‘economic associations’ rather than by the State. With regard to the creation of purchasing-power, it is sometimes thought that Steiner suggested, as a cut-and-dried reform, the introduction of ‘three kinds of money,’ purchase-money, loan-money and gift-money. This is a misunderstanding. What he actually said was, that money does already take these three forms, according to the purpose for which it is used. Ordinary purchase-money, as soon as it is invested, is actually metamorphosed into quite a different kind of money — into Leihgeld (invested money). Only, said Steiner, our present way of looking at money and thinking of it, is such as to mask these metamorphoses. And he added that the mask must be removed. Steiner was much more concerned to describe things that are actually happening than to propose any definite measures of reform.

This he considered to be the business of others more immediately concerned with the economic life. More than once in the Economics Course after making a suggestion, he qualified it by adding that it was only given as an example of the sort of thing that might be done and that in any given circumstances some quite different measure might turn out to be the best. The task he set himself was to help men to know; once they knew, he had confidence that they would be able to act for themselves. Thus one suggestion which he made for dealing with this problem of the permanense of capital investment was that money must be made to ‘wear out’ like other commodities. By some process of dating it, money must be so constituted that every day brings it nearer to its demise. But this growing old and consequent loss of value would only apply to money qua invested money. As purchase-money it would retain its full face-value, whatever its date. And money once invested would not be reconvertible into purchase-money.

The oldest money of all, money that was nearing its date of expiry, would still be able to be used as gift-money and after this final metamorphosis could be renewed (or corresponding new money created) ty those ‘economic associations’ which are an essential feature of Steiner's sociology and which figure no less prominently in the Economics Course than in The Threefold Commonwealth. Now, although there is no need to underrate the importance of this definite and practical suggestion, it would in my opinion be a misunderstanding of the Economic Course not to realise that the only thing that is of paramount importance is the principle involved; and the principle is, to find a means of counteracting the tendency of capital to preserve itself. The world has found out the way to build up financial capital; the problem is, to find a way of destroying it — without destroying the human and spiritual values which produced it and which, properly controlled, it will foster in its turn. Douglas approaches the problem empirically, as an engineer who has turned his attention to sociology. It happens that in his everyday life he is brought up against the actual financial effects of the tendency of capital to preserve itself, and he sets himself to work out a solution.

Steiner reaches down, so to speak, to the problem out of the firmament of his knowledge of the whole nature of man. He is less pre-occupied with the immediate effects of the tendency he describes, regarding it as his task rather to elucidate the tendency itself. He is like a doctor prescribing to the patient what is a healthy diet and a normal human way of living. Whereas Douglas is like a surgeon, ready to perform an operation for appendicitis. This also comes out very clearly in the attitude of the two writers towards wages and costs of production. Douglas has detected and described the financial flaw in the world's costing system. The purchasing-power which is being distributed at any time, he points out, ought to be equal to the prices of consumable goods on the market at that time. Actually today it is not determined by these prices at all but by the fact that, as ‘wages,’ it forms part of the costs of things still in course of production. Thus there arises a gap between purchasing-power and prices. This gap Douglas would bridge in the way I have attempted to describe. Steiner, on the other hand, starts by cutting the knot altogether.

Labour is not a commodity and therefore wages are not ‘costs’ at all. He knows that to regard them as such must lead, on purely economic grounds, to disaster; for his knowledge is drawn from those depths in the soil of truth at which the roots of ethics and economics are still intertwined. A man must be paid — not the price of his labour as part of the cost of the thing he is still in course of making, but the price of the other things he has already made. He may not be ale to make a complete commodity himself as in the days of the medieval craftsmen; nevertheless at the end of the week or other period he has made a notional part of a commodity, or it may be of many commodities, and that notional part is measurable financially as a value. This is what he should sell to the community, not the labour of his hands which is part of the man and therefore not for sale. Douglas says: pay him a sum equal to the price of the goods on the market, the price itself being determined (as at present by past costs. Steiner says: pay him the very price itself of the commodities he has produced, that price being determined by present values.

For a value, once created, no longer has a cost. It only has a price. It must however be clearly realised that this is only an attempt to contrast the different lines of thought by which the two writers have approached the problem. Thus, although Douglas sets out to bridge the gap between ‘wage-costs’ and prices by increasing purchasing-power, the difference would not be made up to the wage-earner actually in the form of increased wages. It would take the form partly of lowered prices of existing commodities and, partly, of a ‘national dividend’ to be distributed to all alike. He also conceives of wages as likely to form a progressively less important factor in the distribution of purchasing-power and it is significant that in the Scheme for Scotland published last year in the Glascow Evening News provision is made for a decrease in the rate of wages. It is easy to feel the ethical soundness of Steiner's doctrine. It is not so easy to perceive its economic inevitability or the way in which failure to regard it is at the root of the world's financial distress today. That has been made possible, for me at any rate, by the thinking of Major Douglas.

The difference between the two ways of looking at costs and wages is to my mind not more striking than the resemblance. And it is in their treatment of this problem and of the problem of capital depreciation that the relation between the two writers is to be found and understood. I must conclude with a reminder that the scope of this article is limited to that relation. It does not pretend to be an exposition of the two systems or economics; and indeed any such claim for an article of this length would be absurd. From ANTHROPOSOPHY, A Quarterly Review of Spiritual Science. No. 3. MICHAELMAS 1933/ Vol. 8. London: Anthroposophical Publishing Company UK/NY. [1] It follows that it is incorrect to say that capital is either of these things. Capital is the intangible something which may become either one of the other. A good example of it is a Trust Fund. The fund continues to exist as a single identifiable unit of capital, though the assets of which it is composed may be perpetually changed by sale and purchase. [2] That is the minimum aggregate price of all the goods which the factory produces and sells.

It is too commonly forgotten by those who are fond of invoking the law of supply and demand that there is such a thing as this minimum aggregate price. It is the lower limit beyond which the law of supply and demand is no longer true. [3] Profit is omitted for the sake of simplicity. Or it may be regarded as part of the cost of production. [4] It must not, however, be supposed that this contrast has any relation to the contrast between economic ‘nationalism’ and ‘internationalism’ so frequently drawn during the recent London Conference on Economics. President Roosevelt's conception of wages, for example, is much more in accordance with an economic theory for which the world is the real unit than the pious cant of the usurers who blame him for wrecking their plans at the Conference. But this must not be taken as implying the opinion that his own plan of borrowing to finance production can bring America any lasting benefit. Other Works by Owen Barfield Social Credit by Major Clifford Hugh Douglas Major Clifford Hugh Douglas About the Author Clifford Hugh Douglas was born in 1879. He was educated at Cambridge University, and was an engineer. Douglas developed a view of the role of money, and a monetary system, which he called Social Credit.

He presented his ideas to the Canadian government in 1923 before the Committee of the House of Commons on Banking and Industry in 1923. His books, including "Social Credit", influenced the Farmers Co-operative (the UFA) in Canada, to which Douglas became a financial advisor in 1927. From those beginnings, the Alberta Social Credit Party was formed in 1935, with popular educator and radio preacher William Aberhart as its leader. That party came to power and, in 1935, Major Douglas became the chief reconstruction adviser to Premier Aberhart. Differences between Douglas' views and the party's policies resulted in Douglas' resignation as advisor. Douglas published many books on his views concerning money, banking, and the globally influential and powerful. His other books include Economic Democracy (1920), The Monopoly of Credit (1931), The Use of Money (1935), and The Alberta Experiment: An Interim Survey (1937). Douglas died in 1952. About the Book This is the 1933 Revised version of "Social Credit", the first edition of which was published in 1924.

It is an important book for inclusion at Mondo Politico for a few reasons. First, it is difficult to find copies of this book anywhere. Students both of monetary theory and of political history should find this Mondo Politico presentation of "Social Credit" useful. Second, many economists have rallied against the fractional reserve system of banking that prevails in the industrialized world (e.g., Irving Fisher, Lloyd Mints, Henry Simon, Murray Rothbard, Milton Friedman and most economists of the Austrian School of economics [see, for example, the Ludwig von Mises Institute ]). But few, if any, other authors have explained that as productivity increases year after year, who benefits from that increased productivity is determined essentially by money and banking policy. Specifically, Douglas explains (particularly in Part 2, Chapter 2 ) that, if the money supply is not increased, dollars/pounds become more valuable, such that prices drop. But, if the money supply is increased just enough, the value of each dollar/pound - hence prices - can be left unchanged. Finding it desirable to keep prices unchanged in this way, Douglas then explains that, essentially, a decision has to be made about who gets the additional dollars/pounds.

Under our current fractional reserve system, the banks do, by creating and lending out extra credit. Under a "social credit" system, the extra dollars would be divided up and given to all citizens in equal portions as a "dividend". His rationale: that increases in productivity - resulting as they do from innovation and technological advancement over time - are a "cultural heritage" that belongs not to banks but to all members of society. His message is clear: the citizenry are prevented from benefitting from their own cultural heritage, and this leaves them increasingly indebted to banks, and unable to reduce, over time, the portion of their lives that they spend working and simply trying to survive. Under social credit, Douglas foresees a decrease in work and an increase in leisure or, at least, the opportunity to work less if one so chooses. Third, "Social Credit" clearly has had a major impact on the direction of politics, particularly in the Commonwealth for decades. For example, but for Douglas' works on Social Credit, Canada quite possibly would not have a Conservative Party of Canada today. Before entering politics, "Bible Bill" Aberhart opened a bible school in Alberta. The school's first pupil was one Ernest Manning.

Aberhart was drawn into politics primarily after finding, in Douglas' Social Credit, what he saw to be an answer to the "poverty amidst plenty" that he saw in 1930's Alberta. Ernest Manning was at his side, spreading the Social Credit word and helping to grow the Social Credit party in Alberta. Alberta's several attempts to implement some form of Douglas Social Credit failed when the Supreme Court of Canada repeatedly held that Alberta lacked the constitutional authority to implement such monetary and banking laws: those, it held, were laws that only the federal government had the authority to make. When Aberhart died, Ernest Manning took over as premier. Owing largely to investments in the Alberta oil industry, the province received such abundant revenues that implementing any form of Social Credit mechanism was unnecessary: Social Credit lived on in Alberta (and later, in British Columbia) only as a name for what became a mainstream conservative party.

Arguably due to his father's involvement in politics and his father's experience as premier of Alberta, Ernest Manning's son, Preston, later was the chief architect of one of the most quickly successful federal political parties in Canadian history, the Reform Party, which was comprised chiefly of so-called "blue tories" from the Progressive Conservative party that had lost its popularity - and most of its seats in Parliament - by the time of the federal election of 1993. Despite its meteoric rise, the Reform Party chronically found insufficient support east of Saskatchewan, Canada. In 1999, it decided, in effect, to re-unite with whatever "blue" Tories might remain in the Progressive Conservative party, but under a new party name with newly voted-upon policies: the Canadian Reform Conservative Alliance ("CA"). As of March 2002, despite the effort, the so-called CA still had not been able to gain sufficient support east of Saskatchewan to form a government.

In October of 2003, the leaders of the CA and of the still quite withered PC party agreed in principle to merge the parties, effectively reuniting "blue Tories" with "red Tories" and undoing the split that had occurred when PC members left the party in the late 80's and early 90's to form the Reform Party. The memberships of the parties ratified the agreement in principle in December of 2003, and the party was registered the "Conservative Party of Canada" in January of 2004. In March of 2004, the most recent leader of the CA became the leader of the Conservative Party, leaving many to argue that the Conservative Party was just the CA with a different name. Time will tell but, arguably, none of the ride that led Canadian conservatives to split and later reunite would have happened but for the onset of the Social Credit party in the 1930s. Finally, to this day, there remains a considerable interest in Douglas' Social Credit monetary theories, particularly in Australia, Canada and the UK and among monetary reformers the world over.

For these reasons, and perhaps a few others, Mondo Politico is proud to make this presentation of Major C.H. Douglas' "Social Credit" available to you. Enjoy. Social Credit - Theory by Clifford Hugh Douglas Donate History is crystallised Politics, not disconnected episodes.C.H. Douglas, The Big Idea The modern State is an unlimited liability corporation, of which the citizens are the workers and guarantors, and the financial system the beneficiary.C.H. Douglas, The Monopoly of Credit The proper function of a money system is to furnish the information necessary to direct the production and distribution of goods and services. It is, or should be, an “order” system, not a “reward” system.C.H. Douglas, Social Credit [U]nder certain circumstances, almost universal in modern industry ... purchasing power cannot be equal to prices, if purchasing power and prices are both considered as a flow....C.H. Douglas, The New and the Old Economics Unrestrained by the financial system, the resources of modern production would be sufficient to provide for the material desires of the whole population of the world at the expense of a small and decreasing amount of labour....C.H.

Douglas, The Monopoly of Credit [T]he twin evil (common more or less to all existing organized Society) of servility is poverty ... Poverty is in itself a transient phenomenon, but servility (not necessarily, of course, of manner) is a definite component of a system having centralised control of policy as its apex....C.H. Douglas, Economic Democracy [T]he only sane objective of an industrial and productive system is to deliver goods as, when, and where desired with the minimum of trouble to anyone....C.H. Douglas, Warning Democracy At the root of the growing danger of Government and other embodiments of execution is the idea that human beings are all alike. So far from this being the case, I believe that as human beings develop they become increasingly different.C.H. Douglas, Security: Institutional and Personal There is only one sound basis for co-operative society, and that is individual and personal responsibility.C.H. Douglas, The Big Idea [T]he true cost of a given programme of production is the consumption of all production over an equivalent period of time....C.H.

Douglas, The Monopoly of Credit From one point of view a perfect financial system would simply be a mirrored reflection of every change in physical facts of the economic system....C.H. Douglas, Money and the Price System [T]he real basis of credit is the producing and consuming capacity of the community....C.H. Douglas, The Monopoly of Credit Every article which is produced has a price attached to it, and somewhere on the opposite side of the account there should be a sum of money capable of moving each and every article out of the production system into the consuming system.C.H. Douglas, Warning Democracy [T]he Just Price of an article ... bears the same ratio to the cost of production that the total consumption and depreciation of the community bears to the total production.C.H. Douglas, Economic Democracy [A] national dividend is justified economically, by the increased power of production, and morally by the fact that this increased production is not due to any section of the community – neither the labourer, scientist or capitalist, but to all.C.H.

Douglas, The Monopolistic Idea Consumer control of production is the only basis of freedom; and no method of obtaining consumer control has ever been tried with success which did not ban state control of money and credit and include decentralised individual credit power.C.H. Douglas, The Development of World Dominion "Credit is the substance of things hoped for, the evidence of things not seen,” and no stable society can endure on false evidence.C.H. Douglas, The New and the Old Economics That you must have policy democratic and execution hierarchical is one of our fundamental conceptions in Social Credit.C.H. Douglas, The Policy of a Philosophy The general principles which govern association for the common good are as capable of exact statement as the principles of bridge building, and departure from them is just as disastrous.C.H. Douglas, The Tragedy of Human Effort It is very much better that philosophies should follow facts than that facts should be constrained in accordance with philosophies.C.H. Douglas, Warning Democracy [T]he whole promise of a brighter, probably a very bright, future for the world lies in doing the best possible things in the best possible way.C.H.

Douglas, Economic Democracy [I]t is accurate to say that ultimately the core of the problem can be put into four words – “the monopoly of credit,” and that the solution of the problem is also contained in four words – “the distribution of credit."C.H. Douglas, Major C.H. Douglas Speaks Liberty is really a simple thing, although difficult to come by. It consists in freedom to choose or refuse one thing at a time.C.H. Douglas, Social Credit Political democracy without economic democracy is dynamite. The need is to abolish poverty, not represent it.C.H. Douglas, The Monopoly of Credit It is a legitimate corollary of the highest conception of the human individual that to the greatest extent possible, the will of individuals shall prevail over their own affairs.C.H. Douglas, The Brief for the Prosecution [N]othing but the rehabilitation of democracy in a genuine sense, and with an understanding of its limits will enable Social Credit to become an actual fact.C.H. Douglas, The Nature of Democracy The proper function of Parliament ... is to force all activities of a public nature to be carried on so that the individuals who comprise the public may derive the maximum benefit from them.C.H.

Douglas, The Tragedy of Human Effort The essential nature of a satisfactory modern co-operative State may be broadly expressed as consisting of a functionally aristocratic hierarchy of producers accredited by, and serving, a democracy of consumers.C.H. Douglas, Credit-Power and Democracy The widespread distribution of vested interests would be the greatest guarantee of social stability conceivable.C.H. Douglas, The Tragedy of Human Effort [T]he business of bureaucracy is to get us what we want, not to annoy and hinder us by taking from us by taxation and irritating restrictions those facilities which we otherwise should have.C.H. Douglas, The Brief for the Prosecution [T]here will, I believe, be nothing but strife and distress in the world until an imposed policy is replaced by an agreed policy.C.H. Douglas, Social Credit You will be perhaps puzzled to find that the conflict in the economic world is not so much between cartels, monopolies and nationalized industry and property, as between all three and small businesses and privately-owned property.C.H. Douglas, The Brief for the Prosecution Latest Blogs Just last week, Equifax Canada, a credit reporting agency, revealed that... 21 11

Question: What economic theory was originated by Major C H Douglas?
Answer: Social Credit